Microsoft Wants Chat With Yahoo About Search Deal

A partnership would make sense given Google's lead in search, Microsoft CEO Steve Ballmer said.
Microsoft chief executive Steve Ballmer on Tuesday said he wants to talk with new Yahoo chief Carol Bartz about a search deal that would help both companies better compete against market leader Google.

Ballmer told financial analysts at a meeting in New York that he wasn't interested in buying the Web portal, which Microsoft tried to do last year but failed to negotiate a price acceptable to Yahoo. Instead, he would discuss pooling the companies' resources to take on Google together.

Ballmer, however, said there's been no movement toward talks yet. "I don't know if anything is going happen," he said.

A partnership would make sense given Google's lead in search, Ballmer said. In comparison, Microsoft has a "small share."

As of December, Google accounted for 63% of Web searches in the United States, followed by Yahoo at 21%, and Microsoft at 8.5%, according to Web metrics firm ComScore.

While investors have often said Ballmer should abandon the search and advertising market, which he acknowledged has been "very unprofitable" for Microsoft, the company believes it can't ignore the revenue potential.

"This is a huge opportunity," Ballmer said. "If you give up, you can't get back in the game."

Carol Bartz
Carol Bartz

However, Ballmer acknowledged, "we are up against incredible odds." Google has a larger number of employees focused on search and has a larger distribution network. But Microsoft believes it can offer an attractive product to advertisers and gain share over time.

"Search share isn't going to go from 4% to 25% in a year," Ballmer said. "That's just not reasonable."

But Ballmer said he's determined to be successful. "I don't want to wind up being known as the Jerry Yang in this market," he said, referring to the co-founder and former CEO of Yahoo.

Yang was replaced by Bartz amid investor frustration with his failure to negotiate an acquisition deal with Microsoft, which last year offered $47.5 billion.

Yahoo has had other search partners before. InformationWeek has published an independent analysis of the company's pairing with IBM. Download the report here (registration required).