Wednesday, May 24, 2006

Internet Buyout Rumors Abound

Is something big about to happen in the tech industry?
Speculation is rife on Wall Street that a big internet deal or alliance is in the works, with Google, Yahoo, eBay or Microsoft as possible partners - and a Yahoo-eBay partnership seen as most likely.

"A partnership or merger between eBay and Yahoo! is the most strategically feasible," a report authored by analyst Imran Khan and the JP Morgan internet team said.

"A combined company would have the leading position in auctions, communications, payments, graphical advertising, audience reach, and geographic breadth," the report said.

Silicon Valley insiders, high-tech bankers and financial analysts are giving new credence to potential merger deals, which fly in the face of common wisdom that the internet's rapid growth has always outweighed the logic of consolidation.

But internet growth is slowing and competition among the biggest companies - Google Inc, Yahoo Inc, eBay Inc and Microsoft Corp - is intensifying.

EBay stock is down 30 per cent on the year, Yahoo is off 20 per cent and Google down 10 per cent.

Google, which nearly doubled its revenues last year, is expected to grow 62 per cent this year. EBay is seen growing 30 per cent, down from 50 per cent two years ago, and Yahoo's growth is slowing at a similar pace.

EBay spokesman Hani Durzy said the company works very closely with all the major web search providers - Google, Yahoo and Microsoft - but he declined to comment on any potential Yahoo tie-up.