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Ballmer distances Microsoft from Yahoo deal

But he leaves door open a crack

By Nancy Gohring
July 24, 2008 12:00 PM ET

IDG News Service - Talks with Yahoo Inc. are for now off, Microsoft Corp. CEO Steve Ballmer said today, but he left the door open a crack.

"It didn't work out, fine, we're done, we can move on," he said, speaking at Microsoft's annual analyst meeting. "Does that mean nobody will ever talk to anybody again? I suspect the answer to that is also no. It's a long time and a big world, but we are moving on."

Microsoft first made an offer to buy Yahoo in February but was rebuffed. The companies have since had on-again, off-again discussions over various deals, including one where Microsoft would buy Yahoo's search business. Microsoft has also had discussions with Carl Icahn, a wealthy investor who owns nearly 5% of Yahoo shares and had tried to replace Yahoo's board in order to make some sort of deal with Microsoft.

Ballmer pointed out the downsides to a Yahoo deal and reiterated that Microsoft will do well without a deal with the company. "Yahoo for us was always a tactic, not a strategy," he said.

Yahoo would have helped Microsoft improve the number of advertisers on its network to deliver more relevant ads to users. Yet, a Yahoo acquisition would have had some downsides, he said.

"Frankly, without the big commitment to buy Yahoo, our flexibility in reinventing the search and ad model, we have more flexibility," he said. After putting nearly $50 billion into an acquisition, Microsoft to some degree would have been locked into building on the same model that Yahoo had created, he said.

Microsoft is working internally on alternate ways to increase ad relevance, he said.

In addition, Yahoo largely has a presence only in the U.S. and Japan, so it wouldn't have helped Microsoft in other areas of the world, he said.

Ballmer again touched on why timing was such a crucial issue in completing a deal with Yahoo. The company didn't want to do a deal that wouldn't be able to complete the regulatory review before an administration change in the U.S., he said. "At the wrong price and two administrations of regulatory review, it was not a good tactic," he said.

Ballmer also seemed to try to downplay Yahoo's future potential for innovating and causing big changes in the search market. "In the search business, let's face it, this is not about Yahoo. This is a two-horse race, it's Microsoft and it's Google," he said.

Reprinted with permission from IDG.net. Story copyright 2014 International Data Group. All rights reserved.
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