MS Suggests Yahoo Alliance, Pilfers Yahoo Workers

Microsoft CEO Steve Ballmer has called out to Yahoo, asking them to join his company in a fight against mutual foe Google.

As recently reported, Microsoft decided not to compete with Apple on the smartphone battlefield, opting instead to praise the iPhone for its innovative features. Now it appears Ballmer is addressing another rival, Yahoo, in the hopes of bettering the Internet-search figures of both companies.

Google is the current leader of the Internet-search market with 63% of all queries. Microsoft controls just under 10%, while Yahoo controls just over 20%. If the two corporations team up, the Microsoft/Yahoo alliance could control close to 30% of the entire Internet-search market. (Source: bloomberg.com)

Second Time's a Charm

This isn't the first time Microsoft has reached out to Yahoo for assisted aid. Last year, Microsoft pushed hard on a campaign that would have seen Microsoft purchase Yahoo for a reported $47.5 billion.

Yahoo may not be so quick to reject Microsoft this time around. That's because when Microsoft's intentions were first pitched to Yahoo last year, Jerry Yang was the CEO of Yahoo. Now, Carol Bartz is at the head of the company after a change in the Yahoo hierarchy last month.

Analysts believe that Bartz is ready to listen to Microsoft, and while a complete takeover is still out of the question, a possible alliance is not (though Yahoo refused to comment on the situation when questioned). Her accepting approach may be influenced by a three year decline in revenue for Yahoo.

Stolen Talent

There could be one small wrench in the deal: in the past few weeks, Microsoft has acquired the services of 10 engineers from Yahoo.

Ballmer did not specify which engineers he hired from Yahoo, though the acquisition of Qi Lu (who is now president of Microsoft's online-services group) was big news. This was also the case with Larry Heck, who used to oversee a Yahoo lab that developed search and advertising algorithms. (Source: businessday.co.za)

While Google's 63% control of the Internet-search market means that a Microsoft and Yahoo alliance would still trail behind, every percentage point is a step in the right direction for two companies struggling in this economic climate.