Microsoft Says Yahoo No ‘Silver Bullet’ to Fix Online

Microsoft Corp., trailing Google Inc. in online advertising and search-engine users, said joining forces with Yahoo! Inc. wouldn’t be the “silver bullet” that fixes its Internet business.

“Yahoo doesn’t have the magic solution,” Chief Financial Officer Chris Liddell said yesterday at a Goldman Sachs Group Inc. conference in San Francisco. “No one should think it will transform the industry.”

Microsoft’s Live.com Internet search brand hasn’t caught on with consumers and may be replaced, Liddell said. The company has proposed joining forces with Yahoo’s search engine to compete against Google. For now, Microsoft is assuming the deal won’t happen at all, Liddell said.

Liddell’s remarks came a day after Yahoo’s finance chief said his company hadn’t ruled out the idea of a search deal with Microsoft. Last year, Yahoo spurned Microsoft’s offers to buy its search business. Yahoo hired a new chief executive officer in January, opening the possibility of new talks.

If a deal happens with Yahoo, “that’s great,” Liddell said. No one at Microsoft thinks its Internet business has done as well as it should, he said.

Yahoo CEO Carol Bartz reorganized the Internet company yesterday, naming a new chief marketing officer and announcing the departure of its finance chief, Blake Jorgensen.

Microsoft’s Overtures

In addition to rejecting Microsoft’s bid for its search engine last year, Yahoo also turned down offers for the whole company. Microsoft bid as much as $47.5 billion before talks broke down. After Bartz took over, she said she didn’t plan to sell the company and didn’t want it to be “pulled apart and left for the chickens.”

Google handles 63 percent of search queries in the U.S., according to ComScore Inc. of Reston, Virginia. That gives it more opportunities to sell ads. Even combined, Yahoo and Microsoft’s online advertising businesses generated less than half of Google’s revenue in the fourth quarter.

Microsoft fell 21 cents, or 1.3 percent, to $16.21 at 9:32 a.m. New York time on the Nasdaq Stock Market. Google shares dropped $2.52 to $334.66.

Liddell also said that Microsoft may sell $1 billion to $3 billion of debt at some point in the next six months. Microsoft said in November that it’s considering issuing senior unsecured debt. The company is authorized for $4 billion in debt after selling $2 billion of commercial paper last year.

Microsoft won’t “fundamentally change its capital structure,” Liddell said.

The company may repurchase a smaller amount of shares for a quarter or two if it decides it wants to conserve more cash, he said.