Microsoft rules out buying spree as it plots post-Yahoo strategy

Shaon published 21 Jun 2008, 05:35 in main - 345 views

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Microsoft will not try to make up for its failed move on Yahoo with a spate of other internet acquisitions, according to the top executives behind its online strategy.

Speculation about Microsoft's next move has been rife since Yahoo last week rebuffed the software company's overture, ditching Microsoft for a search advertising pact with Google.

Among other companies picked out as acquisition targets are Facebook, in which Microsoft already owns a small stake; the AOL division of Time Warner; and a slew of smaller concerns.

However, Steve Ballmer, chief executive, scotched talk that Microsoft would turn to a "plan B" of other acquisitions to boost its online presence.

"People don't understand what they're talking about," he said in an interview with the Financial Times. "At the end of the day, this is about the ad platform. This is not about just any one of the applications."

Kevin Johnson, head of Microsoft's Windows and internet businesses, added that the move on Yahoo was based purely on Microsoft's need to strengthen its advertising business, with the search advertising market by far the most important aspect of it.

"The most important application for the foreseeable future . . . is search," said Mr Ballmer. "I don't think we can say: 'OK, well, we're going to be in the ad platform business and we're going to do it just on the strength of non-search-based assets.' We don't have to dominate, but we'd better have a darn good chunk of the search market over time."

Microsoft already supplies display advertising to Facebook and would gain little from trying to acquire the site outright, Microsoft executives suggested.

The comments, in interviews with the FT this month, were made days before Yahoo opted for a search advertising pact with Google. Since then, Microsoft has left open its offer to buy Yahoo's search business, as well as taking a $8bn (£4bn) stake. It has also madeacquisitions to extend its advertising portfolio.

"When you have an entrenched competitor, and you're plopping around at 9 to 10 per cent query share, chasing tail-lights is not going to get you there. We have to innovate and disrupt," said Mr Johnson.

Copyright The Financial Times Limited 2008