7 questions for Steve Ballmer

Robert A. Guth, Dow Jones Newswires

Published February 5, 2008 at 12:05 a.m.

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Photo by Kimberly White / Getty Images

Steve Ballmer says Microsoft's bid for Yahoo is based on the expectation that online advertising will grow by leaps and bounds in the next 10 years.

Microsoft Corp.'s $44.6 billion offer to buy Yahoo Inc. will test many people, but none more than Steve Ballmer.

The 51-year-old Microsoft chief executive has led the software giant on an aggressive push to be a bigger player in online advertising and better compete with Google Inc., far and away the leader in the field. Now Ballmer not only has to persuade Yahoo to accept Microsoft's offer, but, if he is successful, he'll have to integrate Microsoft's 80,000 people with Yahoo's 14,000.

Two days after making his bid public, he outlined his thoughts ahead of a regularly scheduled meeting Monday in New York. Here are some excerpts:

1 Is the Yahoo bid a bet that the economy is brighter than people think?

Making investment decisions with a primary focus to the shorter term economic conditions is probably not a wise thing to do for the leadership of this company. It doesn't mean that we're oblivious; it doesn't mean that we're not affected; it doesn't mean we might not tune slightly, but big strategic calls can't be guided by short-term economic reality.

Now, if we thought we were headed into something really terrible, maybe all bets are off, but I think at worst people think we have a few years of tough economic sledding in front of us as opposed to some more major issues.

2 The Yahoo deal implies a certain faith in the continued growth of online advertising. If advertising growth dipped, how would your outlook for this deal change?

In the longer term - two, four, five, seven years - there's no less reason to be optimistic about online advertising than ever before. Offline advertising will all be online sometime in the next 10 years. That means there's going to be huge growth in online advertising, and we think the market deserves, at least on the advertising platform side, some good competition for the current leader (Google).

3 Is Microsoft "betting the company" with its bid for Yahoo?

This is clearly a big move for us. I would certainly not call it a bet-the-company move.

We have many technologies but we go to market with four big businesses: the desktop business, for which this may or may not be additive, but it's not a bet-the-company move for what we've been doing in Windows and Office; our enterprise business, this is not a bet-the-company move. In our online efforts this is a chance for us to really take the progress we've been making in our online efforts to the next level.

4 Two years out, how is this acquisition going to help Microsoft?

Can we deliver more value to consumers? Answer: Between the two of us, taking the same aggregate R&D staff, and having them be able to focus on priorities differently, we get an opportunity to invest in more new innovation.

From an advertiser perspective, the opportunity to see good competition to the market leader, to see a thriving and successful pool of innovation will mean the ability to reach audience, the ability to have great tools and targeting capabilities against audience.

And last but certainly not least is other publishers. Right now there's not much competition to Google when it comes to soliciting third-party publishers. We've dug down and done a good job of winning guys like Viacom and Facebook and others, but we and Yahoo together will have a lot of opportunity to make a difference there.

5 Can you really take two companies that are perceived as the slow-moving players in the online market, combine them and make it an "accelerant," to your business, as you described it?

We have fantastic talent in this area. We don't have the market-leading position, but we've got fantastic talent, and we have some fantastic assets. I know a number of the Yahoo people. I know leadership. They've got incredible talent. They do have great assets. They've done a phenomenal job on their portal, their mail offering is leading. So, I think there's just a great base to build from.

6 For the record, have you heard back from Yahoo?

For the record, I wouldn't answer that question. We have had the opportunity to put an offer in front of their board and their shareholders, which is great. They've said they're considering the offer.

7 What are your options if there's a rival bid?

We've got a very fair offer in front of the Yahoo shareholders, and I think the chance to work with our engineers and to work with us is just a great opportunity for everybody to create value for shareholders, for employees at both companies and for customers.

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