Before my interview today with Microsoft CEO Steve Ballmer, he glared at me when I told him what Yahoo's CEO Carol Bartz had to say about a potential partnership: I can't react to an offer or a deal when there's no offer or deal to react to, she said.
Sometimes silence speaks volumes.
When I asked him about this in the interview, he reiterated that a deal for all of Yahoo was no longer an option, and that even an acquisition of Yahoo's Search business didn't seem to be in the cards. Now, Microsoft is pursuing some kind of "partnership" instead. The funny thing about partnerships, Ballmer said, is that it takes two to craft one. No offer; no proposal. But a "partnership," which tells me that Yahoo investors hoping for some big time payday may not want to hold their breath.
Meantime, he did talk about the company's new search engine "Bing," which is getting glowing reviews from Forrester Research. Still, after playing with it for awhile, it's got some compelling features but it is hardly an imminent threat to Google. Which is a surprise since Microsoft continues to invest big in its Online Services unit, continues to lose enormous amounts of money, and continues to be a long way from offering any material, competition to Google.
There's been lots of rumors that Microsoft may buy SAP and go after Oracle. Ballmer says he has great respect for SAP, that it's been a good Microsoft partner over the years, and that the two had discussed a deal years ago. As far as some new deal in the works today? He was unusually cagey in his response and didn't want to go there.
He gave me a demo of the new Zune HD, due this Fall. Super slim, great screen, very nice. But with no App Store or iTunes to link to, it's gonna be hard for this product to resonate in the marketplace, and generate real competition to Apple's iPod , which still owns better than 75 percent of the market. Still, he said, he got the ultimate compliment when his son said he and his friends would be getting the new Zune over a player "from the other guys."
Speaking of the Zune, lots of rumors about a new Zune phone. I wrote about this last November with Microsoft code-naming the project "Pink." And while a Zune phone may have been in the works, he categorically stated today that Microsoft is not working on a Zune phone. Period. Not to say it won't ever, but there's nothing planned.
And what about the ongoing competition with Apple? He still refers to Apple as an extremely narrow niche player, with 97 percent of the market using Windows-based PCs. He points to Windows Mobile devices vastly outselling iPhone last year, though "we'll see what happens this year" as that handset continues to surge. Microsoft is a profit king, he says, generating $20 billion in pre-tax cash last year. But from an investor's point of view, the company has been a laggard, and compared to Apple? Well, there simply isn't a comparison.
Microsoft is stodgy. Apple isn't. Microsoft stock is a dullard. Apple stock isn't. Ballmer can write off Apple as a niche player as much as he wants, but with more cash in the bank, the leader in all things digital media, and an excitement-factor you simply can't put a price on, that's a hell of a big niche generating a hell of a lot of buzz, cash, and return for investors.
Which one would you rather invest in...
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