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YAHOO MERGER COULD DELIVER E-MAIL POWER

A Microsoft takeover may create dominance.

A merger of Microsoft Corp. and Yahoo Inc. would have a curious impact on tens of millions of Internet users: Their e-mail accounts would eventually be processed by a single tech behemoth.

About 46 percent of the more than 200-million Internet users in the United States have Web-based e-mail accounts run by Yahoo, while 27 percent use Microsoft's Live Hotmail and 29 percent use Google's Gmail, according to analyst Karsten Weide of International Data Corp.

"E-mail is the more promising area from the perspective of looking at antitrust issues," said Haim Mendelson, a professor at the Stanford Graduate School of Business who has studied the impact of electronic information in the business world. "It is not clear why having a dominant position in e-mail hurts anybody." Yet "e-mail is part of a bigger issue, which is identity."

For now, the proposed merger is in limbo after Yahoo rejected Microsoft's bid, initially valued at $44.6-billion, although the suitor has said that it reserves the right to pursue other options. Many analysts believe Microsoft will either raise its offer price or launch a hostile takeover.

Microsoft and rival Google Inc., which has come out publicly against the merger proposal, have traded blows over e-mail and other issues. Shortly after Microsoft unveiled its bid, David Drummond, Google's chief legal officer, wrote in a company blog that the two companies have an "overwhelming share of instant messaging and Web e-mail accounts."

"Between them, the two companies operate the most heavily trafficked portals on the Internet," he said. "Could a combination of the two take advantage of a PC software monopoly to unfairly limit the ability of consumers to freely access competitors' e-mail, IM and Web-based services?"

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