Google spits the dummy
By Martin J Young

HUA HIN, Thailand - Unless you've been asleep all week, you'll already know the big tech story and may be considering the implications of Microsoft's US$44.6 billion bid for Internet stalwart Yahoo!, which has been around since the beginning of the commercial web. The root cause of this bid, according to a number of analysts, is Google, which is certainly not taking this news lying down.

The magic figure offered by Microsoft is based on $31 per share, which was 62% more than the stock's most recent closing price. This makes any attempt by Yahoo to inflate the price or fight for its independence a tough move to make. Microsoft chief executive Steve Ballmer said the buyout could be completed by the end of the year. He rejected suggestions that the takeover would be anti-competitive and continued to state that the creation of a more powerful "number two" to Google on the Internet would be good for consumers.

The scale of the proposed deal has analysts aflutter as they reach for their hype boxes. "If it goes ahead, the Microsoft and Yahoo merger would be one of the major events in the history of the Internet," stated Alex Burmaster from Nielsen Online, an Internet media and market research firm. Tech blogs have been hot with speculation on a possible amalgamation of 250 million Hotmail users and 300 million Yahoo users and whether Microsoft will simply consume its latest acquisition or focus on the overlapping services, clean out the redundancies and concentrate on what each company currently does best.

The fact is that Yahoo has been struggling recently with a falling share price and having to cut its workforce. It simply cannot ignore Microsoft's offer. Some even say the deal represents a show of confidence by Microsoft in the straggling Internet company. Yahoo founder Jerry Yang has tried to reassure staff with a circulated email stating "absolutely no decisions have been made. This proposal is just that - a proposal, you can be sure the board is going to review it thoughtfully and carefully, and do what's right for our great company."

Google, which already has over half the share of the global search market and more than both Microsoft and Yahoo combined, formally responded on its official blog this week. David Drummond, Google's senior vice president, corporate development and chief legal officer, stated, "Microsoft's hostile bid for Yahoo raises troubling questions." Troubling indeed if you look at what a combined force of "Microhoo!" or "Yahsoft" may be capable of.

Google's official response appears loaded with hypocrisy if you read deeper into it; the cyber dummy has been spat. "This is about more than simply a financial transaction, one company taking over another. It's about preserving the underlying principles of the Internet: openness and innovation," stated Drummond, who seemed to neglect to mention the fact that Google's web ranking system and algorithms are a closely guarded secret that play tens of thousands of web developers across the globe like puppets on virtual strings, struggling to keep up with what will appease the almighty search god this month.

The statement went on to ponder on the premise of more control over Internet portals, email, communications and personal computers by the two rivals should they merge; it failed to take into account that Google is doing exactly the same with its recent foray into the mobile-phone market, among other avenues.

It's all very well Google ranting about an "evil empire" and innovation when it is wealthy enough simply to buy it up at will and envelop other companies such as YouTube, Blogger, Picasa and DoubleClick, to name a few. Google may even be considering offering its own partnership with Yahoo, but a bid would be out of the question due to antitrust constraints. What Google really has its eye on is Yahoo's search advertising division which, if outsourced, would yield greater profits for both search companies and leave Microsoft in the dust in that department.

Advertising is a key factor, as Yahoo and Microsoft combined would be able to compete far better for paid search revenues than they can as individual companies. Google has over 80% of the search share in many European countries and almost 60% in the US. Internet research company IDC stated that Google has more than 32% of the US online advertising market, and a combined Microsoft and Yahoo company would have nearly 23%.

Both potential partners also have strong ties to the popular social networking craze that is taking over the Internet. Microsoft has bought a stake in Facebook and serves ads there while Yahoo possesses other popular social networking platforms such as Flickr, Delicious and Yahoo Answers. Together they could offer some serious competition to the Google steamroller. However, this is unlikely to happen for a couple of years, in which time the search behemoth won't be waiting around. The jousting will continue, but the more light that gets shone onto this market will only reveal how much dominance Google already has in it.

Software
Microsoft has rolled out its Service Pack 1 for Windows Vista to manufacturing this week. The first annual update for the operating system is long overdue and it is hoped by the software giant that the glitches will be ironed out and more people will make the switch.

First impressions by analysts and testers are not favorable. While file transfer speed seems to have been improved, many other annoyances seem to linger. Installation, for one, takes a while and requires a number of reboots, and many of the obtrusive security alerts and reminders still remain. A slew of new websites and applications has been released since the emergence of Vista to help users clean out the bloat and streamline the system. Microsoft will release the official SP1 as a download and integrate it into new systems with the operating system in March.

Internet
Conspiracy theorists have had a field day over the recent Internet cable cuts in the Mediterranean following reports of further damage to cables compromising Internet access in the Middle East. With reports claiming up to five cables have been cut or damaged within a week, its no surprise that the blogosphere has been a hotbed of speculation that this is the prelude to World War III.

Everyone from Islamic extremists to the US Central Intelligence Agency has been blamed, but the explanation is far more likely to be something as benign as a fishing boat anchor. Cable repair company Global Marine Systems stated, "Undersea cable damage is hardly rare; more than 50 repair operations were mounted in the Atlantic alone last year. But last week's breaks came at one of the world's bottlenecks, where Net traffic for whole region is funneled along a single route."

Other misinformation comes from the misreporting of how many cables were actually cut. Some publications seem to have counted one twice and other sources attribute bandwidth bottlenecks to power outages and not scuba diving jihadis!

Martin J Young is an Asia Times Online correspondent based in Thailand.