Google\'s Good News Bad for Microsoft, Yahoo

CNBC
Google's Good News Bad for Microsoft, Yahoo
Thursday May 22, 2:29 pm ET

At a time when Microsoft and Yahoo publicly stumble about, trying to come up with some way to take on Google's search juggernaut, we now get more market research data showing Google continues to gobble up market share. And it's the kind of news that neither Microsoft nor Yahoo can afford to hear.

ComScore reports that Google's (NasdaqGS:GOOG - News) core web search properties owned 61.6 percent of the US market in April, a couple of percentage points ahead of the 59.8 percent the research showed a month earlier. Worse for its competitors, Google was the only company that enjoyed a market share increase, with Yahoo (NasdaqGS:YHOO - News) , Microsoft (NasdaqGS:MSFT - News) , Time Warner's (NYSE:TWX - News) AOL and IAC/Interactive's (NasdaqGS:IACI - News)| Ask.com all posting declines.

Yahoo came in at number 2 with 20.4 percent, while Microsoft came in third with 9.1 percent.

All of this comes against a backdrop of those two companies trying to come up with a plan to take on Google, and brings a new sense of urgency to getting some deal done. Even if the two companies were to join forces, their combined market share would still only measure up to half of what Google enjoys. And that's a problem in and of itself. In other words, as we all wait breathlessly for any movement of any kind in connection with both Yahoo and Microsoft, it's not clear that it'll make any difference as Google continues to tighten its control over domestic search.

Meantime, Legg Mason's Bill Miller senses that urgency, in an interview in New York today, saying he isn't sure he's ready to support Carl Icahn's competing slate of directors to run Yahoo's board, but is sure that Microsoft needs to come up with a way to make a deal for Yahoo palatable.

He calls it a "strategic imperative" for Microsoft to change its position. It would seem that Miller wants Microsoft to abandon the piecemeal approach the company has suggested in recent days that some speculate involves a buy-out of Yahoo's search business only, and re-engage on a deal for the entire company, but at a higher price.

Miller's comments carry some weight. Legg Mason owns 405,000 Microsoft shares, but 64 million shares of Yahoo. Carl Icahn owns about 59 million Yahoo shares, telling an investment conference this morning: "Microsoft would be crazy to give up this opportunity that we've handed them in this fight."

I'm not clear Microsoft has given up any opportunity. But it's clear that Icahn's doing just fine. He bought Yahoo beginning in the low-$20s; a little more in the mid-$20s. If his cost-basis is around $25 a share, and he owns about 59 million shares, he's pocketed a cool $120 million for a couple weeks work. Not bad. Sure, his original investment is over $1 billion, but hey, $120 million is $120 million, whether you're Carl Icahn or not.

In fact, Icahn is sitting almost as pretty as, well, Google.

YHOO major holders BREAKDOWN

% of Shares Held by All Insider and 5% Owners: 10% % of Shares Held by Institutional & Mutual Fund Owners: 71% % of Float Held by Institutional & Mutual Fund Owners: 79% Number of Institutions Holding Shares: 611