* Google to buy ITA for $700 million cash
* Says deal is "pro-consumer"
* Travel industry worries about its dominance
(Recasts, adds details from call, analyst comments, byline,
changes dateline from Los Angeles to Washington)
By Alexei Oreskovic and Diane Bartz
SAN FRANCISCO/WASHINGTON, July 1 Google Inc
(GOOG.O) plans to buy one of the Web's key providers of airline
travel software for $700 million, potentially raising new
antitrust concerns for the world's largest Internet search
Google said on Thursday that it had agreed to buy
privately-owned ITA Software, in a move that Google said would
allow it to improve the way consumers find flight and fare
"What we're going to do is build new flight search tools
that focus on end-users," Google Chief Executive Officer Eric
Schmidt said in a conference call with analysts and members of
the press on Thursday.
He said that Google had no plans to sell airline tickets to
consumers and that Google planned to honor all existing
agreements that ITA has with its partners.
The deal should allow Google to match innovations made by
Microsoft Corp (MSFT.O), whose recently re-launched Bing search
engine has gained share by focusing on a handful of specific
search categories like travel and shopping.
The deal, which was reported to be in the works for weeks,
has unnerved travel industry players worried that Google could
end up wielding too much influence in the sector.
ITA, which has roughly 500 employees, provides software
that organizes flight information like fares and flight times.
The company is a major source of information about airfares to
the aviation industry, used by airlines, travel agents and
other sites including AMR Corp's AMR.N American Airlines,
Continental Airlines (CAL.N) , Hotwire, Kayak, Orbitz OWW.N
and Microsoft's Bing.
Google beat out reported bidders Expedia (EXPE.O),
Kayak.com and Travelport.
On a conference call on Thursday, Google executives called
the deal "pro-competitive" and "pro-consumer" but said it
expects that U.S. regulators will examine the deal's
"I would expect that it would be a significant review,"
said Schmidt. He declined to estimate when the deal would
The ITA deal comes shortly after Google closed its $750
million acquisition of mobile advertising firm AdMob. That deal
was held up for several months by regulators, but ultimately
approved when the Federal Trade Commission concluded that Apple
Inc's (AAPL.O) nascent mobile ad business would keep the market
Antitrust lawyers said they expected the Google-ITA deal to
be scrutinized by regulators, but ultimately approved.
"I would be surprised if this transaction were blocked,"
said attorney Richard Brosnick, an antitrust expert with Butzel
He said that the argument against the deal is not that it
would make Google dominant in the field, but that Google could
use its power to hurt other online travel companies like
Expedia and Orbitz.
Brosnick said he expected the government to enforce certain
conditions before approving the deal, such as requiring that
Google/ITA continue to deal with Orbitz and others on even
Google executives said on Friday that it was too soon to
say exactly how the company would incorporate ITA into its
search service, or how it might make money from ITA's flight
Caris & Company analyst Sandeep Aggarwal said that
travel-related searches currently accounted for 10 to 12
percent of Google's revenue, which totaled almost $24 billion
But he said that Microsoft's advances in its online travel
search service, including its 2008 acquisition of the FareCast
travel information service, had forced Google to bolster its
own travel capabilities.
"Google's number one competitor has been successful by
penetrating some of the verticals, and travel is one of them,"
"This Google ITA deal is motivated by both offensive and
defensive reasons," he said.
Google shares, which slid 1.2 percent on Thursday to
$439.49 in a weak market, were unchanged in after-hours trade
(Reporting by Alexei Oreskovic and Diane Bartz, with
additional reporing by Edwin Chan, Megan Davies and Paritosh
Bansal; editing by Leslie Gevirtz and Carol Bishopric)