October 5, 2009

Ballmer Says Microsoft Will Not Make Internet Search Acquisitions

Microsoft Chief Executive Steve Ballmer said on Monday he did not expect to make acquisitions to help the company challenge Google's dominance in the Internet search market, Reuters reported.

Microsoft recently agreed to a search partnership with Yahoo after a failed attempt to buy the company.

Ballmer said after a lecture to Britain's CBI business lobby organization that Microsoft would continue to work hard and invest in the marketing and continue trying to get the Yahoo deal through regulatory.

He also said he believed global economic growth was likely to return slowly and at lower levels.

"Things have come down. I see them staying down and slowly growing," he said.

He also suggested that information technology would play a key role in driving efficiency and productivity gains to help the world out of recession.

The industry is expected drive the creation of 5.8 million new jobs worldwide by the end of 2013, according to a joint study with industry research firm IDC.

However, Microsoft is freezing its research and development budget, the world's largest, at $9.5 billion -- partly in order to preserve resources for the fight with Google, Ballmer said.

Microsoft suffered a revenue decline of 3 percent, including a 17 percent drop in the fourth quarter -- its first-ever drop in annual revenue in its fiscal year to end-June.

"It was like a cultural reformation for us," Ballmer said. "We said: 'First, let's lock the R&D budget. Let's not necessarily grow it the way we might have.'"

"Let's make sure we keep the money we need to continue to establish us in new businesses," he said. "We're trying to give Google a little competition in the search business. They've been trying to give us a little competition in some other ways."

Industry tracker comScore's figures for July show that Google has about 77 percent of the global Internet search market, while Yahoo comes a distant second with 8 percent and Microsoft fourth with 3 percent, behind China's Baidu.

By the end of June, Microsoft had cash and short-term investments of $31.4 billion.

The new 10-year deal with Yahoo will have Microsoft's new Bing search engine powering queries on Yahoo's sites. Microsoft will then pay Yahoo 88 percent of revenue from advertisements generated from those sites.

Therefore, Microsoft should receive more traffic to refine its search technology and build up its ad base, while Yahoo gets revenue from search ads without the expense of managing its own search engine.

Since its U.S. launch four months ago, Bing has made inroads in the United States, backed by a huge marketing campaign.

But analytics firm StatCounter reported that Bing's U.S. share slipped by more than 1 percentage point to 8.5 percent in September.


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