Microsoft, Once Again, Officially Not Interested in Yahoo

Despite CEO Ballmer's Continued Public Flirting

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NEW YORK (AdAge.com) -- "Our position hasn't changed. Microsoft has no interest in acquiring Yahoo; there are no discussions between the companies," a Microsoft spokesman said in an e-mail.
Steve Ballmer
Steve Ballmer Credit: Nancy Kaszerman

If that all sounds familiar, it's because Microsoft has made such declarations several times in recent months as it disputed rumors about making another bid for Yahoo. But this latest statement, sent to Ad Age today, came just hours after Microsoft CEO Steve Ballmer told the audience at a Gartner conference in Orlando, Fla., that the deal still makes "economic sense."

Investors encouraged
Yahoo's stock soared 20% on Mr. Ballmer's remarks, indicating just how dearly its investors are hoping for a revived Microsoft bid. It's now up about 10% to $13.

Of course, it makes more economic sense now, given Yahoo's stock price has slumped in recent weeks, dropping into the $12 range. At the time of Microsoft's initial $31-a-share bid (which was upped to $33 a share before negotiations finally ended), Yahoo's stock had been languishing in the $18-$19 range.

Mr. Ballmer told the conference it would continue to talk about search partnerships with Yahoo. After the talks between Microsoft and Yahoo dissolved earlier this year, Yahoo inked a deal with Google that has the search leader serving up to 5% of its search ads. That deal is currently under examination by the Department of Justice to determine whether it violates antitrust regulation; Microsoft has publicly argued that it does.

Ambitious goals
Many people believe a Microsoft-Yahoo marriage is inevitable if Microsoft wants to accomplish the goals it has previously stated for itself in the area of online advertising. Nabbing a 30% share of web search is pretty much impossible without a big purchase such as Yahoo, which would bring Microsoft's share to about that number. (Buying AOL would get it to about half that, around 15% of the search market.) Mr. Ballmer has also said he wants online advertising to account for 25% of Microsoft's revenue in the next four to 10 years, which is another long shot without a major partner.

Still, something seems certain to happen between Microsoft, Yahoo and AOL. Over recent weeks, Yahoo has also been talking to AOL about combining forces, although that could easily be a ploy to lure Microsoft back to the table.
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