These remarks were made by Microsoft's Chris Liddell concerning Microsoft's acquisition of Yahoo. This is from Microsoft's third quarter earnings call.
With or without a Yahoo combination Microsoft is focused on the online advertising market which is expected to double by 2010 to $80 billion. Although Yahoo would accelerate our efforts we have an existing strategy that is already centered on three key pillars; drive innovation and search, increase value to advertisers and publishers through innovation and scale and grow user engagement across our MSN and Windows Live properties. We have an extremely talented engineering team, a great portfolio of advertiser and publisher tools and key assets in information content, communications and social networking. Lastly we are committed to compete in online advertising through organic investments, partnerships and acquisitions such as aQuantive and Rapt.
With respect to Yahoo we have been as evidenced in the size of our offer premium that speed is of the essence for the deal to make sense and get folded into our online strategy. Unfortunately the transaction has been anything but speedy as is being characterized by what would appear to be unrealistic expectations of value. Our initial offer was an extremely generous more than 100% premium fee [inaudible] core business. And our view on value is shaped by the long-term value of the company and we intend to remain disciplined in our approach. The strongest argument that I’ve heard on why we should increase our bid, simply that we can afford to, is not one that I favor. We’ve yet to see tangible evidence that our bid substantially undervalues the company. In fact we see the opposite. Yahoo continues to lose search share and profitability continues to decline year-on-year. The results that they announced on Tuesday were in line with the guidance that they gave on their last earnings call on January 29, after which their stock price closes at $19.05 and Wall Street analysts’ consensus on value was significantly decreased. As outlined in our recent letter to the Yahoo Board, unless we make progress with Yahoo towards an agreement by this weekend, we will reconsider our alternatives. We will provide updates as appropriate next week. These alternatives clearly include taking the offer to Yahoo shareholders or to withdraw our proposal and focus on other opportunities both organic and inorganic. With that being said I’d like to remind you that we’re here today to discuss our earnings and we hope you understand that we can’t go beyond in the Q&A session what I’ve just said.
So clearly if Yahoo was to happen we’d have to overlay that impact. We would still think about spending I would think virtually all of that money in terms of organic growth anyway. If Yahoo wasn’t to happen, could we consider other investments, yes but we’ll cross that bridge when we come to it.
Heather Bellini – UBS
...about the buybacks, I believe I read in your Q you cut them to about a billion dollars this quarter, should we expect that level to stay until we know the outcome of the Yahoo transaction?
On the buyback, yes you are correct it was low this quarter in particular because of the Yahoo transaction. I want to maintain the most amount of flexibility for that transaction in terms of our cash buildup and how the final transaction might work if it does. Therefore I don’t intend to get into quarter by quarter and I don’t want to give specifics but also just from a legal perspective, its difficult for us to be too active in the buyback market so I would expect us to be relative modest from a buyback perspective until we get clarity on Yahoo one way or the other.
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