December 23, 2005 8:47 AM PST

Week in review: Googly eyes

'Twas the week before Christmas and as shoppers hit the stores, deals were brewing behind closed doors.

In a week otherwise dominated by holiday parties and retail buzz, Google and America Online made some big news Tuesday by announcing a long-rumored partnership.

Google will invest $1 billion for a 5 percent stake in Time Warner's America Online unit as part of a partnership that expands their existing search engine deal to include collaboration on advertising, instant messaging and video.

Google also is offering a $300 million credit that AOL can use to buy keyword-based ads from Google. Google will become the only shareholder in AOL other than Time Warner. Google also will have "certain customary minority shareholder rights, including those associated with any future sale or public offering of AOL," the companies said in a statement.

CNET News.com reader Nathan Boyle said the deal isn't so much about the future of AOL "because it doesn't have one."

"This is a war over who gets to feed on the carcass of AOL," he wrote. "I don't think we should look at this in terms of what AOL will become with help from Google. I think we should view it in terms of how does Google parlay this in the long term. This was a poker game against (Microsoft), and Google won."

The deal leaves Microsoft out in the cold after months of negotiations with Time Warner over AOL's search business. Microsoft was on the verge of striking a deal before the surprise turn in Google's favor late last week.

Speaking of Microsoft, Google settled with the software giant in the lawsuit filed over the hiring of Kai-Fu Lee, an expert in speech recognition technology and the man who founded Microsoft's China research lab in the late 1990s. The settlement was made public late Thursday.

Google announced in July its plans to hire Lee to head up its China research lab. Microsoft immediately filed suit in Washington against Lee and Google, arguing that Lee was violating a one-year noncompete agreement that was part of his Microsoft contract.

The tug-of-war over Lee was seen as Microsoft's latest attempt to thwart Google's growing influence. The two have increasingly crossed swords, and Mountain View, Calif.-based Google won an important round with the aforementioned deal with AOL.

But the game isn't over for jilted suitor Microsoft. Microsoft plans to leverage its desktop market dominance to compete with Google on search and advertising, analysts said Wednesday.

In other deal news, IBM made two acquisition announcements. First, Big Blue said Tuesday that it has acquired Bowstreet in its quest to tightly integrate the portal development tools of its longtime partner into its service-oriented architecture strategy.

Bowstreet, based in Tewksbury, Mass., is expected to have its Portlet Factory software integrated into IBM's software products in the second half of next year. Until then, IBM will continue to offer the Portlet Factory software with its WebSphere Portal tools.

Then, on Thursday, the company announced plans to acquire network-management software maker Micromuse in a $865 million cash deal.

The transaction is designed to enhance Big Blue's Tivoli software portfolio with Micromuse's network-management offerings. Micromuse's software supports IT systems handling voice, video and data traffic over the Internet.

Also this week, the European Commission officials gave their blessing to Oracle's $5.8 billion merger with Siebel Systems, removing the last major antitrust hurdle for the enterprise software companies.

Scammers and bah humbugs
For some, it's the season of giving gifts and spreading good will. To others, however, it's the time for taking consumers' personal information and spreading bugs and worms.

With the holidays just days away, Internet users can expect to see almost twice as many phishing attacks this December compared with last year, said Andrew Klein, manager of the threat center at MailFrontier, an e-mail security company in Palo Alto, Calif. Phishing scams combine spammed e-mail messages and fraudulent Web sites to trick people into giving up sensitive information.

In one example, scammers crafted an e-mail that looks like it came from eBay. The mail announces that "Christmas is coming!" and encourages recipients to click on a link to "www.ebaychristmas.net" for advice on "seasonal selling." Though they appear legitimate, the e-mail message and the Web site were fraudulent, Klein said.

Meanwhile, a Santa Claus worm is attempting to trick America Online, Microsoft MSN and Yahoo instant-messaging users into

CONTINUED: Santa Claus worm…
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