Google, Microsoft Consider Rival Moves To Finance Acquisition Of Yahoo: Report

Google (NSDQ:GOOG) and Microsoft (NSDQ:MSFT) are likely helping finance rival bids to acquire Yahoo (NSDQ:YHOO), with mountains of cash as likely a motive as competitive reasons, The Wall Street Journal reported on Monday.

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Google has talked to at least two private equity firms about the possibility of financing bids to acquire Yahoo, the Journal reported.

The word of the potential deal comes less than a month after it was reported that Microsoft may be looking for a partner to bid on Yahoo.

The possibility of both Google and Microsoft financing rival bids for Yahoo makes a powerful statement about the future of the Internet and search engines.

Yahoo and Microsoft in 2009 agreed to work together in the online search and advertisement business, with Microsoft’s Bing search engine powering Yahoo’s search capabilities and Yahoo becoming the exclusive worldwide relationship sales force for both companies’ premium search advertisers.

A successful bid by a Microsoft-backed private equity firm could help cement that company’s relationship with Yahoo.

At the same time, Google is Yahoo’s top rival in the online search engine business, an important business because searches help drive a large portion of internet advertising dollars. If Google were to back a successful bid for Yahoo, it could help prevent Microsoft from capitalizing on its Yahoo relationship.

The Journal, citing two unnamed sources, wrote that Google is in talks with two private equity firms about the possibility of financing a bid for Yahoo.

Such a move, however, would come under strong antitrust scrutiny, especially since an agreement between the two regarding an advertising partnership was scuttled by the U.S. government in 2008.

Google and Microsoft may be looking to finance bids for Yahoo for reasons other than competitive drivers. The Journal, in a separate report, wrote that Google has about $42.6 billion in cash, while Microsoft has about $57.4 billion in cash. For both companies, the bulk of that cash is overseas, and could be put to better use as a loan to private equity firms than leaving it in the bank, the Journal wrote.

Yahoo’s share prices rose 3.7 percent to $16.71 on the news of the rival bids.

Google did not respond to a request for further information.