Is Microsoft Negotiating to Buy Yahoo?

Is Microsoft negotiating to buy Yahoo? How big a competitive threat is Google? What is the biggest threat to IT at this point? These were all questions that Microsoft CEO Steve Ballmer and Cisco CEO John Chambers fielded in a lengthy debate they had in New York on August 20 about working more closely together on interoperability.

When asked by moderator Charlie Rose why Microsoft had not bought Yahoo, Ballmer quickly corrected him by saying "Why don't we buy Yahoo," before going on to say that Yahoo was an independent company with its own vision.

"But it is a very expensive acquisition for anybody to do, whether it is Microsoft or somebody else," he said, in response to which Rose noted, "You can afford it." Ballmer acknowledged that Microsoft could, before going on to say that the company had an independent view of the world.

"I talk to Jerry [Yang], we have a very good relationship with them, a sophisticated type of cooperation-coopetition with them, like we are trying to put in place here with Cisco, and we'll continue to find ways to partner with those guys where it makes sense," he said.

Pushed to say whether Microsoft was in discussions with Yahoo or not, Ballmer quipped that if Microsoft was, "I wouldn't tell you," and "[if] we weren't, I wouldn't tell you, which means I won't say a darn thing. If you start saying a darn thing in the middle of any negotiation, then you have to start saying something in the middle of all negotiations, so I think I'll just take the most respectful 'No comment' that I can manage."

With regard to Google's growing role in the Internet infrastructure space, Ballmer admitted that Google had done some things well in the area of search and advertising, "and believe me we are pushing and pushing into that area," he said.

Google has ambitions in areas that overlapped with Microsoft, and Google has ambitions in a lot of areas, as does Microsoft, he said.

"We are going to see them in more places. Are they going to choose to become a telecommunications company? I don't know. We're not choosing to become a telecommunications company, but we are going to compete with Google, but we are going to do that in a way that is largely in partnership and co-operation with the telecommunications industry [that] put in the capital infrastructure required to make these next-generation networks work," he said.

For his part, Chambers was upbeat about companies like Google, saying anything that loaded networks with video benefited Cisco.

"Google is neither a friend nor a foe. They are a company in the industry that we watch and I admire them in terms of their execution. But the reality is that Steve is going to work with some of our competitors; we are going to work with some of his competitors -- that's a way of life -- but Google does not fit in that category for me," he said.

Chambers also called out security as one of the issues that could slow down the IT industry quicker than anything else, noting that Cisco had worked closely with the federal government to try and remove the threat and solve the problem.

"One company cannot solve this by themselves. We cannot solve all the security issues of our customers and neither can Microsoft, but together we touch a large part of their exposure," he said.

The ability to come together and solve a common set of problems lay behind the collaboration work on interoperability between the two companies, Chambers said, adding that companies did not want complications because products from Microsoft and Cisco did not interoperate with one another.

As to where he saw Cisco in five years' time, Chambers said that if he was right in that the second phase of the Internet was underway, then a lot of growth opportunities lay ahead, and the company would move from just being a plumber to solving customer problems and working in an open way to make it easier to use technology.

This would transform how the network, software and hardware worked, and the magnitude of the changes would make the last few decades look fairly small in terms of the opportunities that lay ahead, he said.