Tuesday, July 15, 2008
Yahoo Google Senate Antitrust Hearing
I wasn't planning to write anything about Microhoo until there were any 'new' developments, but if the U.S. Senate Judiciary Committee is getting in on the act, I figure its time to update. The Senate Judiciary Committee's Subcommittee on Antitrust, Competition Policy and Consumer Rights is holding an anti-trust hearing on the Google-Yahoo search advertising agreement, and in attendance are Michael Callahan, General Counsel, Yahoo! Inc., David Drummond, Senior Vice President Corporate Development and Chief Legal Officer of Google Inc., and Brad Smith, Senior Vice President and General Counsel for Microsoft Corp.
In his opening statement, Yahoo General Counsel Michael Callahan said that "With this business arrangement, Yahoo! will continue to execute on its long term corporate strategy. Microsoft, on the other hand, has turned to activist shareholder Carl Icahn, in the apparent hope that this will force a fire sale of Yahoo!’s core strategic search business."
He also made the rather ironic observation that this deal with Google will help Yahoo compete better against Google... Anyway, very little about this whole saga makes any sense, so its better not to quibble over the little details.
David Drummond, Google's Chief Legal Officer, topped that off by flatly declaring that they had no need or requirement to get approval from antitrust authorities prior to implementation. And he then proceeded to top himself with a perfectly geeky opening statement which dealt more with the technological aspects of the agreement than with the financial or market implications. That's probably the result of spending too much time playing ping-pong with the geeks at Google Labs....
Microsoft General Counsel Brad Smith then proceeded to throw a wrench into the deal by claiming that the Google-Yahoo deal hinders competition in critical ways. "Advertisers and online content providers would be harmed through price coordination that will establish higher prices and limit choice", he said.
Senator Patrick Leahy (D-VT), Chairman of the Senate Judiciary Committee, was more concerned about the privacy implications of Google getting access to data on Yahoo's users, and said that "The ability of a single company to dominate the online advertising marketplace also raises the specter that one company will accumulate vast amounts of personal viewing data. This leads to significant privacy concerns, an issue on which I will remain focused as the online advertising market continues to develop."
For the record, Google and Yahoo have done some limited testing but have held back from implementing the deal, pending an antitrust opinion from the Justice Department. Anything to be noted from this talk-fest? Well, a couple of points, maybe. First, that considering the battalion of Microsoft lobbyists waiting to lubricate the "Wheels of Justice", its highly unlikely that the ad deal is going to slip by Congress, or the DOJ, anytime soon.
Second, there's the question of what happens if the deal gets scrapped. What happens is that Yahoo needs to pay Google $250 million. Meaning that if Icahn and/or Microsoft get their hands on Yahoo, then add another $250 million to the acquisition costs. This would be on top of the costs for the change in control severance plan aka the poison pill, and other integration issues that any buyer/buyers would face.
That brings us to another question. At this stage, one of the possible results of this tech opera is a split, breakup and sale of Yahoo to various parties. If that happens, who exactly is going to pay all these add-on costs? Probably Microsoft, since they're the driving force behind this deal.
Side note: After reading the statements from all parties concerned (Icahn, Yahoo, Microsoft) about the recent '24 hour take it or leave it' offer, I think its fair to say that Icahn got a bit carried away, and Ballmer got taken in by Icahn's assurances. Be that as it may, Icahn has filed a definitive proxy, and everybody is ready and primed to duke it out, from Washington to Wall Street to Silicon Valley. 15 days to go. August 1 2008, either Yahoo shares will soar past $30, or they'll crash to around $18 or so.
In his opening statement, Yahoo General Counsel Michael Callahan said that "With this business arrangement, Yahoo! will continue to execute on its long term corporate strategy. Microsoft, on the other hand, has turned to activist shareholder Carl Icahn, in the apparent hope that this will force a fire sale of Yahoo!’s core strategic search business."
He also made the rather ironic observation that this deal with Google will help Yahoo compete better against Google... Anyway, very little about this whole saga makes any sense, so its better not to quibble over the little details.
David Drummond, Google's Chief Legal Officer, topped that off by flatly declaring that they had no need or requirement to get approval from antitrust authorities prior to implementation. And he then proceeded to top himself with a perfectly geeky opening statement which dealt more with the technological aspects of the agreement than with the financial or market implications. That's probably the result of spending too much time playing ping-pong with the geeks at Google Labs....
Microsoft General Counsel Brad Smith then proceeded to throw a wrench into the deal by claiming that the Google-Yahoo deal hinders competition in critical ways. "Advertisers and online content providers would be harmed through price coordination that will establish higher prices and limit choice", he said.
Senator Patrick Leahy (D-VT), Chairman of the Senate Judiciary Committee, was more concerned about the privacy implications of Google getting access to data on Yahoo's users, and said that "The ability of a single company to dominate the online advertising marketplace also raises the specter that one company will accumulate vast amounts of personal viewing data. This leads to significant privacy concerns, an issue on which I will remain focused as the online advertising market continues to develop."
For the record, Google and Yahoo have done some limited testing but have held back from implementing the deal, pending an antitrust opinion from the Justice Department. Anything to be noted from this talk-fest? Well, a couple of points, maybe. First, that considering the battalion of Microsoft lobbyists waiting to lubricate the "Wheels of Justice", its highly unlikely that the ad deal is going to slip by Congress, or the DOJ, anytime soon.
Second, there's the question of what happens if the deal gets scrapped. What happens is that Yahoo needs to pay Google $250 million. Meaning that if Icahn and/or Microsoft get their hands on Yahoo, then add another $250 million to the acquisition costs. This would be on top of the costs for the change in control severance plan aka the poison pill, and other integration issues that any buyer/buyers would face.
That brings us to another question. At this stage, one of the possible results of this tech opera is a split, breakup and sale of Yahoo to various parties. If that happens, who exactly is going to pay all these add-on costs? Probably Microsoft, since they're the driving force behind this deal.
Side note: After reading the statements from all parties concerned (Icahn, Yahoo, Microsoft) about the recent '24 hour take it or leave it' offer, I think its fair to say that Icahn got a bit carried away, and Ballmer got taken in by Icahn's assurances. Be that as it may, Icahn has filed a definitive proxy, and everybody is ready and primed to duke it out, from Washington to Wall Street to Silicon Valley. 15 days to go. August 1 2008, either Yahoo shares will soar past $30, or they'll crash to around $18 or so.
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