Microsoft CEO sees Web search buys unlikely

LONDON, UK: Microsoft chief executive Steve Ballmer does not expect to make acquisitions to help the company challenge the dominance of Google in the Internet search market, he told Reuters on Monday.

"No, I wouldn't expect it," he answered when asked whether acquisitions would be part of the strategy. Microsoft recently agreed a search partnership with Web company Yahoo after a long and unsuccessful struggle to buy the company.

"You'll continue to see us work hard and invest in the marketing and the like, and of course we're trying to get the Yahoo deal through regulatory," he said after a lecture to Britain's CBI business lobby organization.

Ballmer also reiterated his often-voiced opinion that growth was likely to return slowly and at lower levels to the global economy.

"Things have come down. I see them staying down and slowly growing," he said in answer to a question from the audience, adding: "I feel wholly unqualified... to answer the question."

Ballmer also said Microsoft was freezing its research and development budget - the industry's largest - at $9.5 billion, partly in order to keep resources in reserve for the fight with Google.

"Let's make sure we keep the money we need to continue to establish us in new businesses," he said. "We're trying to give Google a little competition in the search business."

Microsoft had cash and short-term investments of $31.4 billion as of end-June.

Under the 10-year deal with Yahoo, Microsoft's new Bing search engine will power queries on Yahoo's sites. In return, Microsoft will pay Yahoo 88 percent of revenue from advertisements generated from those sites.

In theory, that means Microsoft gets more traffic to refine its search technology and build up its ad base, while Yahoo gets revenue from search ads without the expense of managing its own search engine.