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Microsoft to invest in web search - with or without Yahoo!
Bill Gates: Watch out Google, we want our share

By Reuters

Published: Tuesday 19 February 2008

Microsoft plans to invest heavily in web search to compete against Google, even if it fails to acquire Yahoo!, chairman Bill Gates has said.

Gates, who called Microsoft's offer for Yahoo! "very fair", said Google is the only company with "critical mass" in web search. Microsoft needs a bigger piece of the market to create a more competitive and profitable web search business.

Gates said: "We can afford to make big investments in the engineering and marketing that needs to get done. We will do that with or without Yahoo!."

He added: "But we also see that we'd get there faster if the great engineering work that Yahoo! has done and the great engineers there were part of the common effort."

The two companies are at a stand-off in Microsoft's unsolicited bid to acquire Yahoo!. Microsoft has offered to buy Yahoo! for $31 a share in cash and stock, a bid which Yahoo!'s board rejected, saying it undervalued the company.

Microsoft countered by saying its offer was "full and fair", but did not say what it planned to do next. Analysts expect Microsoft to sweeten its bid, possibly to $35 a share, to clinch a deal.

Gates said: "There is nothing new in terms of the process. We've sent our letter and we've reinforced that we consider that it's a very fair offer."

Microsoft's stock has fallen 13 per cent since its offer for Yahoo!, reducing Microsoft's offer price to $29. Yahoo! shares closed at $29.66 on the Nasdaq on Friday, indicating investors expect Microsoft to raise its bid.