Outlook: Googling all the way to the bank as Microsoft squares up

Damp squib?; BSkyB roasting

News that Google, everyone's favourite internet search engine, has rejected a takeover approach from Microsoft in favour of a long planned IPO will come as a relief to opponents of Bill Gates' supposedly evil empire. Yet is not Google another Netscape or Apple Macintosh in the making? Both were inventors of technologies that Microsoft later copied and bettered, and both of them were eventually trampled all over by the Bill Gates behemoth.

Google is a surprising late success of the internet industry. Founded only five years ago by a couple of friends from Stanford University, Sergey Brin and Larry Page, it has grown relentlessly right through the dot.com bust and is now a better recognised brand name internationally than any of its near counterparts, including AOL, Yahoo and MSN. Some investment bankers value the company at as much as $15bn, so eagerly awaited is Google's public flotation. There's been nothing like it since the dot.com bubble, either in terms of the excitement Google is generating or the valuations being assigned to it. Profits would have to grow at least five-fold over the next five years to justify such an heroic number.

This is not altogether impossible, but it's fantasy to think Google will be left to itself to enjoy such a fast growing market. Yahoo!, which as things stand buys its search engine technology from Google, is finding Google a growing threat to its position in the portal market and plans a fightback. Likewise, Microsoft promises to be ready to introduce its own search engine technology early next year.

Google insists that it can remain ahead of the game. Mr Brin is an impressive operator, with the necessary combination of youth, energy, invention and business acumen to succeed. But he's about to take on the Big Daddy of the IT market, Microsoft, or rather, Microsoft is about to take him on now that he's spurned its advances. The ensuing battle won't be pretty.

Damp squib?

The wheels of Whitehall grind exceedingly slow, but in the case of Lord Penrose, it seems they've scarcely been grinding at all. Lord Penrose is the Scottish judge who was appointed by the Treasury more than two years ago to inquire into the events leading up to the closure of Equitable Life. The inquiry has been dragging on for so long the Government may have hoped that by now everyone would have forgotten all about it. But that would be to disregard the still seething anger of nearly 500,000 policyholders, which the passage of time has done nothing to diminish.

News that the Penrose report, which is finally nearing completion, will not attempt to judge either the directors or the auditors involved in the affair has prompted a fresh outbreak of rage. Policyholders hoped the report might bolster their case for damages and compensation. At least in so far as the auditors and the directors are concerned, that now seems unlikely. Yesterday Lord Penrose issued a clarifying statement, which in the nature of these things was about as clear as mud. My job was to investigate the facts, not determine fault, he thundered, and in particular not to compete with the courts, which are awash with litigation over the affair, in matters which fall within their jurisdiction.

Lord Penrose says he won't find fault, but nor will he shrink from describing or commenting on the role of those involved. Er, right. He will also draw attention to any deficiencies in practice that the findings disclose. On the other hand, he won't adjudicate on liability, including determining any breach of professional, statutory or common law duty. Even so, with some parties at least, the present intention plainly is to criticise them, as the report is currently being subjected to Maxwellisation, a process by which those subject to adverse comment are allowed a right of reply before the report is published. All clear now?

Policyholders would be forgiven for thinking the whole thing a waste of time, as indeed might Lord Penrose himself after more than two years before the mast. What's the point of an inquiry that pulls its punches? For cognoscenti of the inner workings of the life assurance industry, the report will no doubt make fascinating reading, but for everyone else it may look like a damp squib. The fault lies with the Government, which should have ordered a Companies Act investigation into the affair right at the start. The halfway house now awaiting publication seems unlikely to serve anyone, other, perhaps, than government itself. The Government is desperate to avoid paying out compensation for regulatory failure. In that respect, a non-judgmental report suits it down to the ground.

BSkyB roasting

Lord St John of Fawsley, better known as the former Tory arts minister Norman St John Stevas, would never have called himself anything as vulgar as Sid, and nor it seems would anyone else. Sid is the acronym for that latest invention of the corporate governance police, the "senior independent director", a position Lord St John is meant to fill at BSkyB.

Meant is the operative word here, for according to the National Association of Pension Funds, which is advising members to vote against his reappointment as a director at the annual general meeting on 14 November, he cannot be considered independent in any shape or form. In a withering attack, the NAPF says he must also bear some responsibility for the very public and antagonistic debate which has been raging over the identity of the company's next chief executive. For good measure, the NAPF adds that the company's remuneration report is one of the least impressive in terms of clarity it has seen this year and advises shareholders to vote against it.

With characteristic irreverence, Roland "Tiny" Rowland once described non-executive directors as no more than "decorations on a Christmas tree", by which he meant that they served no purpose other than to impress and buy influence. To many in the City, Lord St John seems the stereotypical decoration. He's been on the board for 12 years, he's a personal friend of the chairman, Rupert Murdoch, who contributes to his charities, and he is not obviously an expert on either pay TV or business matters in general.

In the City, he is widely regarded as a buffoon, even though that's scarcely fair for one of Britain's foremost legal historians. The NAPF accuses him of failure to communicate its concerns to the board, or to anticipate legitimate objections to the appointment of the chairman's son, James, as chief executive. In return, Lord St John regards the army of corporate governance busy bodies who have descended upon him as rats and worse. It's no surprise that a stand-off has developed. The City is determined to oust him and is calling in all the BSkyB stock it has out on loan to muster the votes necessary to do so. Feelings are running so high that even News Corp's 34.5 per cent stake may not be enough to save him.

It's Lord St John's bad luck to have been appointed the senior independent director of Sky just as the mood on corporate governance was turning ugly. Shareholder activism is the story of the moment, and Lord St John bewilderingly finds himself in the middle of it. It's also his misfortune to have been assigned the role in a company which is ruled with a rod of iron by one Rupert Murdoch.

The News Corp boss thinks his son the right man for the job as chief executive and he's determined to have him. But rather than attempting to sweet talk the City into accepting the appointment, he's chosen to ignore it altogether. Lord St John's cancellation of a scheduled meeting with members of the Association of British Insurers was an act of stupidity that has greatly inflamed the situation.

Mr Murdoch is said not to give a damn what the City thinks. But it will be Lord St John who is thrown to the wolves as part of the price the News Corp boss eventually pays to perpetuate the family dynasty.

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