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Microsoft bids for Yahoo!

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Google may find itself up against a formidable competitor should the Mircosoft-Yahoo! merger go ahead. In a move to combat Google's dominant position in search and internet advertising, Microsoft is looking to join forces with Yahoo! in a $44.6 billion bid. The announcement came in the wake of struggling performance from Yahoo! in recent weeks and plans to cut 1,000 jobs.

In a statement, Brad Smith, general counsel of Microsoft said: ‘The combination of Microsoft and Yahoo! will create a more competitive marketplace by establishing a compelling number two competitor for internet search and online advertising. The alternative scenarios only lead to less competition on the internet.’

Commenting on the possible merger Hans Friederiszick, managing director of the European School of Management and Technology (ESMT) said: ‘Google may welcome this move as it allows Google to argue that its likely dominant position is contested by an equally strong player.’ He added: ‘One barrier for the proposed merger to get approved may be the relationship between the [European] Commission and Microsoft, following its strategic use and abuse of interoperability. If Microsoft were to bundle search and advertisement facilities into the Windows operating system, this would certainly be a cause for concern.’