Updated from 12:23 p.m. EST
chief Steve Ballmer repeated his warm words for
at a strategy session Tuesday, helping to float shares again on takeover hopes.
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
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
on the topic of Microsoft have been tepid at best.
Bartz has a number of strategic options including
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.
Microsoft is in a difficult position with its desktop software empire eroding and its grip on the smartphone market looking tenuous. While the software giant continues to spin its wheels, others will continue to gain traction, say some analysts.
"We continue to believe that without a search deal with Yahoo," Collins Stewart analyst Sandeep Aggarwal wrote this month, "it is not easy for Microsoft to emerge as the second largest global online ad player."