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Google launches drive to torpedo Microsoft's $44 bn bid for Yahoo

New York Times

Posted online: Tuesday, February 05, 2008 at 2326 hrs Print Email

Search engine giant’s chief executive Eric E Schmidt calls Yahoo chief Jerry Yang, offers help in fending off Microsoft advances

New York, February 4: Standing between a marriage of Microsoft and Yahoo may be the technology behemoth that has continually outsmarted them — Google. In an unusually aggressive effort to prevent Microsoft from moving forward with its $44.6 billion hostile bid for Yahoo, Google emerged over the weekend with plans to play the role of spoiler.

Publicly, Google came out against the deal, contending in a statement that the pairing, proposed by Microsoft on Friday in the form of a hostile offer, would pose threats to competition that needed to be examined by policy makers. Privately, Google, seeing the potential deal as a direct attack, went much further. Chief executive Eric E Schmidt placed a call to Yahoo chief Jerry Yang offering the company’s help in fending off Microsoft, possibly in the form of a partnership between the companies, people briefed on the call said.

Google’s lobbyists in Washington have begun plotting how it might present a case against the transaction to lawmakers. Google could benefit by simply prolonging a regulatory review until the next US president takes office. Several Google executives made “back-channel” calls over the weekend to allies at companies like Time Warner, which owns AOL, to inquire whether they planned to pursue a rival offer and how they could assist. Google owns 5 per cent of AOL.

Despite Google’s efforts and the work of Yahoo’s own bankers over the weekend to garner interest in a bid to rival Microsoft’s, one did not seem likely, at least at this early stage. For example, a spokesman for News Corporation said on Sunday night that it was not preparing a bid, and other frequently named prospective suitors like Time Warner, AT&T and Comcast have not begun work on offers, people close to them said. They suggested that they did not want to enter a bidding war with Microsoft, which could easily top their offers.

A spokesman for Time Warner declined to comment, as did a spokesman for Comcast. A representative for AT&T could not be reached.

In the meantime, people close to Yahoo said the company received a flurry of inquires over the weekend from potential suitors. Some people inside Yahoo have even speculated about the prospect of breaking up the company. That could mean selling or outsourcing its search-related business to Google and spinning off or selling its operations that product original content, these people said.

“Everyone is considering all kinds of options,” a person familiar with the situation said. One person involved in Yahoo’s deliberations suggested that “the sum of the parts are worth more than the whole,” arguing that its various pieces like Yahoo Finance, for example, could be sold to a company like the News Corporation for a huge premium while Yahoo Sports could be sold to a company like ESPN, a unit of the Walt Disney Company.

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