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Google's Victory

By Reuters -  |  Posted 2008-05-06 Print this article Print

Yahoo stock rises after falling significantly.


Microsoft courted Yahoo to capitalize on the rapidly growing market for Internet advertising, one that has long been served by Yahoo's search, e-mail and Web communities.

It is also trying to fend off the expansion of Google, which has made inroads into Microsoft's home turf with a portfolio of Web based-applications, e-mail and messaging.

But now that a deal has fallen apart, Google has emerged as the key beneficiary. Not only has the creation of a larger competitor been averted, Google may also reach a partnership with Yahoo to deliver some of its paid search listings.

Google and Yahoo are hammering out the intricacies of a potential deal and also are sharing their plans with antitrust regulators, a person close to Google, who was not authorized to speak publicly on the matter, said.

A Google deal would boost Yahoo's operating performance in the near term, but runs the risk of regulatory scrutiny over an alliance between the Internet's top two players.

In a letter to Yang over the weekend, Ballmer warned that any deal between Yahoo and Google would be difficult to unravel and would preclude an agreement with Microsoft.

Yang told Reuters the company would take care to structure any new efforts to "preserve as much (as possible) long-term flexibility for Yahoo, both operationally and strategically."

(Additional reporting by Tiffany Wu and Kenneth Li in New York, Muralikumar Anantharaman in Boston, Anupreeta Das in San Francisco and Peter Henderson in Los Angeles; Editing by Brian Moss and Rory Channing)

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