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October 16, 2008 1:28 PM
Posted by Benjamin J. Romano
Reports on Microsoft CEO Steve Ballmer's comments on Yahoo earlier today included snippets (some not entirely accurate) of his comments. I just watched a Webcast of the interview and took down the full question and answer, which is a bit more revealing.
Microsoft corporate PR doused the idea that Microsoft was changing its position on Yahoo with a terse statement.
Ballmer made the comments in a wide-ranging discussion with two Gartner research analysts, before an audience of enterprise IT professionals in Orlando, Fla. It was Ballmer's 10th appearance at Gartner's ITxpo event.
Ballmer was asked about Yahoo about halfway through the 45-minute discussion, which contained several other interesting nuggets. David Mitchell Smith, a lead Gartner analyst on things Web 2.0, got onto the subject by first asking Ballmer, "Do you consider Google your most significant competition?"
"No. Google is the best financed, most ambitious company in the business. ... Microsoft, Oracle, Google, I would say, that would be, of people whose core competence is software ... and we're all reasonably well financed.
"The real competition, the competitive thing that gets my mind oriented is change in business model. Open source, more than anything, wasn't a technology change, it was a different business model. And we had to ask ourselves, How do we compete? How do we deliver better total cost of ownership? ...
"[O]n the consumer side, advertising funding is a big deal and Google definitely has a lead, but it's really about getting good at advertising, because if we're good at advertising, we'll compete with them in anything on the consumer business.
"Software plus services, or the cloud, that again will involve the technology change and a business model change and so I say, I think of our biggest issues really in terms of alternate business models as opposed to specific companies."
Smith suggested that the advertising business-model change was the driving force behind Microsoft's attempt to buy Yahoo, "whose stock, we noticed, has continued to drop. So we have to ask you, if the acquisition made sense 8 months ago, why wouldn't it even make more sense now, now that the price would presumably be a lot lower?"
"Well I don't know if the price would be lower. We offered 33 bucks not too long ago and it's 11 and a half today, so I don't know what price might have gotten the job done. It's clear that the Yahoo --- that Yahoo did not want to sell the company. It didn't want to sell when we offered $33. If they thought the company was worth more than $33 six months ago, they probably still think it's worth at least $33 today and so, I think what we learned through that is look, they want to remain independent. Perhaps there will continue to be opportunities to partner around search. We're not in any discussions with them, but that was an offer we made after the acquisition had fallen through. We'll see. I still think it would make sense economically for their shareholders and ours."
Now, having read the full answer, let's review the statement from corporate PR: "Microsoft has no interest in acquiring Yahoo!; there are no discussions between the companies."
No mention of a search partnership.
Henry Blodget points out that even if the official line is no deal, "Steve Ballmer just inadvertently revealed HIS OWN attitude toward a Yahoo deal, not Microsoft's official one. But given that Steve is Microsoft's CEO, it's his own attitude that matters."
For the record, Yahoo finished the day at $12.99, up $1.24 or 10.6 percent. Microsoft gained $1.53, 6.8 percent, to $24.19. The Nasdaq was up 5.5 percent and the Dow climbed 4.7 percent.
Here's my earlier post.