Internet giant might put money into takeover that would give it huge share of US search business
Google is considering providing the finance for the acquisition of Yahoo by another company or group of companies – potentially putting it into direct opposition in a bidding war with search engine rival Microsoft.
The shadow manoeuvring to bid for Yahoo, which fired Carol Bartz, its chief executive of just 18 months, in September is beginning to heat up as Microsoft and a number of private equity companies begin formulating their propositions for the struggling media company.
Google, with $42.6bn (£27.4bn) in cash, could afford to buy Yahoo, which has a market value presently of just over $20bn, but it unlikely to make a direct bid for it. There would be regulatory problems with the approach because if it were to take over Yahoo's search business then it would have a stranglehold on that sector in the US beyond its already dominant 65% share: Yahoo has about 15.5% of the sector in the US, with Microsoft's Bing (which powers Yahoo's search) at 14.7%.
Bloomberg News reported on Monday that Google's chiefs are still trying to decide whether to aid on one of the bids being cooked up.
A Google-backed takeover would ensure that Microsoft could not get control of the media company, which has been struggling with falling advertising revenue and share as rivals such as Facebook capture both attention and advertising. That, in turn, would mean that the Bing search engine which is presently a significant lossmaker for Microsoft would be unable to move into profit in the medium term, and could be shut out of a significant position in the desktop search market. Microsoft is trying to build Bing's share of the mobile search market through deals with Nokia and RIM, but with little impact so far.
Microsoft has recently been mentioned as a potential backer for a bid for Yahoo, in which it would provide a large chunk of the cash required for the bid, together with a number of other private equity companies. Yahoo's management has instructed Goldman Sachs to investigate potential scenarios to enhance the company's value - which could include a sale or going private.
Google is already under regulatory scrutiny from governments around the world. Greg Sterling, an analyst at Opus Research in San Francisco, told Bloomberg: "If competition dissipates or diminishes, then the hand of regulators is strengthened. If competition is diminished or marginalised, then all the arguments about Google being a monopoly ring more true."
In June the US Federal Trade Commission began a review of Google's business practices, including search and advertising. The European Union and the state of Texas also have begun investigations of the company's leadership in search and advertising markets.
Potential financing by Google for a bid for Yahoo has parallels with the $150m investment that Microsoft made in competitor Apple in 1997 to help preserve competition in the computer market, Sterling said.
But a Google bid would trigger regulatory interest. The US government threatened to challenge an earlier proposal by Google to place ads on Yahoo's site, causing Google to abandon the effort in 2008. At the time Microsoft was making a $44.8bn bid for Yahoo which ultimately proved fruitless.
Representatives of Yahoo and Google declined to comment.
The chief executive of China's Alibaba Group, whose largest shareholder is Yahoo, has also said his business is "very interested" in the Web portal, an arrangement that would help the Chinese company buy back its 43% stake.
KKR & Co. and Blackstone Group are among firms weighing an offer for Yahoo, people familiar with the matter said earlier this month. Alibaba has discussed a plan with Silver Lake and Russia's Digital Sky Technologies to make a joint bid, people familiar with the matter have said. Another group interested in an offer includes Providence Equity Partners and former News Corp. executive Peter Chernin, people have said. Google advertising customers are able to buy space on Yahoo sites through Google's Invite Media service, according to the person familiar with Google's deliberations.
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Google is considering providing the finance for the acquisition of Yahoo by another company or group of companies – potentially putting it into direct opposition in a bidding war with search engine rival Microsoft.
The shadow manoeuvring to bid for Yahoo, which fired Carol Bartz, its chief executive of just 18 months, in September is beginning to heat up as Microsoft and a number of private equity companies begin formulating their propositions for the struggling media company.
Google, with $42.6bn (£27.4bn) in cash, could afford to buy Yahoo, which has a market value presently of just over $20bn, but it unlikely to make a direct bid for it. There would be regulatory problems with the approach because if it were to take over Yahoo's search business then it would have a stranglehold on that sector in the US beyond its already dominant 65% share: Yahoo has about 15.5% of the sector in the US, with Microsoft's Bing (which powers Yahoo's search) at 14.7%.
Bloomberg News reported on Monday that Google's chiefs are still trying to decide whether to aid on one of the bids being cooked up.
A Google-backed takeover would ensure that Microsoft could not get control of the media company, which has been struggling with falling advertising revenue and share as rivals such as Facebook capture both attention and advertising. That, in turn, would mean that the Bing search engine which is presently a significant lossmaker for Microsoft would be unable to move into profit in the medium term, and could be shut out of a significant position in the desktop search market. Microsoft is trying to build Bing's share of the mobile search market through deals with Nokia and RIM, but with little impact so far.
Microsoft has recently been mentioned as a potential backer for a bid for Yahoo, in which it would provide a large chunk of the cash required for the bid, together with a number of other private equity companies. Yahoo's management has instructed Goldman Sachs to investigate potential scenarios to enhance the company's value - which could include a sale or going private.
Google is already under regulatory scrutiny from governments around the world. Greg Sterling, an analyst at Opus Research in San Francisco, told Bloomberg: "If competition dissipates or diminishes, then the hand of regulators is strengthened. If competition is diminished or marginalised, then all the arguments about Google being a monopoly ring more true."
In June the US Federal Trade Commission began a review of Google's business practices, including search and advertising. The European Union and the state of Texas also have begun investigations of the company's leadership in search and advertising markets.
Potential financing by Google for a bid for Yahoo has parallels with the $150m investment that Microsoft made in competitor Apple in 1997 to help preserve competition in the computer market, Sterling said.
But a Google bid would trigger regulatory interest. The US government threatened to challenge an earlier proposal by Google to place ads on Yahoo's site, causing Google to abandon the effort in 2008. At the time Microsoft was making a $44.8bn bid for Yahoo which ultimately proved fruitless.
Representatives of Yahoo and Google declined to comment.
The chief executive of China's Alibaba Group, whose largest shareholder is Yahoo, has also said his business is "very interested" in the Web portal, an arrangement that would help the Chinese company buy back its 43% stake.
KKR & Co. and Blackstone Group are among firms weighing an offer for Yahoo, people familiar with the matter said earlier this month. Alibaba has discussed a plan with Silver Lake and Russia's Digital Sky Technologies to make a joint bid, people familiar with the matter have said. Another group interested in an offer includes Providence Equity Partners and former News Corp. executive Peter Chernin, people have said. Google advertising customers are able to buy space on Yahoo sites through Google's Invite Media service, according to the person familiar with Google's deliberations.
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