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Seattle Times Brier Dudley Column

July 14, 2008

By Brier Dudley, The Seattle Times

Jul. 14–If you feel a rumbling coming from the Hunts Point area Tuesday, it’s probably Steve Ballmer doing one of his celebratory dances.

Not because the Microsoft chief executive is finally closing the Yahoo deal. Who knows if, how and when he’ll untangle that hairball?

The Yahoo drama is really a diversion from the real war that’s going on between Microsoft and Google.

All the attention on Carl Icahn and Jerry Yang is starting to feel like we’re obsessing about “American Idol” finalists while a war rages in the Middle East.

The bigger story is that Google and Microsoft are warring over which one will be the world’s dominant software company. Yahoo’s not a contender, it’s materiel.

It’s in that war that Ballmer can claim a small but important victory Tuesday, when Google will be the focus of a hearing before the Senate subcommittee on antitrust, competition policy and consumer rights.

The same committee in 1998 raked a cocksure Microsoft over the coals.

Now the senators are concerned about Google providing ad services to Yahoo, and what that consolidation of market share means to the public and Internet advertising.

Separately, the U.S. Department of Justice has started a formal investigation of the May partnership Google and Yahoo formed to thwart Microsoft’s takeover attempt, The Washington Post reported.

Was Ballmer’s master plan to hang the antitrust albatross on Google?

He claims to want Yahoo mostly so Microsoft’s online businesses can quickly scale up. But Ballmer had to anticipate increased antitrust scrutiny of Google could be a positive outcome if Yahoo was pushed into an alliance.

Microsoft is probably the world’s most knowledgeable company when it comes to antitrust scrutiny.

Not only has it learned the ropes in Washington, D.C., the hard way, it’s also had painful lessons in the ways regulatory problems can gum up the works at a fast-moving technology company.

You’re not as nimble if you’re second-guessing your moves and you have to run everything by lawyers first.

One thing to watch for is whether the hearings and subpoenas discover more than just Google’s big market share.

Remember that Microsoft’s monopoly wasn’t the problem as much as the tactics it used in the 1990s to build and extend that position.

Even if Google really does no evil, it would have been scrutinized eventually because of its dominance. It’s approaching 70 percent of the U.S. search market share and 90 percent in the United Kingdom, according to Hitwise.

Google had to know this was coming. In some ways it’s a turnabout, since its chief executive, Eric Schmidt, previously worked for Sun Microsystems and Novell when they were fighting antitrust battles with Microsoft.

Another thing to watch is how Google responds to the challenge.

The company’s collegial, democratic management style is already being tested by its growth.

Now, with antitrust regulators poking around, Google managers have to be more cautious and consult more frequently with lawyers.

Fortunately for Google, many of its engineers and managers have been through this before, at Microsoft.

Brier Dudley’s column appears Mondays.

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