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FIRST ON CNBC: CNBC TRANSCRIPT: CNBC'S JIM GOLDMAN SPEAKS WITH STEVE BALLMER, MICROSOFT CEO, TODAY

HERERA: WE HAVE TO GO TOJIM GOLDMAN NOW WITH BREAKING NEWS YOU JUST INTERVIEWED MR BALLMER RIGHT JIM

GOLDMAN: YES SUE YOU KNOW CAROL BARTZ THE YAHOO CEO MADE SOME HEADLINES IN OUR INTERVIEW LAST EVENING THAT EXCLUSIVE INTERVIEW WHEN I ASKED HER ABOUT THE ONGOING TALKS WITH MICROSOFT AND WHETHER ANY KIND OF PARTNERSHIP OR OUTRIGHT ACQUISITION WAS STILL IN THE CARDS AND SHE SAID SHE COULDN'T REACT BECAUSE THERE WAS SIMPLY NO FORMAL PROPOSAL OF ANY KIND ON THE TABLE AND THAT CAME AS A SURPRISE TO MANY MICROSOFT AND YAHOO INVESTORS THAT I HAVE BEEN SPEAKING WITH SINCE THAT INTERVIEW I JUST FINISHED WITH STEVE BALLMER THE MICROSOFT CEO IN THIS FIRST ON CNBC INTERVIEW AND ASKED HIM ABOUT THAT RATHER STRANGE DEVELOPMENT HERE'S A LISTEN

BALLMER: WE'VE HAD TALK WE'VE HAD TALKS ABOUT ACQUISITIONS THOSE ARE ALL OVER AND DONE THERE'S NO AND THAT IS WHAT HAD HAPPENED IN THE PAST AND WITH A GROUP THAT WAS REALLY NOT MANAGEMENT WE HAD A DISCUSSION OF A SEARCH ACQUISITION THAT DIDN'T MAKE SENSE TO THEM EITHER AND SO WE HAVE YOU KNOW I HAVE SOME INTEREST AND SOME ENTHUSIASM ABOUT THE POSSIBILITY OF A SEARCH PARTNERSHIP NOW A PARTNERSHIP IS A FUNNY THING NOBODY PROPOSES AND THE OTHER GUY ACCEPTS OR NEGOTIATES IT TAKES TWO TO CRAFT AND YOU KNOW AS IT BECOMES APPROPRIATE AND THERE'S REAL DISCUSSION THERE'S SOMETHING TO SAY I'M SURE WE WILL SAY IT BUT THERE'S NOT REALLY ANYTHING TO SAY TODAY

GOLDMAN: IS IT FRUSTRATING THAT IT I MEAN ALL THE WHILE WHILE MICROSOFT AND YAHOO CONTINUE TO TALK, NOT TALK, TALK A LITTLE OR TALK SOME MORE GOOGLE CONTINUES TO STRENGTHEN ITS STRANGLE HOLD IN THIS MARKET THAT YOU HAVE SAID IS SO CRITICALLY IMPORTANT

BALLMER: YEAH BUT I MEAN HERE'S YAHOO IT'S AN INTERESTING TACTIC FOR US AND POTENTIALLY A STRATEGY WHO KNOWS WHAT IT MIGHT BE BUT EVERYDAY WE'VE GOT THOUSANDS OF PEOPLE COMING TO WORK AND THEY'RE NOT WONDERING WHAT'S GOING ON WITH YAHOO THEY ARE SAYING HEY WE ARE HERE TO BUILD BING THE NEW MICROSOFT SEARCH ENGINE WE'RE HERE TO DIFFERENTIATE WE'RE HERE TO WORK ON THE FUNDAMENTALS WE'RE HERE TO TRY TO COME UP WITH SOME GAME CHANGERS OVER TIME WE'RE JUST IN THE GAME

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JIM GOLDMAN: THREE QUICK BULLET POINTS FOR YOU AS FAR AS MICROSOFT IS CONCERNED. NO DEAL OF ANY KIND IS IMMINENT WITH YAHOO!. NO MONEY EXCHANGING HANDS OF ANY KIND A PARTNERSHIP, NO NEWS ON THAT FRONT AT ALL. NUMBER TWO MICROSOFT WON'T COMMENT ON THE RUMORED PLANS TO ACQUIRE S.A.P. NUMBER THREE, NO PLANS FOR ZUNE PHONE, NO PLANS FOR A MICROSOFT-BRANDED HAND SET SMART PHONE AT LEAST ACCORDING TO STEVE BALLMER. WHEN IT COMES TO THE OVERALL ECONOMY AS FAR AS A TURN AROUND OR A RECOVERY, STEVE BALLMER ISN'T SHY, BUT HE IS NOT AFRAID TO SAY, I DON'T KNOW AND AS FAR AS MICROSOFT STOCK, WHAT IS THE MESSAGE TO INVESTORS? TAKE A LISTEN.

STEVE BALLMER: THE ECONOMY IS THE ECONOMY. IT IS NOT CONTROLLABLE. ON THE THINGS THAT WE CONTROL, WHICH IS HOW WE PERFORM AGAINST WHATEVER THE ENVIRONMENT IS, WE'VE GOT A LOT OF THINGS GOING GANGBUSTERS AND WE'VE GOT SOME THAT THINGS SLOWLY BUILDING AND DISTINCT OPPORTUNITIES FOR IMPROVEMENT. IN A SENSE, THAT'S NOT A BAD THING TO HAVE. IT'S GOOD TO HAVE THINGS YOU CAN COUNT ON AND GOOD TO HAVE THINGS IN THEIR BURST PHASE. IT'S GOOD TO HAVE SOME THINGS THAT YOU'RE WORKING ON THAT MAY TAKE LONGER. BUT GOT A LOT OF POTENTIAL.

GOLDMAN: THE STOCK CONTINUES TO SIT THERE IN A VERY NARROW RANGE. THERE IS NO DEAL TO BE TALKED ABOUT WITH YAHOO!. APPLE CONTINUES TO GENERATE THE LION'S SHARE OF EXCITEMENT OF MEDIA IN THE MARKETPLACE. THE INNOVATION CONTINUES THERE. MICROSOFT AS AN INVESTMENT FOR STOCKHOLDERS JUST SITS. IT HAS SAT FOR SO LONG. WHAT IS GOING TO BE DONE TO JUICE THE EXCITEMENT IN THIS COMPANY SO THAT AT SOME POINT WE TALK ABOUT MICROSOFT WITH THE SAME EUPHORIA THAT SO MANY IN THE MEDIA TALK ABOUT WHEN THEY REFER TO APPLE?

GOLDMAN: WELL, YOU KNOW, IF YOU WANT TO BE A NARROW-NICHE COMPANY, WHICH IS WHAT APPLE IS, BUT IT'S A DIFFERENT APPROACH, AND THERE IS A MEDIA FRENZY, WE'VE GOT TO

REMEMBER 97% OF PEOPLE CARRY A WINDS PC OR USE A WINDOWS PC. 3% DO USE MACs. IN THE PHONE MARKET, WE OUTSOLD APPLE IN THE LAST YEAR. WE'LL SEE WHAT HAPPENS THIS YEAR.AS iPHONE IS SURGING, I'M NOT SAYING APPLE DOESN'T DO A GOOD JOB, THEY JUST HAVE A DIFFERENT APPROACH. FOR INVESTORS, AT THE END OF THE DAY IT'S ABOUT PROFIT. THE ECONOMY IS CERTAINLY A FACTOR IN RESETTING OUR PROFITS. WE'VE GOT TO WORK OUR WAY THROUGH THAT.WE DREW THE LINE ON COSTS AND ARE MANAGING THAT. IF YOU LOOK AT THE PROFIT PERFORMANCE FOR OUR COMPANY OVER THE LAST TEN YEARS, THE STOCK SEEMS TO BE FLAT. THE PROFITS ARE UP DRAMATICALLY. IF YOU GO UP TO 99, TEN YEARS AGO, LAST YEAR THEY WOULD HAVE BEEN UP FOUR FOLD, MAYBE NOW THEIR UP THREE FOLD. IT IS REALLY A STUNNING EXPLOSION IN PROFIT RELATIVE TO MARKET CAP.

GOLDMAN: YEAH. THERE IS NO QUESTION ABOUT IT. MICROSOFT HAS BEEN A STUNNING PERFORMER WHEN IT COMES TO GENERATING PROFITS. JUST NOT SO MUCH WHEN YOU'RE TALKING ABOUT THAT STOCK. AND IF YOU COMPARE IT AGAINST APPLE, MY GOODNESS LOOK AT WHAT APPLES SHARES HAVE DONE AND CONTINUE TO DO AGAINST MICROSOFT.I ASK YOU GUYS, WHAT DO YOU THINK THE BETTER INVESTMENT IS? WHAT DO YOU THINK THE BETTER OPPORTUNITY AND POTENTIAL IS FOR INVESTORS? I DON'T KNOW WHERE MICROSOFT'S STOCK GOES FROM HERE. IT HAS TO CONTINUED TO TRADE IN SUCH A TERRIBLY NARROW RANGE.




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