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Mar. 17, 2008

Some critics are saying that Microsoft's plans to acquire Yahoo might not be such a good idea after all. They say that, long-term, it wouldn't serve the Internet community in the best interest, the way a 'Neutral Yahoo' would.

Not surprisingly, one such critic comes from Google's CEO Eric Schmidt. Without citing specifics, Schmidt added that his observation is based on "the things that Microsoft has done that have been so difficult for everyone."

Schmidt also added that Google "would be concerned by any kind of acquisition of Yahoo by Microsoft." Schmidt said that to reporters during a recent visit to Beijing.

To most people, it's relatively easy to guess what he was referring to, among other things, Microsoft's long history of antitrust battles both at home and with the European Union, which has continued to fine the software giant for not complying with sanctions on the pricing structure Microsoft had set for licensing of its operating systems, its interoperability protocols and many other patents.

The European Commission, the EU's regulatory body, initially fined Microsoft $424 million for failing to provide complete and accurate interoperability protocol information to rivals.

That followed the EU's original decision on the matter four years ago, which was upheld by the European Court of First Instance in October 2007. Microsoft's intransigence on licensing prompted another EU fine, this time for the astronomical sum of $1.35 billion last month.

The irony in this specific case is that the EU's approval two weeks ago of Google's proposed acquisition of advertising services specialist DoubleClick, probably intensified pressure on Yahoo, which will face even more competitive pressure now that the $3.1 billion Google-DoubleClick merger has closed, to even consider Microsoft's offer.

Overall, Microsoft's bid to acquire Yahoo was initially valued at $31 a share, although informal talks said to be taking place between the two companies could reshape the terms of the proposed deal.

Then Yahoo's board formally rejected Microsoft's offer on February 11.

Schmidt closed with reporters by saying "we would hope that anything Microsoft did would be consistent with the openness of the Internet, but I doubt it will be. We shall see how this matter evolves and in which direction it will lead."

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Source: Tech Blog.