WSJ: Q&A With CEO Steve Ballmer, Before Microsoft Walked Away

It was not surprising that Microsoft decided to abandon the acquisition. Steve Ballmer had hinted at least two weeks ago. But, what is the next way Microsoft would like to do? Take longer time to build the scale by itself? I don't think so.

Jonathan

Q&A: CEO Steve Ballmer,
Before Microsoft Walked Away

By ROBERT A. GUTH
May 4, 2008 2:40 a.m.

With a letter Saturday afternoon, Microsoft Corp. Chief Executive Steve Ballmer withdrew his company's bid to buy Yahoo Inc., ending three months of anticipation over a possible acquisition that gripped Wall Street, the media and the broader Internet industry. The withdrawal came as a surprise to many people, particularly after executives at the two companies had stepped up talks late last week in an attempt to bridge an impasse over how much Microsoft should pay for the Silicon Valley icon.

But at least two weeks before, Mr. Ballmer had hinted privately and publicly that Microsoft was considering stepping away.

Two days before Microsoft withdrew its offer, Mr. Ballmer, in an interview with The Wall Street Journal, outlined his thoughts on Microsoft's options if the Yahoo deal didn't work and talked about the prospect of Microsoft's expanding its online business with or without a partner.

The Wall Street Journal: There is perception that going after Yahoo is an acknowledgment that Microsoft's build-it-yourself strategy isn't working…

Steve Ballmer: We like our strategy. We don't like our position. I'd like to have a better position relative to the guy [Google] who sells the most advertising. But we like our strategy. No question about that. The question is, can we accelerate our strategy?

There are probably a number of things our strategy entails: Some fundamental innovation around the way the business and user experience works; some tactical differentiation; there's some things we've got to do just to match competition in the online space. And it turns out scale matters. It's not true in every business that scale matters. But the way you get increasing return on scale in the ad system -- scale matters. The only way to get scale quickly – or more quickly -- is to do an acquisition.

WSJ: Yahoo is the biggest, easiest way to get that scale. But if that doesn't happen, are other acquisitions necessary to get that scale?

BALLMER: No, no, not at all. It could just take more time. Look at all the properties on the Internet -- everything on the Internet. There's really only five or six that have any scale. Worldwide, you'd maybe get seven or eight. You have MySpace, Facebook, MSN, Yahoo, Google, Baidu, AOL. But then -- boom -- it really falls dramatically after that. So there are really a few guys and [if] something works, it works. And if it doesn't, it doesn't. But then we're just taking longer to build the scale [on our own].