Updated from 12:23 p.m. EST
Speaking at Microsoft's Strategic Meeting Update presentation, Ballmer said he would like to talk with Yahoo! CEO Carol Bartz to see if the two companies could "somehow get together and find out how to provide more competition" for Google (GOOG).
The comments once again revived the notion that Microsoft still needs Yahoo! to strengthen its Internet weaknesses. The idea helped send Yahoo! shares up 73 cents, or 6%, to $12.70 in pre-market trading Tuesday.This of course is familiar ground for Yahoo investors who watched Microsoft spend the better part of last year pursuing and later withdrawing merger proposals. Microsoft is a distant No. 3 player in Internet search advertising and faces a tough choice of keeping its status quo as Google and Yahoo! take more of the business, or make a costly move to jump in to the market. Yahoo's new chief Bartz is reorganizing the company and expected to make an announcement this week on her new plan. So far, Bartz's comments on the topic of Microsoft have been tepid at best. Bartz has a number of strategic options including Time Warner's (TWX - Get Report) AOL franchise if she is deal hunting, as TheStreet.com's Michael Goodman points out. "For advertisers, all of whom will eventually start spending again, AOL's network remains one of the most attractive properties to reach a broad audience," Goodman wrote. In search advertising, Microsoft and Yahoo! could combine to make a formidable foe to Google. And in display ads, where Yahoo! is strong, a hook up with AOL would "make sense," Goodman notes.