Yahoo, Google settle patent, share dispute

[Chris Sherman]

From the press release:

Yahoo! Inc. (Nasdaq:YHOO) and Google Inc. today announced that the companies have resolved two disputes that have been pending between the companies.

Under the terms of the settlement agreement, Google will take a license to U.S. Patent No. 6,269,361 and several related patents, held by Yahoo!'s wholly-owned subsidiary, Overture, and Yahoo! dismissed its patent lawsuit against Google. The two parties have also resolved a dispute regarding shares issuable to Yahoo! pursuant to a warrant to purchase Google shares in connection with a 2000 services agreement.

In connection with the settlement of the warrant dispute, the patent lawsuit, and in payment for the license, Google issued shares of its Class A common stock to Yahoo!.

More:

Yahoo will receive 2.7 million shares in Google stock worth roughly $300 million under a settlement of a patent dispute between the two search-technology rivals, according to regulatory filing Monday.
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[seobook]

that is huge news there.

should take some of the uncertainty out of the Google IPO

[Josh]

This can play out in a couple of different ways for Google during their upcoming offering. Scenario #1 says that interest in Google will fall because they now have more supply to offer, when investors have indicated that demand might be lower than the company expected. Furthermore, Google will take a one time cash hit of about $260-$290 million (depending on the first day stock price), which will cause them to miss profitability in their first quarter as a public company. Alternatively, this could ease some investors’ fears about the possibility that Yahoo! could take Google’s revenue stream out from under them by winning a patent violation case (Adwords represents 95% of Google’s revenue). Regardless of the impact on Google, this looks like a big short-term win for Yahoo! who now adds Google's multi-million dollar loss to their top-line revenue for the upcoming quarter – this one time shot represents about 15% of the price they paid for Overture last summer.

Perhaps more interesting is the impact that this ruling will have on Yahoo's other pending lawsuits. For instance, Yahoo's Overture division has been engaged in a similar patent lawsuit with FindWhat since 2002 regarding their auction-based marketplace. Now that legal precident has been set, will Yahoo be able to strongarm companies like FindWhat into paying a fee for running their business?

[Papadoc]

It may be a darn smart thing from another standpoint. With 300 million worth of Google stock in the bank, how badly do you think Yahoo now wants to hurt Google. Surely they still want to get back on top, but not by kicking the pins out from one of their assets.