In spite of last year's rebuff, Microsoft Corp hasn't given up its quest for a stake in Yahoo, if not a complete takeover of the Internet service provider. Microsoft co-founder and chief executive officer Steve Ballmer said during a media industry conference in New York today that a search partnership with Yahoo! Inc remains a compelling prospect.
Ballmer told the McGraw-Hill Media Summit that the only talk he has had with Yahoo's new chief executive officer Carol Bartz is a single phone call, but added, "I'm sure when it's appropriate, we will have a chance to sit down and talk.''
In a TV interview with BusinessWeek during the summit, Ballmer said, "There is a fairly compelling set of economics that underpin a search partnership. When [Bartz] is ready, we will have a discussion. Unless I'm fooling myself, over time I would expect a there's a good opportunity for a deal."
He added that what makes Yahoo attractive is not necessarily its technology, but its scale-"there are returns to scale''.
Bartz took the reins of Yahoo in January, succeeding co-founder Jerry Yang, who last year had beaten off Microsoft's effort to buy Yahoo for $47.5 billion. Bartz has recently said that every business in Yahoo is up for examination as the company seeks to revive growth and compete with Internet search advertising leader Google Inc.
Bartz has also opened the door to negotiations with Microsoft about a search partnership. But if the two companies do discuss a deal, "we're going to negotiate as companies negotiate, privately'' Bartz said at a recent conference in San Francisco.
On IBM's likely takeover of Sun Microsystems, he said if the two companies combine it could be a year or two of "digesting" for them. "I relish that year," Ballmer said.
Ballmer said it could take as long as four years before normal growth patterns return to the economy. But he added that the current conditions give Microsoft advantages over Apple because "paying an extra $500 to get a logo" on a device is not something he sees many people willing to do in the current climate.
Advantages over Google
Ballmer said that being the underdog in the Internet search market has one advantage – his company can experiment, while rival Google Inc must play it safe. ''Google does have to be all things to all people. Our search does not need to be all things to all people.''
Google may be tentative about changing the look of its search pages, causing the company to take fewer risks, said Ballmer. The challenge is similar to what Microsoft faces with its Windows operating system, which needs to appeal to a broad range of customers, he said.
Microsoft will experiment with new business models and ways to present Web search results, Ballmer said.
So far, its efforts haven't made much headway with users. The company controls an even smaller portion of the Web search market than it did four years ago, when it stopped using Yahoo's search technology. Building market share will be a step-by-step process, Ballmer said.
Ballmer said the biggest opportunities for Microsoft in the next three years were in China, which buys 16 per cent of the world's PCs - "and that is growing". He said Microsoft could make as many as 20 acquisitions this year, but they would be relatively small, in the range of $10 million to $500 million. He said the Microsoft's businesses with the biggest upsides by percentage were phone and search.