Microsoft Chief Financial Officer Chris Liddell just took the financial analysts here through another re-hash of Yahoo pursuit. He said the value of Yahoo has eroded since Microsoft made its acquisition offer in January. Going forward, he said, the chances of Microsoft buying all of Yahoo are so small as to be "essentially negligible." A search-only transaction is still a possibility.

As my colleague Brier Dudley noted, Microsoft Chief Research and Strategy Officer Craig Mundie just described spatial interaction with computers as a major new frontier in computing.

He also showed progress Microsoft has made in robotics and natural user interfaces such as speech and facial recognition. He gave one demonstration of how Microsoft is putting these big ideas in practice.

Microsoft is working on "robotic receptionists" for its buildings that will perform one of the most common but mundane tasks that the real receptionists do dozens of times a day: scheduling shuttles, Mundie said.

I was expecting more discussion at today's Financial Analyst Meeting of the significant reorganization of the company announced late Wednesday afternoon. It could be further evidence that Kevin Johnson's departure for Juniper Networks caught Microsoft by surprise.

Microsoft CEO Steve Ballmer made little reference to the change, which split the giant Platforms and Services Division into two groups, one focused on Windows/Windows Live and the other on Online Services. Ballmer is taking direct oversight of both groups.

He's due on stage again for a Q&A with analysts later this afternoon, so it may come up.

Here's what he said this morning, introducing the section of his talk focusing on the online business and Internet search in particular:

Microsoft said today it intends to buy Aliso Viejo, Calif.,-based DATAllegro, a data warehousing appliance company.

Bill Veghte, Microsoft senior vice president of Online Services and the Windows Business Group, is telling financial analysts about the success of Windows Vista and the improvements in the product and its adoption in the last year.

On security, for example, Windows Vista is 62 percent more secure than Windows XP SP2, he said.

Microsoft has sold 180 million Vista licenses since it launched in January 2007. Sales have been "very balanced" between consumer and business customers.

Enterprises are accelerating their deployments of Vista, particularly since Microsoft released Service Pack 1 in March. Veghte said deployment is consistent with what Microsoft saw with Windows XP.

Contrast Veghte's sunny presentation with this note from market researcher Forrester:

Microsoft Entertainment and Devices Division President Robbie Bach was just asked about pricing for the Xbox 360 at Microsoft's Financial Analyst Meeting.

How does he evaluate the need to drive share this year and maybe lower prices versus your profitability goals, and do you want to increase your share as the cycle progresses or are you more intent on profitability?

Microsoft has inked a search distribution deal with social networking site Facebook.

Satya Nadella, senior vice president in charge of Microsoft's search, MSN and ad platform engineering efforts, said Microsoft "will be providing an API to Facebook where they will create a rich search experience, inclusive of Web search."

It will launch in the fall, and will include both Live Search results and Microsoft search advertising.

The company is positioning it as another effort to broaden awareness of its Live Search engine, which Nadella demonstrated at Microsoft's Financial Analyst Meeting today.

Last August, Microsoft and Facebook inked a display advertising deal. In October, Microsoft bought a 1.6 percent stake in Facebook for $240 million.

Update, 11:15 a.m.: The deal is U.S. only. It is apparently exclusive, as Microsoft will be providing search on Facebook's site, a Microsoft spokeswoman said. I've asked Facebook for confirmation that Microsoft will be, in fact, its exclusive U.S. search provider. Facebook has more than 90 million active users globally.

Upate, 11:23 a.m.: Facebook spokesman Matt Hicks said in an email: "We're not disclosing the terms of the search deal, but it is specifically for the U.S."

If it were exclusive, why wouldn't Microsoft and Facebook come out and say so definitively?

Update, 12:04 p.m.: Just got an update from Microsoft: The deal is exclusive to Microsoft for search in the U.S.

Microsoft CEO Steve Ballmer is explaining his view of the Internet search market and the company's pursuit of Yahoo, which has been the biggest story in the tech world for the first half of the year.

Ballmer repeated his mantra: Yahoo was a tactic to quickly build the scale necessary to compete in search and search advertising, but it wasn't the company's strategy.

The company was ready to spend "$40 whatever blah-blah billion for Yahoo," he said. Because it's no longer doing that, the company has more flexibility to reinvent the search and advertising model, Ballmer said.

He said there's "nothing under discussion between the two of us," but did not rule out the possibility of future discussions.

One big reason Microsoft backed off its proposal to buy the whole company was the delay in moving a transaction forward, which would have pushed the regulatory review process into the next U.S. administration. Ballmer said the company had a tight time line and wanted to go through regulatory review of a potential acquisition with one administration, not two.

About 250 financial analysts have gathered at Microsoft's Redmond headquarters to hear from the company's top leaders, starting with Chief Executive Steve Ballmer, who is on stage now. A link to a live Web cast of the event is here.

Microsoft announced a significant shakeup late Wednesday, including the departure of longtime executive Kevin Johnson, who headed the company's huge Platforms and Services Division. Ballmer also sent an e-mail to employees yesterday outlining his priorities for the 2009 fiscal year.

Ballmer started out telling the investors and analysts in the room that he's with them:

Being a substantial Microsoft shareholder, "I am deeply concerned about where we're going and being responsible about shareholder interest," Ballmer said.

Check back for updates from Microsoft's Financial Analyst Meeting throughout the day.

Update, 9:15 a.m.: Ballmer has covered a lot of territory in 22 minutes on the stage. One big issue for this audience and for investors everywhere: The stock price. Why is it such a laggard? Why does the company's price-to-earnings ratio trail its peers in technology and the S&P 500, despite growing profit by 18 percent a year, on average, for the last six years.

Ballmer didn't say exactly why he thinks the stock has been stuck, but he did list the issues he thinks have the greatest impact on share price:

The Windows PC engine;

Growth opportunities in enterprise;
Technology shift risk;
Success in online and mobile;
Earnings, return of cash, willingness to invest.

Incidentally, the company's shares are down 85 cents, or about 3.2 percent, to $25.58 in midday trading.

Update, 9:45 a.m.: One of the biggest topics on investors' minds today is Microsoft's strategy for online. The company continues to increase its investment in this broad area. We'll hear more throughout the day from executives directly overseeing the various businesses that are touched by the online shift (it's pretty much all of them), but just now, Ballmer laid out the size of the opportunity and why Microsoft has to pursue it.

"Everything in the world that can move to be delivered and embraced over an IP network -- over the Interent -- will be," Ballmer said.

Everything you read, watch, want to communicate is going to happen over the Internet: TV, books, magazines, phone calls, shopping, advertising, online customer service, content, community, commerce, he said.

"The whole world goes digital. ... The size and magnitude of that is really unbelievable," Ballmer said.

The digital transformation is fundamentally "as much a software opportunity as anything else," he said. Software, of course, is Microsoft's expertise, which is part of what gives him confidence in the company's ability to play a major role in the online opportunity.

Why go after it? Ballmer said at Microsoft's scale -- more than $60 billion in revenue during the just-ended fiscal year -- there are few remaining opportunities that can have a major impact on the company's growth rate.

"There's at least $1 trillion just of media, communications and advertising -- not all of which we can capture -- but we don't have a lot of trillion-dollar markets that are being transformed," Ballmer said.

That opportunity, to Ballmer, justifies the investments the company is making now. The $1.2 billion operating loss in the company's Online Services Business last year was about 5 percent of total operating income, he said.

"But the amount of economic value that we have the opportunity to create, is certainly at least 40, 50, 60 percent or more of our total economic value today," he said. "... I think it is a very good risk-return."

While the opportunity extends to nearly all of Microsoft's businesses, Internet search is the tip of the spear -- the front door of the Internet.