Google withdraws from service agreement with Yahoo

It is over before it could even begin. As expected, Google is withdrawing from the proposed advertising agreement with its competitor Yahoo. David Drummond, Google's Chief Legal Officer said in the company's blog on Wednesday that although the regulators have been reviewing the proposal for months, they continue to have concerns about the agreement. As a result, he said, Google has now withdrawn from the agreement. In its initial statement, Yahoo expressed disappointment at Google's reluctance to defend the agreement in court.

There had been strong resistance in the industry to the agreement. The anti-trust division of the US Department of Justice had also expressed its concerns, concerns which a compromise deal put forward by the companies had been unable to satisfy. The agreement was to give Yahoo the option of using Google to provide ads on its websites in the US and Canada. A somewhat shaken Yahoo Group had expected the deal to generate additional revenues worth several hundred million dollars. The proposed agreement formed part of the Group's strategy to counter takeover attempts by Microsoft.

The announcement on Wednesday immediately fuelled renewed speculation that Microsoft could attempt another takeover of Yahoo. The software company had tabled an offer in February, which it later increased, but the bid was consistently rejected by the boss of Yahoo. Investors considered this to be a mistake, even before these latest developments. Microsoft's last offer was $33 per share. On Tuesday, Yahoo shares closed at $13.35, but rose sharply on Wednesday as a result of the latest round of speculation.

(trk)