Ballmer: Deal good for Yahoo, too

Microsoft CEO Steve Ballmer this morning expressed surprise at the negative reaction to how Yahoo came out in the Internet search and advertising partnership that the companies announced yesterday. Speaking at Microsoft's Financial Analyst Meeting in Redmond, Ballmer showed a slide characterizing the deal as good for both companies,

While Microsoft gets the larger market share to improve Bing's search relevance and advertising volume, Yahoo still gets 88 percent of the revenue from ads on Yahoo search, without the R&D and operating expenses that it would normally encounter. That frees up Yahoo to concentrate on its online media business, Ballmer said.

He pointed out that Yahoo expects to increase its operating income by $500 million, or 70 percent, as a result of the deal.

"This is the one that stuns me, that people haven’t figured it out," Ballmer said of the potential Yahoo benefits. "It’s sort of, like, unbelievable."

 Yahoo CEO Carol Bartz made a similar case in an interview with TechFlash yesterday. "I needed to be able to focus this company on other aspects of the business, and let Microsoft, who we know is maniacal about the search business ... take a run against Google," Bartz said. "So I wanted to ride their coattails, so I think people forgot all of the money we were saving here."

Yahoo shareholders either aren't listening or aren't buying it. The company's shares are down again in trading this morning. Microsoft shares are again trading up.

Update, 11 a.m.: The Seattle Times found an alternative version of Ballmer's presentation on the company's web site, which included one slide that Ballmer didn't show, and apparently wasn't meant for public consumption. The slide goes into greater detail on the potential financial impact of the Yahoo deal on Microsoft, including a projection that the company will lose money in the first two years of the deal, totaling $300 million, then "start making decent return" of $400 million.

That particular slide is no longer included in the version of the PowerPoint on Microsoft's site.

Check back throughout the day for coverage from Microsoft's Financial Analyst Meeting in Redmond.

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