Google Rebuffs Microsoft Takeover Bid

Chris Gondek writes "The Sydney Morning Herald has posted that Internet search leader Google has rejected a takeover bid from Microsoft in favour of selling its shares directly to the public. According to The New York Times (Login Required), Google wishes to sell only about $US2 billion worth of shares to the public."

Comments

Good

[The One KEA]

Looks like the management at Google understand the situation. Only selling about $2 billion USD will get them the funds they need to expand, but without the risk of a hostile takeover. Let's just hope that the voting shareholders don't defect to Microsoft. Or to anyone else.

Re:Good

[Anonymous Coward]

What is the real reason for going public when they clearly do not need to....

To allow people who currently have a stake in the company to sell part of it for cold hard cash?

Re:Good

[Prof.Phreak]

they're valued at 15bil? and they only make 50mil a year?... Hmm... that's like 300 times their yearly... wow... one really has to wonder about these valuations... (and be an idiot to buy stock that's this overvalued)

Is this another tech-bubble, or am I missing something?

Re:Good

[Bodrius]

Do you know how many people still think that Yahoo is still the "Internet Home Page", simply because it was the first page they learned about 5 years ago?

From my experience with a lot of users, practically none. Few of them remember what page they were visiting 5 years ago.

Most people still think Yahoo is "the Internet homepage" because IT IS: Yahoo is the default home page in their machines, and has been ever since they got a computer with a home page.

Now, ask how many of them use it as a search engine? The number decreases dramatically to almost nil.

Yahoo made a brandname of itself for the Internet, because it had a better opportunity to do that than anyone else. But the identification of their brandname has moved to the products where they are still competitive. The name itself did not buy them much "Internet time".

Do you think that AOL is the biggest ISP because of value?

YES.

If you are so elitist and blind not to realize that what the average user values is very different from what you value (or myself, for that matter), that's another matter.

I may prefer rusted nails through my eyeballs to use AOL instead of plain Internet access, but that's because what I value of the Internet is different from what other users consider useful/important.

For many users, AOL IS the Internet, and they're very happy with that concept. It's not just marketing: Microsoft was unable to take over that market, and few are as marketing-savy. It's not just network effect, although there is a lot of that which would force MS or anyone else to come up with a MUCH better product to compete, rather than a marginal one.

The fact is that users have a lot of choice for ISPs, but they CHOOSE AOL. Every time their OEM, local PC consultant, telephone company, techie neighbor, etc. tries to convince them to switch (which is about every day for a lot of them) they stick to AOL.

AOL provides them with added value:
An integrated client with cute graphics that limits their options to something they can manage. An icon so they can "launch" the Internet. A messenger system so they can talk to their friends. An application that installs nicely (even if it breaks the rest of the system) without them worrying about configuring "network connections", dealing with IP addresses, etc. A network of equally non-techie friends using AOL that can provide "expertise" without the bills or the constant mocking of the local geek.

There is a significant difference in the system of values:
- The fact that you can do each task better with another application is not as attractive to them because it increases the complexity of "the Internet" for them.
- The fact that you can do things not defined by the AOL client also increases the complexity of what "the Internet" is more than they want.
- Tha fact that the AOL client almost always breaks something else does not seem a problem with AOL to them, because it's always something ELSE that breaks, not AOL.
- The fact that AOL is a big memory and CPU hog for what it does is not a problem, because they got a P4 from Intel to "speed up the Internet".

Average users don't want plain-Internet-access. They WANT something like AOL. They don't want flexibility, they want something that encapsulates the Internet: what the AOL client lets them do with a button, is what the Internet is.

This will change over time, as the concept of the average user, or rather, the average consumer (the guy paying the bills) changes.

Thank God...

[KD5YPT]

Well, looks like Google just throw down the gauntlet against Microsoft. Now, it is time to see whether public support or big money business will win out.
And as a side note, let's buy Google stock when they come out to show our support.

Re:Thank God...

[Davak]

I thought that way too... ...then I bought yahoo.

Google will open very, very strong... and then lose down after the fireworks are over.

Once it settles, then buy! Look at the yahoo chart above to see about what I am speaking.

I agree buying google... just wait until the right time.

Re:Thank God...

[BigRedFish]

time to see whether public support or big money business will win

Methinks accurate results relevant to the search performed will always win. The search engine landscape is littered with 'portals' that don't do jack - when I search for, say, 'KDE 3.2 beta KWin C++ API' and get back 'Buy books about C++ at Amazon.com!', 'Microsoft Visual C++ Studio 50% off!' and so on for the entire first page, I'm outta there and will never go back. Point being, when I hit a search engine it's because I'm looking for links to specific information, not someone to 'manage' my 'internet shopping experience'.

I wonder how many hits on Google are from research assistants, paralegals, programmers, etc. compared to how many are looking for an 'internet shopping experience?' Does Yahoo! think everyone's going to Google because they don't have enough paid links and useless portal categories cluttering up the page at Yahoo!?

I have no idea who the target market is for so many of these sites. There must be someone who sits down at the computer, credit card in hand, hoping a window will pop up allowing them to buy something - anything! - on the Internet. I think this someone only exists in the marketing department's imagination, though. I've never met that person.

Kudos to Google for just saying no. Both to intrusive advertising, and to the do-it-all portal concept that ends up donig nothing well.

good move

[stonebeat.org]

indeed a good move. if MS had purchased google, google would have lost lots of linux users.
similar to what happened to hotmail.

Evil

[Davak]

I can not imagine anything more evil that microsoft + google. Microsoft would be unstoppable.

Fear.

Davak

Re:Evil

[dolo666]

OpenGoogle.com would become a reality if that ever happened. Microsoft would simply push users away to a free, opensource service using possibly better algorhythms.

Remember folks... the only reason people use Google is because it's not bastardized with corporate greed (or at least it has engineered the proper tact levels to offset any money-making going on!).

Re:Evil

[HuguesT]

And who would pay for the thousands of servers, the huge quantity of RAM, the electricity bill, the rent, etc? Google is a lot more than just clever algorithm, it's also a very fast caching system of pretty much the whole internet, and the two go together.

I don't think a distributed effort like SETI@Home would cut it there.

Cheers.

Re:Evil

[gordgekko]

Christ, with people like you I can justify any action short of buying an ad delivery vehicle masquerading as a search engine. Shoot women and children in the back of the head and bury them in a deep hole? Evil. Buy Google? Beyond evil. I can imagine you being herded into the gas chamber shouting, "At least they don't control the Internet!"

Re:Evil

[Tyrell Hawthorne]

Remember folks... the only reason people use Google is because it's not bastardized with corporate greed

Actually, I don't think most people are that idealistic. The reason most people, including myself, use Google is simply because it's the best search engine. Now for the reason why we like Google so much, I'm sure it has a great deal to do with the fact that they aren't greedy, among other things. Their stance on censorship of search results also comes to mind.

Re:It's questionable

[KD5YPT]

I don't think they have a choice letting people know that Microsoft is trying to buy them. Sure it boost their profile well, but I think the media would have dug this up even if they don't announce it. Google might just be trying to come out clean so no one would speculate about anything. Of course, the announcement helps with their IPO evaluation price, two birds with one stone.

Re:It's questionable

[SiliconBateman]

The great thing about Google is its brand (people trust it etc). Only too often old-world ideas like brand and loyalty are forgotten in 'tech-business'... a brand is a great thing, yes it can be lost but its initial value is great and needn't be lost if cards are played right.

Impact on Internet Stocks in General

[Yxes]

I'm guessing that investors will go crazy once again having an Internet stock to bet on. This will push the value of the stock up through the roof as we've seen happen with past companies. By only putting out a small percentage (less than 1/10th of the company) it will also unduly raise the total percieved value of the company exponentially.

The problem is that though most industries have a set valuation on shareholders equity in regards to a multiple of earnings, Google is in a league of their own. This allows investors the opportunity to become speculators and instead of looking at the fundamentals and I predict we will see claims of Google becoming as big as Microsoft on paper.

Early investors will cash out at that point (as the article mentions) and the rest of us are left holding the bag. However those early investors will now have cash to start the process again and we may very well see another albeit smaller run on Internet stocks with the momentum generated by Googles rise to power.

Smart, and not the least bit defensive

[gregwbrooks]

A few assertions about why Google is playing this smart:

• Google is not worth the $15 billion that was being bandied about. It's a very, very safe bet that they're worth more than $2 billion, however, so issuing the smaller portion of stock gives the owners and primary investors comfortable control of the company while at the same time reducing the future volatility of the stock by some measure because there's only so much of the company that can be bought in a hype or sold in a panic.
• Denying MSFT the right to buy denies them their primary business strategy. Microsoft's history is rife with buying an innovation and then tweaking it to fit their overall business model and product line. They're not innovators nearly so much as they are purchasers and tinkerers. If Google isn't on the menu, then getting a leg up on search means they'll have to buy someone else or invent something more compelling than Google internally. History gives better odds to the former than the latter.
• Search today is like the 386 processor was a decade ago, and Google understands this. Ask Microsoft what they want from search, and they'd probably point to more ad sales, integration of a core web functionality into the OS or something similar. Ask the Google folks about search and they want ad sales too -- but the also have a building full of smart people thinking about what search is going to be like 5, 10 and 20 years from now. And guess what: It's going to be pervasive as hell, a whole lot smarter and a whole lot more vital to your day-to-day life. I wouldn't understimate the cluefulnes off the Google folks on this front, which is why I think it's grand that they're choosing to control their own destiny for now.

Re:US Gov should buy google. (not a troll)

[iggymanz]

the government would ruin it (whether liberal, moderate or conservatives in power at the time)..."naughty" searches (by whatever definition) being flagged, "naughty" results being censored, etc.

RedHat is still giving away a "free" (as in gratis) distribution. But maybe Federa seemed too "bleeding edge" for you? I'm giving it a test spin on my home box & it's pretty good so far.

The other search engines are useful, though google is my favorite. It is interesting sometimes to compare the results each give on a topic. The world would not end should something happen to google.

Just shows the need for a free/libre search engine

[iceco2]

So we managed to dodge one bullet, forgive me if I am not jumping up and down. Not only could M$ still try to gain controll over google, We all saw problems with google earlier when they fanagle search results for no good reason.

We all love google we use it every day, but it must be replaced. Replacing google has two problems the software and the hardware. The software is by far the easier one, the general techniques that google uses are well known, and the good guys don't have a shortage of good programers.

The Hardware requires money, a lot of it if you want to compete with google. IMO the solution would be to design a system capeable of working efficiently on a google like setup with dedicated linux clusters around the globe, but also capeable of taking advantage of every half stable server someone can donate somewhere on the globe.

Initially search times would be slow, but money can be raised, to add the servers necessary, A free google alternative must and therfor will be produced.

Me.

Re:It's questionable

[Alomex]

Microsoft has thousands of employees and 50 bil in the bank, which pretty much allows them to develop any search technology they want and hire the best people in the industry.

Only problem with your theory is that I'm personally aware of nine previous failed search engine efforts from Microsoft.

Keep in mind

[mindstrm]

that the article you reference doesn't KNOW how google makes it's money, they GUESS.
Google is a private company, and does not have to disclose where it's profits come from, so it's just speculation based on observation.

It sounds reasonable.. but isn't necessarily true.

Well...

[autopr0n]

I think it's kind of silly to claim everyone is being dense when they say google is a "search engine bussness". Google only started selling advertizing on other sites a couple months ago!

Before that, they only sold advertizing on their own site. They were advertizing, sure. But that's like saying slashdot is an 'advertizing site', or Law and Order is an "advertizing show" or something.

Re:US Gov should buy google. (not a troll)

[jhujoe]

I think many people are making the poor assumption that Google is somehow "untouchable" by any sort of a competitor in the search engine space.

If, for whatever reason, Google becomes crap and no longer worth using, something will come along to replace it, and will most likely be even better.

You suggesting that the United States government should have control over the (currently) most important search engine in the world, is somewhat laughable, and sad. In fact, it is a sure prescription for Google's immediate failure and inability to adapt to the market, as is evidenced by the poor quality of every public service offered by the government when compared to their private sector counterparts.

what's the deal?

[dh003i]

I'm glad that Google decided to maintain their independence, but what would be so bad if they were taken over by MS? After all, it is the decision of those who currently own Google, not ours. They're going to make a decision based on what they think is good for them and their company.

remember hotmail.

[Dark Fire]

hotmail was a great service and I had an account when I was in college. I remember the day that I found out that microsoft was taking over hotmail. I signed up for a yahoo account. I held on to my hotmail to see if the quality of the service would drop. It was ok for a while, then I saw rumors of microsoft trying to convert hotmail over to its technology. The service started becoming very unreliable, it sometimes took 3 months to get an email through. To this day, the service still has problems, it took many years for them to get the service to the point that you could rely on it again. Microsoft has never release any information on the hardware required to run hotmail. I would speculate that the cost of the software/hardware to run hotmail most likely would make the service infeasible by anyone but microsoft since hotmail probably either gets the software for free or at a discount. The hotmail switch was made in order to prove microsoft's technology to other people. The amount of $$$ spent getting it to where it is today must have been staggering.

Now look at google. They use about 8000-10000 linux 1u servers to run their software. Imagine how long it will take microsoft to switch google's software over to their technology. And the cost? Will it even be possible with 1u servers? Or will they need huge 32 processor unisys servers running windows datacenter? google will go down the tubes if microsoft takes them over because they will try to port google's software from the linux platform to the windows platform, and money will be no object.

Hopefully, google won't sell out.

On a side note, it makes microsoft look pretty desperate since they were bragging about working on technology to defeat google just the other day. Apparently it must be a much more monumental task than they originally envisioned...

Re:US Gov should buy google. (not a troll)

[Malcontent]

The DNS registry worked great under the govt. When it was privatized it went to hell.

Paul Ryan - fear him Google

[treeslasher]

This guy is good. Formerly the CTO at Overture. Now with MSN Search.

Clean as Google

[presearch]

Google needs to stay clean and as independent as possible until
the grow about 10x. At that point, they've got something that's
-really- interesting.

If they have even the smallest partnership with M$, it will poison
them and they will die, as it has poisoned all of those companies in the past.
M$ involvement would only be good for M$, not for Google's users,
it's customers, or the company itself.

It will be difficult to resist temptation up to the 10x point, but by
then even M$ will be marginalized. Should be fun to watch.
Good luck guys. Keep it pure.

Very Interesting???

[ratfynk]

Just for a laugh I decided to try the acid test. I searched Google for linux Results; (top 6)

News: The Linux Documentation Project Turns 10 - Slashdot - 31 Oct 2003 Motorola Launches Linux-Based Phone - PC World - 31 Oct 2003 Try Google News: Search news for linux or browse the latest headlines

The Linux Home Page at Linux Online Linux Online, ... Linux is a free Unix-type operating system originally created by Linus Torvalds with the assistance of developers around the world. ... Description: Comprehensive information and resources about the Linux Operating System. Category: Computers > Software > Operating Systems > Linux > Directories www.linux.org/ - Similar pages

Linux.com: Linux news, information, software, documentation, and ... Linux.com, New to Linux? Start Here. October 31st, 2003, ... Click Here. Linux News, section sponsor. IBM eServer xSeries + Linux: get IDC report. - Latest News -. ... Description: A Linux portal and directory. Category: Computers > Software > Operating Systems > Linux www.linux.com/ - 58k - 1 Nov 2003 - Cached - Similar pages

Red Hat -- Linux, Embedded Linux and Open Source Solutions Red Hat is the destination for Linux, Embedded Linux, and open source solutions. We provide Linux-based support, documentation, downloads, training. ... Description: Official site; news, support, documentation, whitepapers, downloads, consulting, training, embedded... Category: Computers > Software > ... > Linux > Distributions > Red Hat www.redhat.com/ - 29k - 1 Nov 2003 - Cached - Similar pages - Stock quotes: RHAT

Debian GNU/Linux -- The Universal Operating System Debian GNU/Linux is a free distribution of the GNU/Linux operating system. It is maintained and updated through the work of many ... Description: Official site. One of the most important distributions, uses only Free Software as defined by FSF.... Category: Computers > Software > ... > Linux > Distributions > Debian www.debian.org/ - 17k - 1 Nov 2003 - Cached - Similar pages

The Linux Documentation Project is now on tldp.org The Linux Documentation Project is working towards developing free, high quality documentation for the Linux operating system. The ... www.linuxdoc.org/ - 16k - 1 Nov 2003 - Cached - Similar pages

The Linux Kernel Archives The Linux Kernel Archives. Welcome to the Linux Kernel Archives. ... Many thanks for your support! The Linux Kernel Archives Mirror System. ... Description: This is the primary site for the Linux kernel source. Category: Computers > Software > Operating Systems > Linux > Kernel www.kernel.org/ - 18k - 1 Nov 2003 - Cached - Similar pages

Then I searched MSN

RESULTS (TOP 6)

FEATURED SITES - ABOUT # Amazon.com Buy Linux software at the Amazon.com software store. www.amazon.com

# eBay Find great deals on Linux software and accessories. Also find millions of other items in over 18,000 categories. www.ebay.com

# Introducing Linux Find the latest news and information on this operating system. tech.msn.com

# Alternatives to Linux-Apache-MySQL-PHP Learn about the Microsoft alternatives and how to move to them from open source products. www.microsoft.com/serviceproviders/migration

WEB DIRECTORY SITES - ABOUT # Linux Online Provides support, advice on getting started, a bookstore and sections for downloading applications, hardware, and distributions. www.linux.org

# Linux Journal Previews the upcoming issue and presents selected articles from past issues. Includes subscription details and related links. www.linuxjournal.com

If you follow the google links you can actually easily find out linux distros and learn about lots about linux. All and all it goes to show how a search engine can slant results in favour of a company. To alow MS to take over internet search is like sending the mouse to see the cat.

Re:US Gov should buy google. (not a troll)

[jqstm]

What about about all the folks outside the US that use google(e.g. www.google.de)? Would the US gov be interested in maintaining the foreign language sites?

How about all those other search engines that work reasonably well? Would it be fair to these other companies to have a government subsidized search engine?

-jq

Re:US Gov should buy google. (not a troll)

[4lex]

What about those of us who do not live in the states? I would not like that all this power goes to a country. US is not better to me than MS. What about a more neutral entity, which is supposed to care about us, and not only about you?

What about the UN? What about the UNESCO? If it is a public good, then why shoud it be public=US, and not public=humanity?

(Just a thought).

Re:US Gov should buy google. (not a troll)

[kalinh]

Oh, I had the exact same idea as you! Except the year was 1996 and the site was Altavista. Couldn't live without it. Thank Goodness the government didn't nationalize and subsidize them making the emergence of Google as a successful, profitable, private, limited liability corporation next to impossible. But now that we have Google maybe we should reconsider your plan, I mean, nothing could ever get better than this, right?

Sure, Google may have come from nowhere to become profitable while providing a huge amount of value not only to the people who risked piles of time and money on the enterprise, but also to the public at large and their customers. But of course mutual benefit through voluntary association and private property just usually isn't possible in a capitalist system, this is an anomaly and it must be protected.

I also rely on Debian daily for job related activities; I know a lot of people who do. Maybe final decision making power for Debian should be removed from the technical committee and developers and transfered to an appropriations committee of the US Dept of Commerce. I mean, can we really risk such an important piece of technology to a bunch of private individuals. I even heard that one of the former DPLs played a major role at a major corporation in the motion picture industry, while he was involved with Debian!. We all know how greedy and untrustworthy that type is; there is no way of telling how he may have subverted Debian when he had control of it.

Ok now that I've pulled my tongue out of my cheek, could I ask you to put down the Adbusters and spend time every day really thinking about these wonderful things that we rely on and where they came from? Also think about the real freedom to innovate and how that could start to be lost.

And if you do the honourable thing and keep your emigration pact with Alec Baldwin, please don't come to Canada.

Re:Stupid

[vidarh]

Teoma may do the same as Google, but are they making money? And are they making as much as Google? If you are to invest in Google, you should invest in the customer base (advertisers) and userbase and the ability to sustain and grow that business, not the technology.

It's not important whether Google is the best search engine or not, and whether or not they can maintain the technical lead.

What IS important is whether they manage to maintain SUFFICIENT quality that they can maintain or grow enough of a userbase that their marketing and sales force manages to grow their ad revenue.

What also matters is whether they restrict their tech. spending to only what is needed to maintain that position, rather than going overboard and insist on trying to be the best whatever the cost - it might very well be better for business to let someone else take the lead and copy what they do, even when factoring in the risk of patents restricting them.

The point is the search engine business is mostly an advertising business. They need eyeballs and clicks, and that is as much based on reputation, marketing and inertia as it is on technical excellence.

(Disclaimer: I work for Yahoo, which owns lots of search engines that competes with Google)