Steve Ballmer speaks out regarding a possible Yahoo takeover

Outspoken Microsoft CEO Steve Ballmer today said Microsoft is interested in a possible Web search partnership with Yahoo, but ruled out a complete takeover of the struggling company.

"Let me be as clear as I think I've tried to be publicly," Ballmer said during the Microsoft annual shareholders meeting.  "We are done with all acquisition discussions with Yahoo.  I've said that a bunch of times.  Somehow some people have gotten confused nonetheless."

After Yahoo CEO Jerry Yang's announcement earlier in the week he would step down once a replacement was found, an immediate buzz about a possible Microsoft-Yahoo partnership began to circulate yet again.

Yang and company turned down a $47.5 billion takeover from Microsoft earlier in the year, claiming the number "undervalued" Yahoo.  Since then, the company's stock has slid down hill as Yang continued to lose control over the company.

Instead of selling its search business to Microsoft, Yahoo reached a search advertising accord with Google, which fell apart because of legal threats by the U.S. antitrust regulators.  The Justice Department was concerned Google, the no. 1 web search company, would have an unfair advantage if it worked with Yahoo, which remains the No. 2 search engine in the world, despite continually losing market share.

Even if Microsoft acquires Yahoo's search technology, another company could come in and try to make an offer for the rest of Yahoo, analysts predict.  Microsoft and Yahoo are not discussing a search deal at the moment, Ballmer said, but Microsoft will likely wait until Yahoo has chosen a new CEO.

Ballmer's announcement caused Yahoo's shares to drop 14.5 percent, or $1.67, down to $9.88.

Analysts warn that Ballmer could be positioning Microsoft to be able to later purchase Yahoo at a lower price, which would allow the company to strengthen its online search and advertising businesses at an even lower price.

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