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Yang: 'Best Thing for Microsoft Is to Buy Yahoo'

Yahoo CEO Jerry Yang
Yahoo CEO Jerry Yang
Source: Reuters
SAN FRANCISCO -- Oh, what lousy timing.

Yahoo's embattled CEO, Jerry Yang, lived up to his commitment to speak at the Web 2.0 Summit here late Wednesday -- on the same day that Google scrapped an ambitious, search ad deal with his company.

That revenue-sharing agreement had promised to bring in hundreds of millions of dollars, helping to buttress Yahoo's (NASDAQ: YHOO) turnaround strategy. But while he expressed disappointment that Google (NASDAQ: GOOG) had pulled out in the face of increasing scrutiny by the Department of Justice (DoJ), Yang insisted the deal hadn't been a critical part of the company's growth plan.

"We were disappointed going through the process with the Department of Justice because we thought it was a good deal for the marketplace," Yang said.

In his onstage interview with Web 2.0 Summit chair John Battelle, Yang had a good deal to say about the scrapping of that other major deal: the Microsoft's acquisition bid for over $40 billion.

Yang insisted it had been Microsoft (NASDAQ: MSFT) that "walked away" from talks while Yahoo -- widely described as being averse to an acquisition -- still wanted to negotiate.

He also said that buying Yahoo still makes sense for its onetime suitor.

"Today, I think the best thing for Microsoft to do is to buy Yahoo," he said. "Did we want to do a deal? Yes."

He added that he was willing to sell the company at the right price and that the two companies weren't far apart on terms.

Without being specific on price or the timeline, Yang said that as the negotiations dragged on and Microsoft backed off, Yahoo offered to be sold at a price Microsoft had suggested earlier, but was rejected.

"A lot of people have replayed that in their minds. I'm no exception," he said.

Yang said the two companies are not currently negotiating and that Microsoft has since made it clear it doesn't want to buy Yahoo.

He also said, contrary to criticism in the blogosphere and elsewhere, he does not have "an ego about remaining independent versus not. As a shareholder, and especially as CEO, my job is to find the right path for Yahoo."

Downplaying Google

That path now evidently won't include doing a deal with Google, either.

Yang dismissed the implications of the failed partnership with the search leader, adding that the deal would only have been "incremental" to Yahoo's overall growth plans and hadn't been part of its financial forecasts.

He also said it's wrong to think the deal's collapse seriously impacts Yahoo's plans in search.

"At the end of the day, it's incredibly important we compete vigorously in the search market and we continue to see our share of the market grow," Yang added. "We're doing better now than we were when we started talking about this deal."

He added that the he felt the government's reluctance to OK the deal had shown it doesn't understand the Internet industry. "Their market definitions are too narrow," he said.

Onetime suitor Microsoft also had a hand in publicly challenging Yahoo's deal with Google, claiming before lawmakers that a deal between Google and Yahoo would create a monopoly in search advertising.