May 6, 2008 7:51 AM PDT

Microsoft exec on Yahoo: 'We've moved on'

Posted by Ina Fried

In the wake of Microsoft's decision to pull its Yahoo offer, executives are trying to make the case that Redmond's online business can go it alone.

Speaking to investors Tuesday, Windows Live General Manager Brian Hall tried to bring the focus back to what Microsoft is doing on its own, rather than what might have been.

"We've withdrawn the offer and moved on, and now are focused on how we grow as fast as possible organically," Hall said, speaking at a Merrill Lynch technology conference.

Pressed further on the point, Hall said Yahoo would have helped in the e-mail business worldwide--and in the instant-messaging arena in the United States, in particular.

Investors also wanted to know whether AOL might be Microsoft's next acquisition target. Hall wouldn't address that question, but he did offer his take on AOL's strengths and weaknesses.

On the positive side, he pointed to AOL's strong position in e-mail and instant messaging, and as a portal, in the United States, as well as its strong messaging position in Germany and Russia.

"They certainly have a large customer base today in those markets," he said. "At the same time, they don't have an ad platform."

Also on the negative side, he pointed to the fact that AOL has been monetizing its search results via Google for some time. He also noted that AOL has been losing ground to rivals overall.

"They are not gaining share today, for sure," he said.

The strategic value of Windows Live
As for where Microsoft is going on its own, Hall discussed the company's key efforts around MSN, Windows Live, and search.

Hall provided one of the clearest arguments to date of the strategic importance of Windows Live. Although it is a component of Microsoft's online business, one of its main purposes is to try to keep the operating system relevant in a world that has become very browser-centric.

He pointed to the growing number of desktop applications Microsoft has created that connect to online services, such as Windows Live Mail, Windows Live Photo Gallery, and Windows Live Writer.

"Our goal there is to clearly create killer apps for Windows, where people appreciate Windows more," Hall said.

At another point, Hall mentioned movies as an area in which Microsoft might also have an opportunity on the desktop side. If the company continues developing software like Windows' Movie Maker application, we could see an application that offers the ability to connect to online video-sharing applications such as YouTube or MSN Soapbox.

On the search front, Hall reiterated familiar Microsoft refrains: that search results still are not all that good and that Microsoft sees opportunities to gain ground, particularly by integrating search experiences directly into its online tools.

"We think we can do a lot more to drive contextual search," he said. "We see a lot of opportunity to push the envelope there."