The US House Judiciary Committee will hold a hearing next week to scrutinize Microsoft's multibillion-dollar bid to acquire Yahoo in order to take on Internet goliath Google.
Leading members of the committee scheduled a hearing for Friday after Microsoft announced it is courting California-based Yahoo with a US$44.6 billion offer.
"Microsoft's bid to acquire Yahoo is certainly one of the largest technology mergers we've seen and presents important issues regarding the competitive landscape of the Internet," representatives John Conyers and Lamar Smith said in a written statement. "The committee will hear from experts who will weigh in on whether this proposed consolidation works to further or undermine the fundamental principles of a competitive Internet."
Conyers, a Democrat from the state of Michigan, heads the judiciary committee and Smith, a Republican from Texas, is a member.
The committee's Antitrust and Competitive Policy task force will hold the hearing to give the idea of a Microsoft-Yahoo merger "careful examination," the congressmen said.
Yahoo has yet to say whether it will accept Microsoft's offer, but analysts believe it is too good a deal for the struggling Internet veteran to refuse and that US regulators are unlikely to find grounds to stop it.
The deal could reshape the landscape for high technology by combining Microsoft and one of the leading brands on the Internet.
The move comes as Yahoo is losing ground rapidly in the Internet space to Google, a search leader that has cashed in on the market for online advertising.
California-based Google is challenging Microsoft in cyberspace. It beat out the Redmond, Washington giant in buying hot video-sharing Web site YouTube and online ad-targeting colossus DoubleClick.
Google is also ramping up offerings of on-demand online software that compete with Microsoft products.
"Google is moving more and more into Microsoft's territory and it was about time Microsoft went on the offensive," Briefing.com analyst Kimberly DuBord said.
Microsoft and Yahoo Web sites combined get 15.6 percent of all online traffic in the US, while Google gets 7.7 percent of Internet visits in the country, according to Hitwise statistics from the end of last month.
But when it comes to online searches, Google rules with 65.98 percent of the US market, Hitwise reported.
Google's dominance in search and the low barrier of entry into the market are expected to ameliorate antitrust concerns and clear the way for a Yahoo-Microsoft merger, should such a deal be struck.
Microsoft said it believes the proposed combination would get a stamp of approval from regulators and be completed in the second half of this year.
The Microsoft bid, the biggest ever in the tech sector, is what is known as a "bear hug," since it represents a premium so large -- around 62 percent -- that investors and board members may find it hard to resist.
"It's clear that Microsoft is facing increased pressure from their competition with Google and this is a bold move for them to make, especially given [chief executive Steve] Ballmer's disdain for doing large acquisitions like this," said Michael Gartenberg, analyst at Jupiter Research.
Erick Schonfeld of the Web site TechCrunch said: "This is an advertising play for Microsoft. It wants to combine the scale of its recently acquired advertising networks with that of Yahoo's, along with Yahoo's vast consumer reach."
Citigroup analyst Mark Mahaney said that Microsoft's bid for Yahoo "makes sense" from a broad Internet perspective.
"For Microsoft, or any other company seeking to gain scale in Internet advertising, Yahoo is an obvious strategic choice given its position as one of the top three Web properties worldwide," Mahaney said in a research note.
He said that if Yahoo wanted to remain independent, it will have to show investors that it is willing to take "radical, value-creating steps."
Yahoo said it was examining the "unsolicited proposal" and added that its board "will evaluate this proposal carefully and promptly in the context of Yahoo's strategic plans and pursue the best course of action to maximize long-term value for shareholders."
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