Google buy Youtube

***wraggster*** · October 10th, 2006, 18:27

Web search leader Google Inc.'s (GOOG.O: Quote, Profile, Research) $1.65 billion deal to buy Web video-sharing site YouTube.com is part of a broader strategy to invest in the emerging online video market, a top executive said on Monday.

Google Chief Executive Eric Schmidt told investors and news reporters on a conference call following news of the deal that YouTube will be "one of many investments" Google plans to make in the video field.

Schmidt said that Google will run YouTube as an independent company but also preserve its own Google Video as a separate operation. He described YouTube as the "clear winner in networking and the social side of video" for the way the site encourages its users to share videos with their friends.

"We were very impressed and that's what led us to begin conversations with YouTube," Schmidt said.

David Drummond, Google's senior vice president of corporate development and general counsel, said the $1.65 billion acquisition price will be slightly dilutive to Google earnings for the remainder of this year and into 2007.

"There will be some slight dilution this year and next, but we think this is a good structure," Drummond said.

The deal was structured as an all-stock transaction to make it tax-free for YouTube shareholders and also cheaper for Google than paying out of its roughly $10 billion in cash horde, Drummond said.

In response to a Wall Street analyst's question, Schmidt declined to quantify this impact on earnings, reiterating the company's policy against commenting on its financial outlook.

The YouTube deal is expected to close in the current fourth quarter, Drummond said. "All necessary corporate approvals by both companies boards are complete," he said.