INTERNET

Internet giants parry blows in Web slugfest

Thursday 10 April 2008

It looks like the prizefight for heavyweight Web search-engine champion is going into extra rounds.

 
Two months after Microsoft popped its unsolicited $44.6 billion bid for Yahoo, the affair is turning into a high-stakes slugfest, with a possible proxy fight in the offing and new contenders entering the ring.
 
Yahoo rejected Microsoft’s $31-a-share bid as too low in the early rounds of the takeover fight.
 
Since then, much of its presumed strategy has hinged on keeping Microsoft at bay while it courts possible allies – perhaps forcing the software giant to raise its bid.
 
In the absence of a sizeable sweetener that made a merger more palatable, Yahoo would regard its independence as paramount.
 
Microsoft’s CEO, Steve Ballmer, fired off an ultimatum to Yahoo’s directors at the weekend threatening to take its case directly to Yahoo’s shareholders unless Yahoo softens its stance.
 
The prospect of a bloody proxy battle is generating some creative strategies.
 
Yahoo, which some analysts say has been on the ropes, is, according to reports, fighting back with a combination of stiff upper-cuts.
 
According to the Wall Street Journal, Yahoo is in talks with Time Warner's AOL on a deal to combine their Internet operations. The paper says Time Warner would fold its Internet unit into Yahoo and pony up a cash investment in return for a roughly 20% stake in the combined entity.
 
At the same time, Yahoo is also reportedly talking to Google about an advertising deal. The idea would be to give Google's advert technology a trial run on a limited number – maybe 3% of total searches - of Yahoo-originated Web searches.
 
Yahoo’s stepped-up sparring, the reasoning goes, could destabilize Microsoft and force it to sweeten its offer.
 
Meanwhile, Microsoft is said to be in its own talks with Rupert Murdoch's News Corp. about teaming up to take over Yahoo.
 
NewsCorp. is a mighty player in its own right, owner of the MySpace social networking site. Fusing it with Microsoft's MSN network and Yahoo’s search engine would spawn a Web juggernaut. That’s one reason why such a prospect (or a Yahoo-Google collaboration) would reportedly raise the hackles of antitrust regulators.
 
Whatever the outcome, this fight may be going into extra rounds.