Google considers Expedia buyout – Rumour

Shares in travel website Expedia surged 9% this week amid rumours that search giant Google is considering a takeover bid. It is not the first time market watchers have named Expedia as a possible Google target. Last April, Expedia shares jumped 10% in response to similar buyout reports.

Expedia is refusing to comment. However, remarks from Expedia CEO Dara Khosrowshahi earlier this month suggest the firm is not expecting a merger. Speaking at the Reuters Travel and Leisure Summit, Khosrowshahi said ?access to capital markets is essentially nil and consolidation typically requires capital.?

A takeover deal would also contradict Google CEO Eric Schmidt’s statement that the search giant plans to let its cash ?pile up?, only spending money on ?very, very conservative investments.? Schmidt explained the strategy during the ECO:nomics conference in Santa Barbara, California earlier this month.

It is unlikely that Google would view Expedia as a conservative investment. As a travel retailer, Expedia is outside Google’s core business of online advertising. Investing in Expedia would mean mastering a new industry at a time when Google is scaling back experimental projects to favour its bread-and-butter online ad activities, which account for 98% of the search engine’s income.

The rumours may be connected to news of redundancies at Expedia. The travel site confirmed late last month that it was laying off an undisclosed number of employees and some analysts are speculating that the cuts are part of a plan to make Expedia seem a more appealing acquisition target. However, the cuts could equally be a part of Expedia’s plan to weather the recession.

A Google buyout is not the only option for Expedia. At the beginning of the year, rumours emerged that the company is considering going private. Analysts speculate that this could help the firm reinvent its product as it would relieve Expedia’s management from the requirements of meeting investors’ quarterly expectations. Expedia’s stock is currently trading for around USD8, down from USD25 this time last year.

Though a Google-Expedia merger seems unlikely, there is a recent precedent for the deal. Last April, Microsoft acquired travel website Farecast for USD115m.

Expedia was founded in 1995 and incubated by Microsoft until it was spun out in 1999. IAC/InterActiveCorp bought Expedia in 2003 but split the firm in two in 2005.