Google ( GOOG) is finding it easier not to do everything itself. The top search engine is relying on eBay ( EBAY) to help it promote click-to-call services, in which consumers make Internet phone calls by clicking on icons in advertisements. Dell ( Dell) and Adobe ( ADBE) are distributing Google's search toolbar. Earlier this year, Google signed a deal with consultants BearingPoint ( BE) to provide services to business customers. "It seems like they are an important partner with everyone," says Mike Binger, who helps manage $1.5 billion for Thrivent Financial, including shares of Google, in an interview. Analysts expect more partnerships to be announced in the coming months as competition heats up between the Mountain View, Calif.-based company and rivals including Microsoft ( MSFT). The partnership push will be seen positively by Wall Street, which is concerned about Google's ballooning costs and wants the company to stay focused. "Maybe Google has been taking its ADD medicine," joked analyst Martin Pyykkonen of Global Crown Capital, referring to attention deficit disorder. He rates Google shares overweight. Google took another shot at the world's largest software maker yesterday, announcing the debut of
Google Apps for Your Domain , a suite of free services including email and calendars for small to midsized businesses. Analysts expect Google to turn to partners to promote and help improve these features.
"The most likely suspect there is Sun Microsystems ( SUNW)," says Gary Beach, publisher of CIO Magazine, in an interview. The ties between Google and Sun run deep. Google Chief Executive Eric Schmidt was chief technology officer at Sun. Last year, the two firms signed an agreement to jointly promote their technologies. A spokeswoman for Sun Micro couldn't immediately be reached for comment. Like everything Google does, its partnership announcements attract a huge amount of publicity. For a while, Wall Street would also react with breathless anticipation and bid up the partner's shares. That's no longer the case. The high-profile announcements also haven't had much of an impact on Google's stock price. It has slumped 8% this year amid broader concerns about a slowdown in the economy. Plus, some of these announcements may not be as big a deal as their initial headlines indicated. For instance, Google has a long way to go before making a serious dent in Microsoft's stranglehold on the desktop. There also are questions about how keen consumers are going to be for click-to-call advertisements. In a note to clients yesterday, Merrill Lynch software analyst Karl Rangan didn't seem too worried about Google's move against the Redmond, Wash.-based company. "It will likely take Google a number of years to match Microsoft's deep functionality and integration," writes Rangan, who rates Microsoft shares as a buy. "If Microsoft can get out Vista and Office 12 on schedule in November (for enterprises) and in the first quarter of 2007 (for consumers), it may allay investor and customer consumers and help showcase Microsoft's continued ability to deliver innovation."
Similarly, skepticism abounds about Internet phone service, also known as VoIP. Wall Street analysts have long questioned the $2.6 billion that eBay paid for Skype last year. Others wonder about the appeal of click-to-call services. "The whole purpose of online storefronts was to be 24/7 without a human body," says Andy Abramson of the blog
VoIP Watch , in an interview. He adds that click-to-call won't be useful to customers if a merchant isn't around to receive a voice mail. Google and eBay executives both say that they are pleased with the deal. "We think that click-to-call is a great way to monetize Skype," says Alex Kazim, Skype's president. The alliance between Google and eBay, which also includes text-based advertising outside the U.S., came as a surprise. Media reports, which the companies have downplayed, have focused on the growing rivalry between the two, particularly in the areas of online payments. Plus, eBay signed a similar partnership with Yahoo! ( GOOG) for its U.S.-based auctions in May. "If anything, I think Google having international is a better deal than Yahoo! having the U.S.," because the growth rates are better, says Pyykkonen.