ballmerhands.jpgSteve Ballmer held a Town Hall conference call with Microsoft (MSFT) employees today--reported minute-by-minute by our Vas Sridharan.

Not surprisingly, the topic employees most wanted to talk about was Yahoo. Specifically, why on earth is Microsoft chasing that thing?

Steve's full answer paraphrased below. Here are the key points:

  • Nothing to announce today, but should know in "very short order" [suggests negotiations ongoing]
  • Won't pay a dime more than Yahoo's worth [but doesn't say what that number is]
  • Acknowledges Microsoft is way behind online, invokes Microsoft's previous come-from-behind victories.
  • Says Yahoo is "part of a strategy," not the strategy itself. [that's one way to spin it]
  • Says the world rooting for Microsoft [in this business, actually true. Fun and ironic]

Q: What is attractive about Yahoo!?

A: Steve Ballmer: We are absolutely 100% determined to build the most interesting position in the world in online advertising media and the kind of social connected social media experience. The future of the way people consume information is going to change in the next 10 years dramatically. We are absolutely committed to being the leading player. We are not today the leading player. We've got very talented bright people. But there are some structural things in the industry that make it hard to make rapid progress.

But it takes a lot of things for us to be there to be important not just in search but in this broader area. We are going to have as big an index as we're going to need to have in search. That's expensive and we're entirely committed to it...

We need to gain scale. The world is rooting for us. The world hopes that there's a very strong company that's not the number one guy. We're gong to work that strategy with Google, with Yahoo! or without Yahoo!.

Why buy Yahoo!?

It accelerates scale. Gets us more advertisers, gets us search. Yahoo’s not a strategy. It’s a part of a strategy. We’re interested in paying for it at some level and beyond that level we’re not willing to pay for it. I know EXACTLY what I think Yahoo is worth and I won’t go a dime above.

We missed the deadline but we’re in the process. I report nothing. I've got nothing to say today.

We’ve got basically the three big options in front of us. There’s the friendly deal, there’s an unfriendly deal, third path is simply to walk away. Given it’s just a part of a strategy – if neither of those look good, we walk away. It makes sense at the price we proposed and I think it’s a good deal for Yahoo shareholders. It’s a huge premium. It’s one of the largest valuations.

We oughta know something – we oughta announce something in very short order.

There’s nothing definitive to say today. We have a great plan and strategy and we have a long way to go. We are not number one and number one is a lot bigger than us. There may not be many people here that remember when we were a distant number 2 before. You gotta be willing to look outside of the box and Yahoo is $44 billion outside of our box. If Yahoo doesn’t happen there’s a number of other things we’ll look at.