November 19, 2003

Truth, consequences: On Oct. 31, the New York Times reported that Microsoft had discussed a buyout with Google. It quoted unnamed ``company executives and others briefed on the discussions'' and said Microsoft had gone to the Silicon Valley online search and advertising company "to discuss options, including the possibility of a takeover".

This week, USA Today quoted Microsoft's Bill Gates, who said such discussions didn't happen. ``We've never been in any talks with Google about any acquisition thing in any way, shape or form,'' he told the paper. OK, someone's lying here.

Could it be Gates? His occasional unfamiliarity with truth is well-known. But if he was lying this time, he was doing so about something material to his company's future, and securities laws frown on such stuff from senior corporate officers. So I'm guessing he's telling the truth. I also tend to believe him because the Times story quoted people who weren't willing to reveal their names to the public. If so, the paper, playing by the rules that constrain journalists when dealing with not-for-attribution quotes, has allowed Google insiders to get away with something.

John Robb, former president of Gomez, a technology research and tools firm, wrote on his Weblog (http://jrobb.mindplex.org/) that the Google leak had the smell of a high-end pump and dump scheme, in which venture capitalists and other insiders were boosting Google's prospects ahead of a public offering widely expected next year. Such an IPO, if it takes place, would be the most widely hyped financial event since Netscape's loud entry into public markets in 1995. However fine a company Google may be -- and it's clearly a terrific operation in most ways -- the uneasy feeling grows that the valley is heading back to the bubble days when insiders shifted all risk into public markets, fueled by greed at every level, including small investors.

``At this point,'' wrote Robb, ``I distrust Silicon Valley VCs more than Microsoft (by a substantial margin) and have no desire to see the same personalities fleece the investing public one more time.'' I greatly admire the Times and would like to see the paper follow up on the story. Were its reporters, and then its readers, deliberately misled by a company (or people associated with it) that has a reputation for integrity? I'm not asking the Times to blow its sources' covers; it would be a violation of journalistic ethics to do so. But this has a really unfortunate odor.

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