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'We've been engaged for months'

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!!!!! Steve Ballmer all but confirmed that Microsoft wanted to buy Yahoo! for scale, branding and audience rather than any technology or products the web media co owns.

Ballmer claimed today that Microsoft's bid for Yahoo! would be a great deal for shareholders on both sides and will let the new company compete effectively in the online advertising market where, we were told, scale is king.

In a conference call with analysts and reporters this afternoon Microsoft's chief executive Steve Ballmer said he'd been "engaged with Yahoo! for eighteen months" and that the two companies "share a vision for online services".

Ballmer said it was a 'transformational' deal which focussed on three constituencies: consumers, advertisers and publishers. He said he could see no better way to address the consumer perspective than by buying Yahoo!.

Ballmer said: "Scale matters for online advertising. Aggregating inventory onto one platform improves yield for publishers."

Ballmer refused to be drawn on what this would mean for average margins saying it was a different business - he described Microsoft as already having four business models for different areas of its business.

Asked if there was a danger of a rival bid emerging, maybe from a big media company, Ballmer repeated his belief that it was a good deal. Then Microsoft's legal counsel Brad Smith piped up with an explanation of how it would be anti-competitive if Google bought Yahoo!.

Microsoft is hoping to close the deal in the second half of 2008, which suggests it doesn't expect too much of a fight from either Yahoo! or competition regulators.

Asked if the scale of the acquisition would mean a hold was put on enterprise software buys, Ballmer answered simply and gruffly: "No!"®

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