Forget Yahoo, Microsoft CEO Steve Ballmer said Thursday at the company's annual meeting for financial analysts. Any plans for a merger are dead and "there's nothing under discussion between the two of us," Ballmer said. "It didn't work out; we're done."
He also told the analysts that "Yahoo for us was always a tactic, not a strategy," and he said the search business is now a "two-horse race" between Microsoft and Google. Microsoft will take the money it didn't spend on Yahoo and invest more in search technologies, he added.
Comfortable 'on Our Own'
"We're going to need to continue to invest until we get greater scale," Baller said. "I'm not going to say it's not a big bet. It is; I'm not going to say it's not risky. It is."
He said Microsoft didn't want to buy Yahoo "at the wrong price" and since the two parties didn't reach an agreement in the spring, there wasn't time to finish a regulatory review before a new president would take office.
"We're comfortable proceeding on our own," Ballmer said. "Does that mean that no one will ever talk to anybody again? I suspect the answer is no. That's a long time and it's a big world."
Ballmer shared with the analysts his vision of an Internet world focused on search.
"Everything in the world that can move to be delivered and embraced over an IP network, over the Internet, will be," Ballmer said. "Everything you read, everything you watch, everything you want to communicate, all of those experiences are going to happen over the Internet."
Microsoft vs. Google
"We're going to have to innovate, we have to reinvent, but we also have to ante up," he added. "I think there are really only two companies that have capability and staying power -- Microsoft and Google. Despite the fact that they're the big-footprint guy and we're just the tiny little Microsoft in this one working away, we at least have the wherewithal to remain in the game."
He said the fact that Google has more people bidding on ads was one reason Microsoft offered to buy Yahoo -- to "get enough advertisers to have a big enough pool to change the approach."
"The more queries we get, the more advertising we get; the more keywords they bid on, the higher they bid," Ballmer said.
Satya Nadella, Microsoft's senior vice president, also told the analysts that the company will extend its searches to Facebook. By the end of the year, users on the social-networking site will be able to search the Web through Live Search, complete with ads, he said.
Image credit: Product shot by Microsoft.