Ballmer: Yahoo deal would provide counterweight to Google

Ballmer: Yahoo deal would provide counterweight to Google

Summary: Microsoft CEO Steve Ballmer said Monday that the company's unsolicited offer for Yahoo would create a No. 2 competitor against Google and serve as a counterweight in the industry.

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Microsoft CEO Steve Ballmer said Monday that the company's unsolicited offer for Yahoo would create a No. 2 competitor against Google and serve as a counterweight in the industry.

The message, which comes a day after Google panned the deal and Yahoo said it was exploring other options, was delivered to analysts getting an update on Microsoft's growth strategy. The software giant also released Windows Server 2008 to manufacturing.

Naturally, the conversation went to Yahoo (blog focus and Techmeme). Ballmer said Microsoft and Yahoo could innovate quickly to close both companies' Google gap. "Having scale really does help," said Ballmer, adding that Microsoft's offer "was a generous one."

Ballmer, who sounded defensive at times, said Microsoft's acquisition of Yahoo "enhances competition" and is designed to "scale up" the software giant's online efforts. "Google's clearly got a dominant position. They've got about 75 percent of paid search worldwide," said Ballmer.

Ballmer added that he expected Yahoo to accept its bid quickly. Microsoft CFO Christopher Liddell also said that the $31 a share price tag was designed to get Yahoo shareholders to take the deal quickly.

All of this banter--from all sides--is part of the game that will decide Yahoo's future.

Liddell said that he expects that Yahoo deal to be completed by the end of the year and that the software giant will float some debt to pay for the acquisition. If Microsoft borrows to pay for the Yahoo deal it will be the first time the company has tapped the bond market. Is this a big deal? Not really, but for Wall Street it's huge. Technology giants don't tap the debt markets often and when they do it's an event. Oracle and Cisco have tapped the bond markets and Microsoft would get an equally warm reception. Think about how good Microsoft bonds will look compared to all the subprime slime and other issues out there.

Other key points from Microsoft's analyst chat, which Mary Jo Foley has rounded up nicely:

  • What is Microsoft? He says he gets this question all the time--from employees. Ballmer said Microsoft is all about software innovation, which means software and services today on multiple devices. All of that said, Ballmer acknowledged that the business model has changed. Software is core capability, but Microsoft "is following its nose" to new markets that need more core competencies. Ballmer said that two examples of Microsoft broadening its online focus and launching into devices. He noted that "the online story and personal devices are still works in process."
  • Ballmer said Microsoft "will democratize" virtualization. Translation: Microsoft will be cutting prices to hurt VMware.
  • Microsoft has begun marketing to enterprises better. These direct sales folks market direct to smaller and mid-sized enterprises--a key market for the company, said Ballmer.

Topics: CXO, Banking, Google, Microsoft, Software, IT Employment, Social Enterprise

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5 comments
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  • Umm, what?

    Mr. Ballmer feels that there needs to be a "couterweight" to Google because they currently have 75% of the market.

    What about the fact that MS has 90% (or is it 95%) of the desktop market? Does he feel that there needs to be a "couterweight" to MS? I don't think so.

    Yahoo, just say no to MS.
    giltjr
    • Having a "counterweight" <sic> to Microsoft

      ... would be up to someone who is currently competing in the same market segment that Microsoft is: servers, operating systems, office suites, collaboration/messaging, etc.

      As far as I can see, Microsoft and Yahoo! both are competing in the same market space as Google so their merger WOULD be a counterweight to the Google machine.

      Perhaps you are thinking about Apple as being the counterweight to Microsoft in the desktop arena?
      Confused by religion
  • Microsoft+Yahoo!!

    This is one case where I agree with Steve Ballmer whole heartly. Yahoo has no one to blame but themselves. They should have entered to a number partnerships *12-16* months ago. The fact they are now more affordable...thats business, go Microsoft! Don't get me wrong, I want and think the Yahoo brand will live on. But I think the combination of the two will help to counter Google's dominance.
    USArcher
  • Microsoft finally has a way to kill Yahoo!

    As with most Mircosoft acquisitions, they will find a way to kill off the company that they acquire.
    B.O.F.H.
  • RE: Ballmer: Yahoo deal would provide counterweight to Google

    For my perspectives on who else is on Microsoft's competitive radar screen, see: http://blog.tmcnet.com/the-hyperconnected-enterprise/ "
    TonyRyb