Is ITA Software's airline-hosting business a deal-breaker or a deal-maker with Google?
While myriad press reports say Google and ITA Software are close to a merger deal, with Google poised to shell out about $1 billion for ITA Software, numerous pundits have characterized the acquisition as a perfect cultural and business fit.
And, in a lot of ways, indeed it is.
After all, there are a bunch of computer-engineer braniacs and otherwise very-talented people at West Coast (Google) and East Coast (ITA Software).
And ITA's QPX shopping and pricing engine has a grip on airline website (Continental, Hawaiian, American Airlnes, US Airways, United, Air Canada, LOT, Alitalia), online travel agency (Orbitz, CheapTickets, Hotwire) and metasearch (Kayak, SideStep, FareCompare, Fly.com, TripAdvisor, Bing Travel) flight search.
So, if Google intends to get into travel metasearch -- and all indications are that it does -- then ITA is an ideal flight-search partner.
In addition, word on the street is that ITA, too, has been playing around with hotel search. And, why wouldn't it?
While hotel and air search are two very different animals and although ITA's DNA is in air, if anyone can turn hotel search up a notch, it is probably ITA.
Hotels are where the money is in the travel business, and Google has been aggressively building out Google Maps with hotel search and pricing.
So, blending Google's and ITA's search acumen and focusing on the hotel beat could be a winner.
Meanwhile -- and this has received virtually no press -- ITA has developed Needlebase, a means for airlines and other travel companies to pursue add-on services such as tours, event tickets and other destination activities. Needlebase, which I wrote about here before it was branded, would only bolster Google's travel aspirations.
But, a potential sticking point in any Google-ITA deal could be ITA's airline-reservations system business.
Some have said -- what airline reservations business?
After dropping its goal of developing a global distribution system business to compete with Sabre, Galileo, Amadeus and Worldspan several years ago, ITA attracted some $100 million in funding and directed a ton of resources -- human and otherwise -- into building a new-age airline reservations system.
ITA won one contract, from Air Canada, for this business line, but the cash-strapped carrier pulled the plug on it last year.
Although ITA says it has some airline-contract prospects in the pipeline, for now it doesn't have any publicly disclosed airline-reservation system contracts.
So, if Google and ITA were to merge, where does this leave ITA's airline-hosting business? How does it fit in?
For Google, it probably doesn't.
Can you imagine Google running the reservations and ticketing system for a major airline somewhere? Does Google want to get into developing revenue management systems for airlines?
How fast can you say non-core business?
And, would ITA want to merely drop a business line that it has thrown its heart and soul into over the last few years?
After failing in the GDS business, would ITA want to admit its shortcomings in the airline-hosting business, too?
Don't forget this: Google isn't the only decision-maker in these negotiations, if indeed they are actively taking place.
ITA, too, could walk away from a deal.
After all, ITA is a very attractive business and has plenty of options for its investors.
One of the enduring questions about ITA has been which would come first -- would ITA be acquired by a Sabre or a Google, or would an IPO trump a merger?
That question hasn't been answered yet.
One possibility would be for ITA to dispose of its airline-reservations system assets and to merge its QPX flight search business into Google.
HP and its EDS unit (now called HP Enterprise Services), which are charged with building a new airline-reservations system for American Airlines, might be a suitor for ITA's airline-res business, especially if rumors are true that EDS is in relative disarray, wracked by HP downsizing over the last year.
Or perhaps ITA could spin off its res system business into a new company.
At any rate, deleting ITA's res business from the equation could resolve some issues for Google, too.
That rumored $1 billion price tag -- earlier I had heard $1.2 billion -- being batted around in the press is a hefty one, even for Google.
In Google's history, its only acquisitions to have reached that stratosphere were for DoubleClick ($3.1 billion) and YouTube ($1.65 billion).
I've heard some skeptism as to whether Google would pay that sum for ITA.
Which doesn't mean it won't happen.
But, separating ITA's QPX business from its airline-reservations system business could bring the price tag down for Google.
And, that could make it easier for the lovable geeks in Mountain View, Calif., and Cambridge, Mass., to hold hands.