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Microsoft's online strategy: Trust us

CEO Steve Ballmer told financial analysts how much Microsoft expects to pour into its online effort in the coming years, but is coy when pressed on the company's strategy.

REDMOND, Wash.--Microsoft went into more detail Thursday about its online spending plans, but offered few new details on just how it plans to catch Google.

In his remarks to financial analysts, CEO Steve Ballmer acknowledged that, in the search business, the company faces the challenge of needing to boost the number of search queries, attract revenue per share and boost revenue. While Yahoo would have offered a clear way around that Catch-22 by boosting Microsoft's advertiser base and query volume, Ballmer insisted he had other ideas besides a deal with the Silicon Vallery Internet company,

"There are other alternative approaches around this Catch-22 which I'm not going to talk about today," Ballmer said during yesterday's financial analysts meeting here.

He was pressed again later, but again demurred.

Ballmer did put a rough estimate to the cost of what he called "ante-ing up" for the next few years. Ballmer showed a slide that has the company expecting to pour 5 percent to 10 percent of its operating income into online search.

Several analysts I spoke to after the meeting on Thursday say they were disappointed Microsoft didn't offer more on the "how" in addition to the "how much."

In a research note, Bernstein analyst Charlie DiBona offered a glass half-full take, saying that although the detail was less than he hoped for, it was more than he expected.

Microsoft "addressed some but not all of the concerns about its spending and the performance in online businesses," DiBona said. He said a "hidden gem" was the assurance by Ray Ozzie that the company's services strategy will be fully fleshed out and made public over the course of this fiscal year.

"The net was a mixed bag, but but generally more constructive than most had expected... we got some clarity on spending but only more superficial assurances about the processes underlying spending decisions."

While Ballmer didn't go into details on Microsoft's Plan B, he did say emphatically that the company was moving on from Plan A: Yahoo.

"There is nothing under discussion between the two of us," he said.

CFO Chris Liddell put an even finer point on it, calling Yahoo a "declining asset."

"I think the chances of us buying Yahoo...are so small that they are essentially negligible," Liddell said.