RealTime IT News

Ballmer: Software Vision Will Continue

Whether Microsoft does or does not win the brass ring – i.e., Yahoo – it will continue to aggressively seek the larger prize, which is to transition its businesses to include online "in the cloud" services, top company executives said this week.

"[Before Friday's offer to buy Yahoo] we were on a path and we will stay on that path regardless," CEO Steve Ballmer told a gathering of financial analysts Monday at what the company billed as a "strategic update" event.

The "path" Ballmer referred to is the company's more than two-year-old software-plus-services push. Key to that is to provide users with a seamless set of online services "in the cloud" that mesh with the company’s software products. One of those keystone services is advertising-funded search.

According to NetApplications' statistics for January 2008, Microsoft provides slightly more than 6 percent of global searches compared with more than 77 percent for Google. In the meantime, Yahoo has just more than 12 percent so a combination of the two firms would yield a combined market share of less than 20 percent.

Microsoft has been pursuing Yahoo on and off for at least a year and a half and made an offer a year ago that Yahoo executives declined, Ballmer said on Friday when the Redmond giant announced its unsolicited bid for the Silicon Valley dynamo.

Since Friday, there has been much back and forth among Microsoft, Yahoo and Google, and a winning offer from Microsoft is far from assured. Google has reportedly offered "help" to Yahoo, and also raised the specter of antitrust actions, should Microsoft try to move forward with its bid.

Ballmer, obviously, disagrees – especially given Google's dominance in search.

"We think the combination of Microsoft and Yahoo makes for a more competitive marketplace," Ballmer told analysts.

Indeed, Ballmer, as usual, is bullish about Microsoft's latest move. "We expect the Yahoo board and shareholders will join us very quickly," he added.

That contrasts, however, with statements made over the weekend by Yahoo.

"A review process like this is fluid, and it can take quite a bit of time," Yahoo said in an online FAQ. Still, Yahoo's board is not ruling out being acquired, although the FAQ did state that the company will consider all options, including moves to keep the firm independent.

In the meantime, Ballmer said Microsoft will continue its efforts to move its software-plus-services vision forward. "When we talk about the transformation of our business to software-plus-services, we're talking about transitioning everything we do," Ballmer said.

"The theme here is, if you want to grow, you have to invest," Ballmer added.

One surprise in Monday's presentation: Microsoft officials disclosed that in order to make the investment in Yahoo, the company is looking at taking on debt for the first time in its history – perhaps not too surprising given that Microsoft has about $21 billion in cash and has proposed to spend roughly $44.6 billion in the effort, about half in stock and half in cash.

"Microsoft has always been very, very conservative on the financial front," Matt Rosoff, lead analyst for legal and financial affairs at researcher Directions on Microsoft, told InternetNews.com.

For instance, he said, the company likes to keep enough cash on hand to run the company for a year, if necessary. Besides that, it's likely that Microsoft may be bid up by the time it completes – if it completes – the acquisition.

"Borrowing has never been cheaper than it is right now so it makes a lot of sense for Microsoft [to take on debt]," Rosoff said.