Microsoft Still Sees Chance of Yahoo Search Deal

NEW YORK (Reuters)- Microsoft Corp Chief Executive Steve Ballmer said a Web searchadvertising deal with Yahoo Inc makes economic sense and may still bepossible, though the two sides are not in any discussions.

Shares of Yahoo jumped 12 percent on the news, as investors hopedBallmer’s comments could lead to the two sides returning to thenegotiating table. The share gains were pared back to about 10 percentafter Microsoft issued a statement saying it had no interest in buyingYahoo.

Talks between Microsoft and Yahoo broke off in July after the Webcompany rejected Microsoft’s proposal to buy its search business andenact a revenue-sharing partnership.

Yahoo had also rejected a full acquisition bid from Microsoft in Maythat was priced at $33 per share. Instead, Yahoo signed a searchadvertising pact with Web leader Google Inc, which is being scrutinizedby regulators.

"Perhaps there will continue to remain opportunities to partneraround search," Ballmer told a Gartner Inc conference in Orlando,Florida.

"We are not in any discussions with them. We’ll see. They want toremain independent. There are probably still opportunities aroundsearch. I think it would still make sense economically for theirshareholders and ours."

Since talks broke off, Yahoo shares have plunged to a 5-1/2-year lowof $11.37, weighed by concerns over the outlook for Web displayadvertising, as major advertisers such as banks and automakers cut backspending.

"We offered 33 bucks not too long ago and it’s 11 and a half. So Idon’t know what price might have got the job done," Ballmer said,responding to a question from Gartner analyst David Smith on whetherMicrosoft might take another stab at buying Yahoo now that its stockprice is so low.

"It’s clear that Yahoo did not want to sell the company. It did notwant to sell when we offered 33 … They probably think it’s worth atleast 33 today."

Yahoo declined comment. Its shares rose to as high as $13.73 onThursday, before settling at around $12.99 in afternoon trading on theNasdaq.

"Our position hasn’t changed. Microsoft has no interest in acquiringYahoo; there are no discussions between the companies," a spokesman forMicrosoft said in a statement.

Microsoft shares were up 1 percent at $22.87.

(Reporting by Anupreeta Das in New York, with additional reportingby Jim Finkle in Boston; writing by Tiffany Wu; editing by GunnaDickson and Gerald E. McCormick.)