Tech Community Waiting For Microsoft's Next Move

May 5, 9:54 PMBusiness ExaminerDarrell Proctor

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The news that Microsoft was dropping its bid for Yahoo! has provided plenty of water-cooler talk about what Microsoft CEO Steve Ballmer will do now in his attempt to keep up with Internet rival Google.

According to researcher ComScore Inc. of Reston, Va., Google has gained 10 percentage points of market share in Internet queries over the past year, and provided nearly 60 percent of all searches in March, the latest reporting period.

According to people familiar with the Microsoft-Yahoo talks, Ballmer (at right) and Kevin Johnson, president of Microsoft's Internet unit, met last week in Seattle with Yahoo co-founders Jerry Yang and David Filo. Microsoft was apparently ready to raise its bid another $5 billion to nearly $50 billion, or $33 a share. But Filo and Yang said they would take nothing less than $37 a share.

So where does Microsoft go now? Ballmer, in a May 3 e-mail to employees, said "We have a strategy in place. We are absolutely committed to being the leader (in Internet search)."

Considering that Microsoft's shares have dropped nearly 20 percent this year, and the fact the Internet unit lost $228 million last quarter, it's clear Ballmer and Co. must find a strategy that works - and soon.

I met Ballmer at the Consumer Electronics Show in Las Vegas two years ago, and he made it clear then he's not the kind of guy to shy away from a challenge. But keeping up with Google - which many folks like to say rules the Earth - may be the ultimate challenge.