What will Google do against Microsoft and Yahoo ?

Microsoft really threw a major push when it announced an offer for Yahoo. For some time now, Microsoft has been smarting at being beaten by Google fair and square in the world of online search and advertising. This was a field that was essentially (not completely true, but approximately) invented by Google, and they have a commanding lead over both Microsoft and Google. Google has essentially been a seach / advertising company that is now trying to do other things, while Microsoft has been a major desktop company that is struggling to replicate its success in the online world (through a spate of new technologies and purchases), while Yahoo has tried to be a massive directory (and seeing the success of Google, tried to also focus on the advertising world). Google has had the benefit of some focused approach on the advertising world, and has reaped the benefits.
Yahoo has been seen as a company on the downward path, and all its efforts have not been able to push it up; it has been seen as having been outplayed by Google, and recently suffered the fate of having to layoff people (not a good sign for a company trying to be the best). It makes tremendous sense for Microsoft to suddenly gain a massive catch up by getting all of Yahoo's business.

According to a Reuters report, Yahoo said it would consider joining forces with Google in order to prevent Microsoft from acquiring it. What sort of partnership could it strike with Google that would hold Microsoft at bay while not triggering antitrust issues? Oh, and Yahoo says $31 per share isn't good enough.
Yahoo's managers have a lot of thinking to do. Microsoft's offer of $44.6 billion was not exactly a low-ball first bid. That represented a 61% premium over Yahoo's stock price on Thursday (Yahoo's stock has since gone up). Yahoo feels that the $31 per share offered undervalues the company. It didn't say that it had requested a higher number from Microsoft, which has indicated it will use cash and loans to buy Yahoo. Sanford C. Bernstein analyst Jeffrey Lindsay suggested that Yahoo's real worth is closer to $39-$45 a share.

The fact remains that the final decision rests with shareholders, who may feel that unless a white knight comes into the picture (who can afford to pay more than $50 billion), Microsoft represents the best bet in terms of growing the business and taking on Google.
Google is not likely to take this lying down. A good first bet would be to appeal to Yahoo's management who would be apprehensive (or rather sure) about their diminished status in a Microsoft pecking line; in addition, there is the entire history of Microsoft's uncompetitive behavior to be thrown up, another good approach is to talk about the obvious problems of pairing the market leaders in online email and messenger. Microsoft would have likely prepared for all this, and one can be sure that there will be a lot more focus on making the Yahoo shareholder see this as a good step forward.

Some Democrats criticize carrier restriction for iPhone

This seems a bit funny. During a Congressional hearing on regulation in the wireless industry, some Democratic leaders lit up on Apple and the iPhone for restricting usage only to AT&T as an exclusive carrier for 5 years. It was sought to be portrayed as a limitation to customers who either had other providers or who were located in areas where AT&T did not provide coverage. Seems a bit strange to be objecting to something that seems so central to how the wireless industry works:

The iPhone "highlights both the promise and the problems of the wireless industry today," said Rep. Edward Markey, D-Mass., chairman of the House Subcommittee on Telecom and the Internet. "This cutting edge technology breaks new ground … [but] consumers can't use this service with other wireless carriers" and those in areas not reached by AT&T cannot use the iPhone at all, he said.
Rep. Fred Upton, R-Mich., was less concerned. "Competition spurs carriers to innovate and build a better mousetrap," he said. "The iPhone is the newest mousetrap and now other carriers will be working to top it." Members convened the hearing to debate whether wireless service agreement regulation should be transferred from state public utility commissions (PUCs) to the federal government. The wireless industry has long favored a more national approach, but state PUCs are hesitant to give up control.

This restriction to AT&T has long been sought as a major weakness for the iPhone, since there will be a number of customers who will not be able to switch over to AT&T because of existing contracts. However, the iPhone is not a device that has a major share of the market, and there will be more devices that will come out of a similar nature that will allow people to use these devices. It is not in the nature of an anti-trust deal that requires lawmakers to comment. It would be nice if there was no restriction, but this is a commercial contract.

Google wants court supervision of Microsoft to continue

In 2000, a federal judge had found that Microsoft had committed a violation of federal anti-trust law; forcing PC makers to use Microsoft software products on the computers sold by them as opposed to similar software made by other software makers. In a massive scare to the company, the federal judge had ordered the breakup of the company. The part about breaking up of the company was set aside by an appeals court, and the case went back to district court and a new judge did not order the drastic breakup step. Under the new settlement, Microsoft reached an agreement with the Justice department and nine states which ordered Microsoft to modify licensing and to provide competitors with adequate technical information such that their products would run on the OS as a first-class citizen, equal to Microsoft products.
This agreement was valid for 5 years, but Google wants this agreement to be extended, accusing Microsoft of a repeat behavior with regard to changes in the desktop search function introduced in Vista.

In a filing with the U.S. District Court for the District of Columbia, Google (GOOG) asked for permission to file a friend-of-the-court brief outlining its concerns. The filing came on the eve of a regularly scheduled hearing to update U.S. District Court Judge Colleen Kollar-Kotelly on Microsoft's compliance with a federal consent decree. "Microsoft's hardwiring of its own desktop search product into Windows Vista violates the final judgment in this case," Google wrote.
In a filing last week, the Justice Department, 17 states and the District of Columbia detailed changes Microsoft agreed to make to its desktop search function, and said the measures would resolve any issues raised by the complaint. "Microsoft went the extra mile to resolve these issues in a spirit of compromise," Microsoft said in a statement. "The government has clearly stated that it is satisfied with the changes we're making. Google has provided no new information that should suggest otherwise in their filing."

Vista introduced a new search capability in Vista called 'Instant Search' that allowed users to search for items in the hard drive. In April, Google filed a complaint that this prevented other companies from providing their own desktop search function, and in a settlement, Microsoft agreed to make changes to its search function to resolve these issues.
With the change, Microsoft will allow computer manufacturers and end-users to select their own preferred search engine, similar to what is being done for other third-party programs. Google, however, does not believe that Microsoft has really turned a new leaf and wants the settlement period extended so that a check can be kept on whether Microsoft is indeed making the required changes.

Microsoft eyeing Yahoo

This piece of news is big news. It is being widely reported that Microsoft is eyeing a 50 billion dollar bid for Yahoo. This was first reported by the New York Post which reported that Microsoft is trying to get Yahoo to agree to this takeover. They have held talks in the past about such a deal, and senior executives of both companies might be negotiating a deal in secret right now. Read this story in Forbes.

Shares of online search site operator Yahoo Inc. spiked Friday, as reports that the company could be bought out by software giant Microsoft Corp. drove the stock up 16.5 percent.
The dramatic rise was preceded by a Friday report in the New York Post, which cited unnamed sources saying Microsoft is trying to get Yahoo to formally negotiate a takeover by the software company. The story cited sources as saying Yahoo could fetch about $50 billion.
In a note to investors, Deutsche Bank analyst Jeetil Patel wrote a partnership or merger between the companies makes strategic sense, since Microsoft is one of the few companies that could repair Yahoo's technology and product development issues.

This deal may make sense for Microsoft since it will give them a pretty good web property, and the overall strength to pose a much bigger challenge to Google. However, a deal of such magnitude is not easy to push through. The companies have conflicting styles. In addition, since both Microsoft and Yahoo are big players in the online search and other properties market, such a deal may have anti-trust implications.

Familiar news: EU tightens screws on Microsoft

In an anti-trust ruling from 3 years back, the European Commission had ordered that Microsoft had to license technical information to competing companies (IBM, Sun, and Oracle) so that they make their softwares work better with the Windows platform.
For Microsoft, complying with the order would have been hard to do, since it never believed that it was doing anything wrong; more so, because the European Commission was far stricter than US regulatory authorities on finding Microsoft guilty of anti-trust.
As a result, Microsoft demanded around 5.95% of these competing companies server revenues for royalty purposes. This is a pretty high amount, given that margins are not very high, and companies would be very unwilling to pay such revenues.
Now it seems that the European Commission is proposing that this demand from Microsoft be rejected, with objections from the commission stating that this demand was very high. A response from Microsoft is awaited.
Read this story here.