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Should China's Alibaba be allowed to buy Yahoo?

With the financial help of Internet company Alibaba, Liu Chunlei has been crowdsourcing so-called "Danger Maps" to make pollution information publicly available

 

CORRECTION: The original version of this article misstated the role of Bain Capital in the attempted purchase of 3Com in 2008. Bain and Huawei Technologies were partners in the deal. The text has been corrected.

Jeremy Hobson: The largest Internet company in China has just hired a lobbying firm in Washington, D.C. And the rumor is that Alibaba needs lobbyists because it wants to buy Yahoo. Yahoo has been struggling lately, and a takeover might be just the ticket for a turnaround. But one of America's biggest Internet companies getting taken over by a Chinese company is guaranteed to raise red flags in Washington. And that's where the lobbyists come in, as our New York bureau chief Heidi Moore explains.


Heidi Moore: When a company in China wants to buy its American counterpart, it needs advisors. Investment bankers to get the right price; lawyers to cover all the regulations, and -- oh yeah -- a lobbying firm to do battle in Washington.

 

Roger Kay: It's essentially the old Cold War enemies. China is a rising power, so there's some suspicion that China really is trying to spy on us, so that's created something of an issue.

Roger Kay is a technology analyst with Endpoint Technology Associates. He say the Internet may be intrinsically a national security issue.

Kay: They could propagandize and influence things. A lot of people read Yahoo, so perhaps that would be an issue. So there's certainly some way that some congressman or Senator could raise an objection if they wanted to.

The U.S. government let one prominent tech deal fizzle. In 2008 Bain Capital, in Boston, and Huawei Technologies of China tried to buy 3Com, a company that held some national security contracts. The Department of Defense suggested Huawei had ties to China's military, and potentially, hackers. The deal died. Clay Lowery chaired the government committee that oversaw that merger. He's now a vice president with Rock Creek Advisors.

Clay Lowery: The government has plenty of operations that utilize the Internet and information technology, so those are the type of areas at least you'd want to look at if you were in the U.S. government.

Yahoo may not have government contracts, but it stands between consumers and the Internet. That means it would get a lot of scrutiny. In New York, I'm Heidi Moore with Marketplace.

About the author

Heidi N. Moore is The Guardian's U.S. finance and economics editor. She was formerly the New York bureau chief and Wall Street correspondent for Marketplace.

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