SAN FRANCISCO — It's hard to believe that Google Inc. actually looked vulnerable just two months ago. The Internet search leader's stock had plummeted 45 percent from its peak. And its two biggest rivals, Microsoft Corp. and Yahoo Inc., appeared poised to combine forces and launch a double-barreled attack.
But on the eve of Google's annual shareholders meeting today, the company looks stronger than ever. Its stock is hot again, and Microsoft has scrapped its plans to buy Yahoo, with Google playing the spoiler's role.
"Google is winning again. What a surprise," said Canaccord Adams analyst Colin Gillis. "If you want to invest in the Internet space, where else do you want to be but Google?"
More investors have been coming to that conclusion since last month, when Google's stellar first-quarter results cast aside concerns that the drooping U.S. economy would depress the online advertising spending that generates most of the company's profit.
Google shares have surged 29 percent since the first-quarter report, regaining a little more than half of the $100-billion in shareholder wealth that evaporated as the stock plunged from an all-time high of $747 last November to a 52-week low of $412 in mid March. The shares finished Wednesday at $579, down $7.36.
Meanwhile, Microsoft and Yahoo are again trying to figure out how to lessen Google's dominance of Internet search and advertising.
Microsoft hoped to throw Google for a loop by buying Yahoo for $47.5-billion. Unnerved by the threat, Google worked behind the scenes with Yahoo to thwart Microsoft's unsolicited takeover attempt.
The counterattack now has Yahoo considering a deal that would allow Google to sell some of the ads displayed alongside the search results on Yahoo's Web site. The alliance, which has already been tested in a two-week trial, will probably hinge on whether the two companies can convince antitrust regulators that the partnership wouldn't undermine competition in the ad market.
Even if a Google-Yahoo pact isn't consummated, the threat of it helped drive Microsoft away from Yahoo for now. Microsoft chief executive Steve Ballmer cited Yahoo's negotiations with Google as one of the major reasons that Microsoft decided to abandon its takeover attempt.
Yahoo is considering the Google deal because it believes its rival's superior ad-serving technology will boost its profits. But by acknowledging the shortcomings of its own ad system, Yahoo could end up driving even more business to Google, even if their partnership doesn't pan out.
"Google is still in the driver's seat either way," said analyst Martin Pyykkonen of Global Crown Capital.