Yahoo! Deal's Biggest Hurdle: Government
Still, some argue that Microsoft could use its dominance in the PC business to gain a stronger hold of the Internet space.
Gary Reback, an attorney for Palo Alto, Calif.-based Carr & Ferrell, maintains that Microsoft is not simply looking at Yahoo!'s ad-based searches as the sole reason for merging companies, pointing to Yahoo!'s content as additional incentive.
"I don't think it's just about search," says Reback, noting that the combined entities would still have far less market share than Google has now. "That strikes me as very narrow-minded."
Trip Chowdhry, an analyst for Global Equities Research, points out that Microsoft owns 90% of the PC operating system platform, which most people use to get on the Internet."The desktop platform is the first entry point to any Internet platform, to get to Yahoo!, eBay (EBAY), Amazon (AMZN) and Google," Chowdhry says. "Now you mold the two, you're merging the PC platform with the Internet platform, and you have totally removed the choice. It is very serious." Chowdhry adds that users tend to have more loyalty to email and instant messaging, thus allowing Microsoft to further seal its dominance. Unlike most observers, Chowdhry believes the Microsoft-Yahoo! deal won't make it past U.S. government regulators. Most others believe the merger will ultimately pass -- even if the process stretches out for months. But Reback speculates that Microsoft will try to ram the deal through by the end of this year, while the Bush Administration, seen as a more lenient government in antitrust matters, is still in office.
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