Video: The Microhoo files Video

Video: The Microhoo files Video Transcript

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>> I'm Dan Farber at CNETNews.com and I'm joined by Jim Kerstetter, the Executive Editor at CNETNews.com and today there's a little bit of a story going around where Steve Balmer the CEO of Microsoft was in Moscow and he said let me quote him, "Yahoo was never the strategy we were pursuing. It was a way to accelerate our on-line advertising business. We will spend money on some acquisitions. You can do a whole lot of things with 50 billion dollars."

>> Which is true of course.

>> So when he said it wasn't the strategy. What does he mean?

>> I haven't the slightest idea to be honest with you.

>> You think he was misinterpreted in Moscow or --

>> I have to wonder about that that's what we always run into in with Reuter stories coming out of Asia so maybe the same thing happens in Russia as well [chuckles].

>> What I think is going on is that Balmer, you know recognized over time that fundamentally what they really wanted was to beat Google and the only way to beat Google is to get deeper into the search business and that the other parts of yahoo while interesting obviously weren't that compelling.

>> Absolutely and remember that if Yahoo wasn't the strategy again I'm not quite sure what the last 3-1/2 months were all about but Yahoo and Microsoft ultimately is about 5 years down the road, 10 years down the road, when Google can really genuinely threaten the Window's franchise.

>> I think it's threatening the revenue armada which is to say and this I find interesting that Microsoft is a 52-billion-dollar company that's what they did last year. Google is on track to do 20, 25 billion dollars --

>> Okay.

>> Just selling those little text ads. So that has to be really scary and I think that goes in to this notion that in many ways Microsoft is pretty desperate to figure out how to stop the Google train.

>> Absolutely. The next year by some estimates the Google search business will be bigger than the Microsoft Window's business. That's pretty interesting. Scan out may be three years of how big will the Google applications business be compared to Microsoft's other unofficial monopoly which is of course the Office Suites.

>> So what do you think the strategy is going for? We know that Microsoft is talking to Yahoo about cutting out the search business and as a way to get what they really want as opposed to the rest of the company although I thought by acquiring all of Yahoo it was actually a good play that there's a lot they could do together in terms of combining audiences and technology, engineering.

>> I still say Microsoft buys Yahoo at some point.

>> But how can they buy when they say it's not a part of our strategy. It wasn't really our strategy. The strategy is really just about getting searched so that they can compete with Google.

>> Maybe they're playing hard to get right now. It was Yahoo direct with this. No Yahoo was a means to an end, as you said, to compete with Google.

>> And then there's Facebook so maybe the strategy, the real strategy is get Yahoo search or some joint venture deal with them acquire Facebooks, you get all that inventory and also you get a beach head in the social networking revolution which is really more that's beginning and as we're saying it will cover the longer term five, 10 years and may make sense.

>> It could. It will be interesting to see how much Microsoft is actually willing to spend for someone like Facebook if they do in fact want to buy them because of their own investments, the Facebook valuation is anywhere between 12 to oh. What have I seen 20 billion dollars? Even Microsoft runs out of money at some point.

>> They do. They will run out of money at some point [chuckles] but I think its burning a hole in their pocket right now.

>> It could be. It could be. I guess giving dividends isn't quite enough for them.

>> Well thanks Jim.

>> Thank you.

>> We've been talking about Microsoft, Yahoo, Google, the usual subject for CNETNews. I'm Dan Farber. Thanks for watching. ^M00:03:50 [ Music ]