Microsoft CEO: catching Yahoo, Google to take time (Reuters)

SANTA CLARA, California (Reuters) - Microsoft Corp. ChiefExecutive Steve Ballmer said on Thursday he has a five-yeartarget to gain a bigger slice of the lucrative onlineadvertising market dominated by Google Inc. and Yahoo Inc. (Nasdaq: - )

Speaking at a business luncheon in Silicon Valley, Ballmersaid he did not enjoy trailing the two Web advertising leadersbut predicted that persistence and the software maker's abilityto create new technology would help it catch up.

"I don't think you will see some overnight transformation,"Ballmer said. "It is going to have to be longer term. It makessense for us to talk about five years."

Microsoft is making a big push into Web services and hasvowed to keep investing in a variety of technologies as itseeks to transform the way both businesses and consumersoperate on the Internet.

At the core of this plan is Windows Live, anadvertising-funded, one-stop shop for services from e-mail, toinstant messaging, to blogs that targets the fast-growingonline ad market. Forrester Research projects onlineadvertising will grow to $26 billion in 2009 from a current $15billion.

Goldman Sachs analyst Rick Sherlund estimates Microsoftplans to spend an additional $2 billion in the year starting inJuly, with much of that investment going toward building anad-supported online business in the mold of Google and Yahoo.

Ballmer acknowledged the world's biggest software maker istrailing Google and Yahoo but he said it was not too late forMicrosoft to win over more advertisers and consumers.

"We are a little bit late in the game," Ballmer said. "Butat the end of the day it is going to be about the ability tocreate a mass marketplace for buyers and consumers."

Microsoft has said it plans to spend about $6.2 billion inresearch and development in the current fiscal year ending June30.

At the same time investors have put pressure on Microsoftshares due to concerns about the lack of details on thecompany's plans to compete with its online rivals and thepotential for more delays to its Windows upgrade, Vista.

Ballmer said Microsoft would seek to create a marketplacewhere consumers want to spend their time and advertisers wantto spend their money. It also plans to leverage the popularityof its MSN, Hotmail and Instant Messaging products, he said.

"We are hard at work on our own core services where at theheart we want the users to be in control," Ballmer said. "Thereis a whole set of things we are doing to let the user be incontrol."

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