In an annual rite of futility, the rumor mill is once again whispering nonsense about a Google (Nasdaq: GOOG) buyout of Expedia (Nasdaq: EXPE).
The leading search engine isn't going to snap up the travel portal giant. You know that. I know that. Mr. Market has a mind of his own.
Bloomberg reported that acquisitive buzz was building after nearly 38,000 calls were traded on Tuesday. It's a substantial number, since roughly a tenth as many Expedia calls change hands on a given trading day.
The Bloomberg article didn't single out Google by name, but the blogosphere took it from there.
There's no point in rushing off to check out the bridal registry. There will never be a Goopedia. You can kiss Expoogle goodbye -- but not good buy.
There are several reasons why this pairing will never happen, but I'll just highlight the major reasons why you should sell on the rumor because it certainly won't be making the news.
1. The rumors have been bogus in the past
Headlines are being ripped from the recycle bin. The nonsensical chatter made the rounds in 2008 and 2009. It was actually a Susquehanna analyst's comments on a potential deal that propped shares of Expedia to double-digit gains in 2008, so let's not dismiss this as the handiwork of neophytes.
Were Google and Expedia even talking during any of those episodes? Probably not. It's true that we will never know, but Google's Marissa Mayer had no problem recently answering questions about the Groupon purchase that failed to materialize.
It's also important to remember that Google isn't stupid. Expedia shares have more than tripled since the last time this chatter surfaced in March 2009. If Big G wasn't flying Expedia at a third of today's price, why chase it now?
2. This deal would never receive control tower clearance
It's been six months since Google announced its plan to acquire ITA Software. There's a reason why you don't see Google's name on the ITA website, and it's that regulators have yet to approve Google's purchase of the leading provider of Web-based travel booking solutions to the industry.
Now, if antitrust naysayers aren't sold on Google snapping up ITA in a $700 million deal, how is it going to pull of a deal for a company that is valued 10 times greater?
Let's put this in away that even a simpleton rumor starter can understand:
Google: I'm hungry. Can I have a doughnut for dessert?
Regulator: Let me think about it. You're too fat. You should really be watching what you eat.
Google: OK. Can I have a dozen doughnuts in the meantime?
Google actually being as brazen as making a play for Expedia -- while the ITA deal hangs in the balance -- would be as insensitive as it is brainless. Even if the deal with ITA ultimately clears, there's no way that regulators would sign off an Expedia purchase.
Let me once again remind you that Google isn't stupid.
3. Buying Expedia would be a business-crushing conflict of interest
Making a play for ITA was gutsy, since the travel software company provides the booking backbone for many of the major air carriers. Orbitz Worldwide (NYSE: OWW), Microsoft's (Nasdaq: MSFT) Bing, and even Expedia's own Trip Advisor are ITA customers as travel portals.
Why would Google buy ITA and then one of its larger customers? The news would send ITA's other clients scrambling elsewhere.
Google relies on airlines and booking sites to spend gobs of money by advertising through its paid search platform. If Google becomes a competitor, how likely is that steady flow of AdWords revenue to continue?
Soft landing
Expedia may very well be in play as a buyout candidate. It wouldn't surprise me to see priceline.com (Nasdaq: PCLN) buy its largest rival, though regulators may have a tough time letting that deal go through.
China's Ctrip.com (Nasdaq: CTRP) is smaller than Expedia, but it's really just a matter of time before Asian giants begin buying stateside leaders.
Microsoft may have the same conflict of interest as Google, but the world's largest software company would have an easier time pushing this deal through. It also just happens to be the same company that spun off Expedia in 1999. The prodigal son returns, and he's flying coach.
We're heading into interesting times in this space. American Airlines parent AMR's (NYSE: AMR) chess game with Orbitz, Expedia, and Sabre in recent weeks may have long-lasting ramifications. If carriers and portals can't play along, everyone loses. This is the kind of uncertainty that would normally find Expedia pondering an exit strategy, so there may be some truth to the actual buyout chatter.
If it does happen, it just won't be Google doing the buying. It can't. It won't. It's smarter than that. It's smarter than stupid.
Who do you think is right in this battle? Share your thoughts in the comment box below.
