Microsoft News Tracker

This morning’s Microsoft Blinkx tie-up story may have turned out to be a dud, but the Google YouTube acquisition rumor panned out to be US$1.65 billion of gold:

Google Inc. announced today that it has agreed to acquire YouTube, the consumer media company for people to watch and share original videos through a Web experience, for $1.65 billion in a stock-for-stock transaction.  Following the acquisition, YouTube will operate independently to preserve its successful brand and passionate community.

The acquisition combines one of the largest and fastest growing online video entertainment communities with Google’s expertise in organizing information and creating new models for advertising on the Internet. The combined companies will focus on providing a better, more comprehensive experience for users interested in uploading, watching and sharing videos, and will offer new opportunities for professional content owners to distribute their work to reach a vast new audience.

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When the acquisition is complete, YouTube will retain its distinct brand identity, strengthening and complementing Google’s own fast-growing video business.  YouTube will continue to be based in San Bruno, CA, and all YouTube employees will remain with the company. With Google’s technology, advertiser relationships and global reach, YouTube will continue to build on its success as one of the world’s most popular services for video entertainment. 

The number of Google shares to be issued in the transaction will be determined based on the 30-day average closing price two trading days prior to the completion of the acquisition. Both companies have approved the transaction, which is subject to customary closing conditions and is expected to close in the fourth quarter of 2006.  

Marshall Kirkpatrick at TechCrunch has some estimates on how the loot will divvied up.

Update: Todd Bishop has the Microsoft reaction:

Where does Google’s $1.65 billion YouTube acquisition leave Microsoft? The question is particularly interesting in light of reports that the Redmond company was one of those that talked with YouTube about a possible deal.

Asked about those reports today, Microsoft didn’t precisely confirm them, but didn’t directly deny them, either. In a statement, the company said it “evaluated acquiring this type of technology several months ago” but decided that building its own video-sharing service would be “a more cost-effective way to compete in this new space.”

In today’s Internet video news, the Microsoft Blinkx deal looks like it will shortly be put in the shade as Andrew Ross Sorkin’s NY Times DealBook Blog reports:

After marathon negotiations over the weekend, Google could announce a deal to buy YouTube.com, the popular video-sharing Web site, for about $1.6 billion as early as Monday afternoon, people involved in the talks said.

Barring a last-minute snag in the talks, the boards of both Google and YouTube were scheduled to hold separate board meetings on Monday to approve the deal, with an announcement possible after the close of regular trading. Discussions could still break down, however, or another party could present a more-attractive offer.

As for the persistent worries about YouTube and copyright violations, YouTube just made some new friends as Chris Williams reports at The Register:

YouTube moved toward full legitimacy today with a trio of deals with media giants.

Universal Music Group boss Doug Morriss had previously described YouTube as a “copyright infringer” which owed his firm tens of millions in royalties.

Now it seems he has acquiesced to the increasing distribution strength of YouTube, as have the big wigs over at Sony BMG.

The latter has properly gotten into bed with YouTube, with a carve-up of per-click advertising revenues on pages carrying its content. Universal has stopped shorter, inking a “strategic partnership” instead. YouTube will simply pay it for each music video or user-generated video that uses its music.

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Warner Music embraced YouTube in September. Three of the big four record companies are now on board, with EMI the lone dissenter, though a deal is inevitable. Smaller record labels have been posting music videos to YouTube for months.

The CBS television network signed up as well as described in the rest of the article. It’s great when a plan comes together. I’m sure that Morriss’ chest beating was mostly in pursuit of better terms since it surely did not escape his notice that Internet music videos are mostly advertising for his product.

Meanwhile, Google was covering all the bases with its own record label deals:

Google said Monday that it had signed agreements with both Sony BMG and Warner Music Group to stream each company’s catalog of music videos free from its Google Video service. The deal would also eventually allow the company’s AdSense partners to also stream the videos as well.

The Mountain View, Calif. based search company is working on technology that would allow Google Video users to incorporate Sony BMG and Warner content into their own content submitted to the service. Such capabilities would be provided for free.

The financial terms are discussed in the article, but that part about the AdSense partners is interesting. They’re the third party publishers carrying Google Web advertising and it sounds like Google is buying them a license.

In the “dirty tricks” or at least the “odd potential use of cash” department, Eric Bangeman reports at Ars Technica on some revelations in the SCO lawsuit against IBM:

In the ongoing saga of SCO v. IBM, one peripheral question has been the extent of Microsoft’s financial support for SCO. Groklaw has dug up an interesting bit of data in the case, namely that Microsoft supposedly promised venture capital firm BayStar that they would guarantee their multimillion-dollar investment in SCO.

Buried in IBM’s recent motion for summary judgment against SCO is a Declaration from BayStar general partner Larry Goldfarb. Near the beginning of the long-running legal soap opera, BayStar invested $50 million in SCO. In exchange for their investment, BayStar received 20,000 shares of preferred stock in SCO.

In his declaration, Goldfarb testifies that former Microsoft senior VP for corporate development and strategy Richard Emerson discussed “a variety of investment structures wherein Microsoft would ‘backstop,’ or guarantee in some way, BayStar’s investment.” Goldfarb then said that after BayStar committed the $50 million to SCO’s cause, Microsoft “stopped returning my phone calls and e-mails, and to the best of my knowledge, Mr. Emerson was fired from Microsoft.”

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Microsoft stood to gain in the event of a SCO victory, as Linux would become a much-less-attractive option for companies looking to wean themselves from UNIX or even Microsoft’s own commercial offerings. In March 2004, an e-mail surfaced that indicated Microsoft had played a part in hooking BayStar up with SCO. At the time, both BayStar and Microsoft denied that the Redmond, WA-based software giant had any financial involvement in the deal, although it did purchase a UNIX license from SCO in 2003, ultimately spending $16.6 million on licensing fees.

Many more details by following the link, but SCO and its laughable lawsuit continue to be a vast morass that soils everyone who gets near it.

Update: Microsoft denies a connection.

Here’s one that slipped under the radar last week - Microsoft and EMC teamed up for a new Enterprise Content Management alliance where Microsoft Office software will serve as a front end to EMC’s ECM offerings:

EMC will bring to market new solutions that seamlessly integrate the EMC Documentum platform with multiple Microsoft solutions and platform technologies including Microsoft Office SharePoint^® Server 2007, the 2007 Microsoft Office system, SQL Server™ 2005 and enterprise search solutions. Microsoft provides content management capabilities in SharePoint Server 2007 today. With this new alliance SharePoint users can take advantage of the advanced ECM capabilities of the Documentum platform. Information workers will be able to access the Documentum platform natively from within Microsoft Office SharePoint Server 2007 and the Microsoft Office system, enabling users to leverage the power of the Documentum platform in areas such as advanced records management, business process management, imaging and rich media from their preferred Microsoft applications.

China Martens at InfoWorld makes the point that the Microsoft Office serving as a front end to third party software is now a familiar refrain:

If that sounds strangely familiar, it’s because that is the same strategy Microsoft is adopting with SAP around the “Duet” product, said Rob Bernard, general manager of Microsoft’s global independent software vendor team.

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And EMC and SAP won’t be the only vendors to get hooks into Office, Bernard said.

“Overall, we are seeing all of the major ECM vendors actively building tight links into desktop tools like Outlook and partnering aggressively with Microsoft,” said Melissa Webster, program director, content and digital media technologies at IDC. Vendors of all stripes are beginning to collaborate to make it much easier for users to have full, unimpeded access to enterprise applications from their familiar desktop productivity software, she said.

We previously mentioned Duet (AKA Project Mendocino) here.

Ingenio press release:

Ingenio, Inc., the pioneer and leading provider of Pay Per Call® advertising, today announced an agreement with Microsoft that enables Ingenio Pay Per Call listings on Windows Live Search for mobile. When mobile users search for local business information, such as restaurants, travel and hotel information or other local services, relevant Ingenio Pay Per Call advertisers appear within these results. Windows Live Search for mobile is the latest partner to join the Ingenio Pay Per Call Advertising Network, which generates more than one billion consumer search queries monthly.

There’s nothing wrong with signing up for ads with what is effectively a middleman, particularly when it is a market leader, but one wonders how it fits in with Microsoft’s development of its own Windows Live Call for Free.

Update: Greg Sterling has more at Search Engine Watch including:

Ingenio’s advertisers are the only paid listings that will appear when users conduct a geotargeted search on Window Live for mobile. There will only be one advertiser shown for any given search and Ingenio’s entire inventory will be funneled into Windows Live. When there are no relevant Ingenio advertisers, no sponsored listings will appear.