(9 February 2008 2:00 pm)

MUMBAI: Last week software major Microsoft made a $44.6 billion offer to buy Yahoo! The aim is to compete more effectively online.

Now internet major Google has raised some "troubling questions" over the bid.

Google SVP of corporate development and chief legal officer David Drummond describes the bid as being "hostile" and notes that the openness of the internet is what made Google and Yahoo! possible. A good idea that users find useful spreads quickly. Businesses can be created around the idea. Users benefit from constant innovation. It is what makes the internet such an exciting place.

"Microsoft's hostile bid for Yahoo! raises troubling questions. This is about more than simply a financial transaction, one company taking over another. It's about preserving the underlying principles of the internet: openness and innovation," he argues.

"Could the acquisition of Yahoo! allow Microsoft - despite its legacy of serious legal and regulatory offenses - to extend unfair practices from browsers and operating systems to the internet? In addition, Microsoft plus Yahoo! equals an overwhelming share of instant messaging and web email accounts. And between them, the two companies operate the two most heavily trafficked portals on the internet.

"Could a combination of the two take advantage of a PC software monopoly to unfairly limit the ability of consumers to freely access competitors' email, IM and web-based services? Policymakers around the world need to ask these questions - and consumers deserve satisfying answers."

He adds that Google takes internet openness, choice and innovation seriously. They are the core of our culture. Google's philosophy is that the interests of internet users come first - and should come first - as the merits of this proposed acquisition are examined and alternatives explored.

Meanwhile, a house judiciary panel hearing into the potential acquisition has been postponed. There are privacy concerns that have been raised over the amount of consumer data collected by Microsoft and Yahoo! Google has also approached Yahoo! to explore a partnership as an alternative. However, this would not pass antithrust laws even if Yahoo! was to agree, reports state.

Concerns would also be raised about the Microsoft deal. Antitrust authorities in Europe and the US may have more than a few reservations about a merger between Micropsoft and Yahoo! which are the number two and number three internet search companies. The companies’ online search and advertising operations are likely to be the focus of regulators’ investigations.

Reports also note that the $44.6 billion bid, if it goes through, is great for Microsoft. By acquiring Yahoo!, Microsoft will not only get the bigger market share in search marketing but also get access to millions and millions of users which are so far near captive to Yahoo! for years.

Microsoft is also expected to save by creating synergies between Yahoo! and its own search marketing business and also in product development activities. In addition, Yahoo! Messenger and MSN Messenger will be able to offer a lot more to its user communities.

In terms of search marketing, Yahoo! is second to Google. If the deal goes through, Microsoft could transfer its entire search marketing business to Yahoo! Search marketing is expected to rise from $45 billion to $75 billion by 2010.

And since Microsoft's strength is its product development capability, it chould take over all product development activities from Yahoo!

It is not surprising, therefore, that Google has raised issues. A deal or a merger will leave Google suddenly finding that its competitors are competing not only with scale but also with more operational efficiency.

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Microsoft makes $44.6 bn offer to acquire Yahoo!