Yahoo! the First Winner in Google IPO

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In early July, I wrote a piece for The Motley Fool in which I talked about how competitors use guerrilla-war tactics during the pre-IPO phase, such as when Barnes & Noble (NYSE: BKS) launched a lawsuit right before Amazon.com's (Nasdaq: AMZN) IPO. I concluded that Yahoo! (Nasdaq: YHOO) might "rattle" its saber with its patent fight with Google.

You see, one of Yahoo!'s smartest acquisitions was Overture, which has patented technology for advertising based on Web searches.

Well, Yahoo! took a stab at Google and reached a settlement yesterday. Yahoo! will get 2.7 million shares of Google, which amounts to $291 million to $365 million based on the price range of $108 to $135. Yahoo!, in turn, will blow out 1.1 million of its shares in the IPO. Currently, Yahoo! owns 6.6 million shares of Google.

Google was smart in reaching the settlement. The company avoided a surprise attack from Yahoo! and also cleared up uncertainty regarding the business model. Just imagine if a federal court ruled that Google had no right to use its auction system, which accounts for much of its revenues.

For Yahoo!, the company was clearly in a position of strength and was not shy in exacting a great deal. After all, business-method patents can often be difficult to enforce. For example, the lawsuit between Yahoo! and Google had lasted two years already.

However, in the brutally competitive war for search, Google may still be sandbagged by its competitors on the eve of its expected IPO. For instance, is Microsoft (Nasdaq: MSFT) cooking up a big announcement?

In the wacky Google IPO process, anything seems possible.

Fool contributor Tom Taulli is the author of The EDGAR Online Guide to Decoding Financial Statements. He does not own shares in any of the stocks mentioned.