"If we were I wouldn't tell you, if I weren't I wouldn't tell you," Ballmer said Monday when asked point-blank by Rose in a joint interview with Cisco Systems' CEO and Chairman John Chambers if Microsoft was currently in negotiations with Yahoo to merge. The two industry heavyweights appeared together in New York to discuss the collaboration between Microsoft and Cisco, which have begun to encroach on each other's territory in the areas of unified communications and network security infrastructure as well as products for the digital home.
There was widespread speculation that Microsoft and Yahoo were talking about a possible deal earlier this year, speculation that was quieted by Microsoft's announcement it would buy digital media and marketing services firm aQuantive in May in a $6 billion deal to boost its online advertising strategy. The deal, Microsoft's biggest to date, closed last week, and the possibility of the company purchasing Yahoo seemed a moot point.
Ballmer initially appeared to reignite Yahoo acquisition suspicions during Rose's line of questioning about Yahoo -- he corrected Rose by saying "Why don't we buy Yahoo?" when asked by his interviewer why Microsoft "didn't" purchase the company.
However, in an interview following his joint public appearance with Chambers, Ballmer said Microsoft has no plans to do another massive deal like the aQuantive one to build out its advertising strategy. Instead, the company will focus on a combination of making smaller acquisitions and building new infrastructure where it is necessary to help Microsoft compete with advertising and search giant Google Inc.
"We're going to buy more stuff and build more stuff ... but we don't have a major conquest [in the works]," he said. "Sometimes we'll have to decide what's better -- to buy or to build."
One thing Ballmer said was certain Monday was that the top executives of Cisco and Microsoft were not sharing the stage to announce a mega-merger between the two technology powerhouses. A combination of collaboration and competition was the order of the day, as the two companies identified areas where they have refocused their efforts on working together to promote the vision both companies have of the convergence of voice, data, video and other forms of media over IP (Internet protocol) networks.
Cisco and Microsoft have been partners for 10 years, but that alliance has become tighter in the last seven months, with the two CEOs regularly checking in with each other to discuss progress and ways to collaborate. This new spirit of friendliness was not by the companies' choice but because customers demand it, both executives said.
"Companies don't want the issue of competition to cause them to interoperate ineffectively," Chambers said.
Microsoft and Cisco have identified seven broad areas of collaboration and engineers are working together to ensure the products each company has in those areas will work together. Those areas of collaboration are: IT architecture, security, management, wireless and mobile computing, unified communications, connected entertainment and the needs of small and medium-size businesses.
Following the formal interview with Rose, engineering leaders from Microsoft and Cisco demonstrated examples of technology interoperability that has resulted from the collaboration.
Microsoft's Senior Vice President Bob Muglia and Cisco's Executive Vice President and Chief Development Officer Charlie Giancarlo demonstrated integration between a device running Microsoft's Windows Mobile 6 and Cisco's Unified Personal Communicator (UPC) unified messaging interface, the latter a direct competitor to Microsoft's Office Communicator product. Like Office Communicator, UPC is an enterprise instant-messaging interface that combines Web presence, chat, VOIP (voice over IP) and video-conferencing functionality.
Another demo by Muglia showed how a next-generation Linksys wireless set-top box from Cisco could communicate with a Windows Media Center PC to show photos on a high-definition display without the PC having to be in the room near the display screen.