Google offers Yahoo help to rebuff Microsoft's bid

Google has entered the fray in Microsoft's unsolicited $44.6 billion bid for struggling internet company Yahoo by suggesting that it would hamper the "openness of the internet".

Google published a statement at the weekend which said the bid raised "troubling questions".

The Wall Street Journal also claimed that last Friday Google chief executive Eric Schmidt rang Jerry Yang, his opposite number at Yahoo, and offered Google's support in rebuffing Microsoft's offer.

Yahoo executives are reported to be considering an alliance with Google to keep Microsoft at bay.

In a blog post entitled "Yahoo and the future of the internet", Google's chief legal officer David Drummond, said if Microsoft acquired Yahoo it would threaten the "openness and innovation" that has underpinned the internet.

"Could Microsoft now attempt to exert the same sort of inappropriate and illegal influence over the internet that it did with the PC?," asked Mr Drummond. "While the internet rewards competitive innovation, Microsoft has frequently sought to establish proprietary monopolies - and then leverage its dominance into new, adjacent markets."

In response, Brad Smith, Microsoft's general counsel issued a statement which said the combined company "will create a more competitive marketplace by establishing a compelling number two competitor for internet search and online advertising".

Mr Smith also pointed to Google's dominance of the search-related advertising market, where it has a 75 per cent market share. According to its offer letter Microsoft is primarily interested in Yahoo to enhance its ability to compete with Google for a share of the online advertising which was worth $40 billion last year. Microsoft believes it can get 40 per cent of that market by combining with Yahoo.

Microsoft chief executive Steve Ballmer stated that Microsoft needs to compete aggressively against Google in providing web services.

Yesterday, Microsoft stepped up the pressure on Yahoo's board by saying it expects it to agree to the deal quickly. "We trust the Yahoo board and the Yahoo shareholders will join with us quickly in deciding to move down an integrated path," Mr Ballmer said.