NEW YORK: Is online auction company eBay Inc. an acquisition target? There is speculation that Microsoft is targeting it in order to merge it with its MSN and take on Google more effectively.
Media reports indicated that the two companies had been in talks and are now in the process of examining possible anti-trust implications on such a merger. Once the legal hurdles are clarified, the negotiations are expected to resume in full strength, the reports suggested.
Microsoft had been keen to conclude a mega deal following the failure of its attempt to grab AOL late last year. In fact, it had sought an alliance with Yahoo, but gave it up saying chairman Bill Gates is not keen on a content company that Yahoo is. But the story could be different and Yahoo would have spurned the offer right at the beginning. That's how the software major has turned its eye on eBay.
Meanwhile, a report authored by an analyst at JP Morgan says Yahoo may finally acquire eBay. It said a partnership or merger between eBay and Yahoo is the most strategically feasible, citing the merged entity will have a very key position in auctions, communications, payments, graphical advertising, audience reach, and geographic breadth.
A spokesperson for eBay said the company indeed works with major search companies, including Google, Microsoft and Yahoo, but he would not comment on any possible merger or tie-up. In fact, eBay is one of the largest buyers of web search terms and it has a portfolio of 15 million keywords on various search sites to attract clients.
The JP Morgan report also looks at a scenario where MSN could be viewing a partnership with Yahoo. Analysts see some synergies in such an association as both Microsoft and Yahoo have complementary strengths.
In fact, there were reports in early May of Microsoft seeking a stake in Yahoo, which the former feels will help it in tackling the competition from Google, which has been going from strength to strength. The news has been partly confirmed by Yahoo chief executive Terry Semel, who said Yahoo has been approached by Microsoft for a share in its search business. However, Semel ruled out any deal that involves the search services, describing any such transaction like selling one's right arm while keeping the left. He also said there was no question of any merger between Microsoft and Yahoo.
In this scenario, Google is seen as a loner. Even the JP Morgan report agrees it is so. It may at best try to gobble up smaller companies and improve on strength, reach and variety.
The circumstances then justify and push for an alliance between eBay and Yahoo -- the search functionalities of Yahoo could bring in customers to eBay's auction platforms, while eBay's facilities like Paypal and Skype internet phone service could be of advantage to Yahoo.
These arguments notwithstanding, eBay to this date, depends largely on Google for search referrals and it cannot consider skipping Google altogether.
