As expected, the U.S. Justice Department has launched an investigation into the two-week test by Google (Nasdaq:GOOG) and Yahoo (Nasdaq:YHOO) to combine parts of their Web search and advertising business.
The two companies told Reuters that they had let the Justice Department know about the test before it was initiated. That of course has no bearing whatsoever on whether it violates antitrust law.
"We informed the Justice Department before we launched this test and we have been responsive to their questions about it," said Google spokesman Adam Kovacevich.
Yahoo spokeswoman Tracy Schmaler said: "Yahoo proactively kept the Department of Justice informed of its intentions to conduct this limited test with Google and have provided information to DOJ on the nature of the test."
Outlook on Yahoo, Google Deal
I would be really surprised if Yahoo and Google were allowed to go forward with their partnership. If this doesn't violate antitrust law, what does? The two companies combine for 80 percent of the search market at this time.
Even though the ads were only spread across three percent of Yahoo's search network in this initial trial, the implications are obvious, and could shake up the definition of antitrust if it isn't stopped. That would have a powerful impact on industries outside the tech sector as well.
The major concern of the Justice Department was the event that led to Yahoo's and Google's actions, which was initiated to try to thwart the offer of Microsoft (Nasdaq:MSFT) to acquire Yahoo, and also the potential of a long-term partnership between the two companies.
Focus is specifically on the phone call between Yahoo CEO Jerry Yang and Google CEO Eric Schmidt, where Schmidt offered Yang help to fend of Microsoft's bid.
I see this as one of the stupidest actions I've seen. When you file an IPO and become a public company, you have the legal obligation to do what's best for the shareholders. The fantasy that Yahoo is going to turn things around has been asserted by company leadership for several years. The offer by Microsoft is definitely a good one, and the Yahoo board has the responsibility to act on behalf of the shareholdres, not whether Jerry Yang doesn't like the way Microsoft may manage the business.
Lawsuits are of course already waiting in the wings if the deal doesn't go through, and more will be added. If Jerry Yang and Yahoo didn't want to be subject to these types of circumstances, they should have kept the company private and had complete control on its future.
Once they went public, they lost the right to act on their own behalf and personal desires or outlooks.
If Yahoo and its leadership would have performed strongly over the last several years, shareholders may have been with them more in fighting off the overtures of Microsoft. Of course if they had done well, even Microsoft may not have been able to afford them with a higher valuation.
This is probably more of a move by Yahoo to buy some time, but time is running out, and Microsoft CEO Steve Ballmer has set Saturday as a deadline for acceptance or rejection of the offer.
When you come right down to it, no matter what the assertion about looking for other deals, this is the only viable possibility at this time for Yahoo, other than taking the chance on shareholder lawsuits if they refuse it.
Comment Preview