Ballmer: Yahoo still in Microsoft's sights

Microsoft still has its eye on Yahoo, but CEO Steve Ballmer would not say Monday whether the company plans to pursue a proxy fight to remove Yahoo's board.

Ballmer confirmed "a range of dialog" and "alternatives" under discussion with Yahoo, whose executives spurned Microsoft's initial $44.6 billion cash-and-stock offer, posing the question of whether Microsoft would pursue a hostile takeover. The worth of Microsoft's offer has declined by several billion dollars as the company's share price has dropped over the past few weeks.

[ Learn more about the ongoing story of  Microsoft's attempt to take over Yahoo ]

"I think it's important for me not to get into the detail," said Ballmer, who gave a keynote speech at the Cebit technology show in Hanover, Germany. "We still think the deal makes sense. We hope over time that becomes a reality."

Ballmer, whose company presented the unsolicited offer for Yahoo on Feb. 1, said the bid has merit for the companies' shareholders, advertisers, publishers and consumers.

Microsoft hopes that a deal will bring it the engineering resources and Web savvy that has made Yahoo one of the most recognizable Web brands and eventually allow Microsoft to better compete in the online advertising market with Google.

Yahoo has also been struggling against Google and been plagued by mediocre financial results in addition to turmoil in its management ranks. However, CEO Jerry Yang has told employees not to be distracted by the bid and to stay focused.

Ballmer said Microsoft remains "fully engaged" with Yahoo and maintained the two companies together have the potential to create a lot of value.

"Ultimately, Yahoo's management's going to have a perspective on that, Yahoo's board will have a perspective on that and Yahoo's shareholders," Ballmer said. "We are trying to have appropriate levels of engagement with all three of those constituencies as well as with other industry participants."