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Wall Street Journal: Microsoft Considered Buying Yahoo

In the past year, Microsoft held discussions with search engine competitor Yahoo regarding a possible buyout, or taking a stake in its rival, according to published reports this week.

A story in Wednesday's Wall Street Journal quoted insiders at the Redmond, Wash., software giant as saying the company is under severe pressure from both within and without to acquire some kind of advantage in its so-far lackluster fight for dominance with search giant Google. Some sort of combination with Yahoo might hold the seeds of a cure for that predicament.

Shareholders, the story says, are tired of Microsoft Network's (MSN) marginal performance despite 11 years of investment. Microsoft's search push to date has been under the branding of MSN Search but was recently re-branded when the company rolled out its Live services initiative last fall.

Key to that initiative is increasing online ad revenues. To that end, the company rolled out its adCenter, a self-service Web advertising service, in the United States on Thursday. At the same time, it was renamed to Microsoft AdCenter instead of MSN AdCenter. The service is targeted to be a direct competitor to Google's AdWords service.

Microsoft also recently hired Ask.com CEO Steve Berkowitz to head MSN. The WSJ story pointed out that one of Berkowitz's fortes is acquisitions -- he has been involved in 40 of them during his career.

Any combination of Yahoo with Microsoft, including simply tighter cooperation, could give both companies a leg up against Google's search dominance.

The Journal notes that any Google competitor needs "three core elements: strong technology, a mass of consumers and a universe of different advertisers. Microsoft is spending untold hundreds of millions of dollars on the technology piece, but it doesn't yet have enough consumers using its MSN service to entice the needed advertisers...a tie-up with Yahoo could address part of that problem."

About the Author

Stuart J. Johnston has covered technology, especially Microsoft, since February 1988 for InfoWorld, Computerworld, Information Week, and PC World, as well as for Enterprise Developer, XML & Web Services, and .NET magazines.

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