Microsoft CEO Steve Ballmer Talks Yahoo, Vista with Stanford Students

Microsoft CEO Steve Ballmer suggested that an acquisition of Yahoo would have been "valuable" and that he was glad the two companies "went down the road" last year, according to a Reuters report.

Speaking to 1,200 students at Stanford University in a classroom-style speech, Ballmer also characterized the economy as decidedly in downturn mode, saying that the world had "too much debt," but stopped short of crushing any budding entrepreneurs' hopes and dreams by saying that even the recessionary environment won’t prevent "really big ideas" from getting funding.

Both Ballmer and Yahoo CEO Carol Bartz have refused to comment on whether the two companies are currently in talks over a search or advertising deal.

A Wall Street Journal report in April 2009 suggested that Microsoft and Yahoo were in talks over a search and display advertising deal, where Yahoo would handle Microsoft’s display advertising, and Microsoft handle search advertising.

The possibility of talks was a surprise to some, who thought that Yahoo co-founder Jerry Yang’s attempts in 2008 to deny Microsoft’s $47.5 billion acquisition attempt had poisoned the waters for any potential Microsoft-Yahoo collaboration.

However, both companies continue to lag behind Google in the search market. According to a March 2009 report from The Nielsen Company, Google currently occupies 64.5 percent of the search market, followed by Yahoo Search with 15.8 percent and MSN/Windows Live Search at 10.3 percent.

That report also found that Google’s search market share had grown 27.6 percent year over year, while Yahoo Search and MSN/Windows Live Search had grown by 1.7 and 0.3 percent, respectively.

Both Yahoo and Microsoft have been battling substantial economic headwinds. Microsoft reported lowered revenue for the last quarter, and Yahoo suggested it would slice 5 percent of its work force in an April 21 conference call.

During that call, CEO Carol Bartz refused to comment on any possible Yahoo and Microsoft deal, but did say that the search business remained "critical" to the company.

Showing that anyone can learn from mistakes, Ballmer hinted that Vista, Microsoft’s much-maligned operating system, wasn’t all that the company had anticipated it would be. "A product like software is only as good as the last release…or two," the Reuters report had him saying. "Yes, thank you. Moving right along."