The move may attract more customers and online advertisers to Microsoft's sites, helping the company compete with Google, the most popular US search engine. Microsoft, whose online business was its only unprofitable division last quarter, had sought to unite its third-ranked engine with No. 2 Yahoo and walked away after the company demanded a higher price.
"They've got to do something major, either through acquisitions or taking more significant steps, like the cash-back offer, to keep things moving,'' American Technology Research analyst Donovan Gow said in an interview. "This could certainly drive some share gains.'' The San Francisco-based analyst advises investors to buy Microsoft shares and doesn't own any.
Microsoft, the world's biggest software maker, fell 4 cents to $28.72 in Nasdaq Stock Market trading at 10:17 am New York time. The stock had dropped 19 per cent this year before today.
The company said on May 18 that it would pursue an alternative transaction with Yahoo! instead of the full takeover that Chief Executive Officer Steve Ballmer had originally planned. Microsoft, which said it may reconsider a bid for all of Yahoo! at some point, has since offered to buy Yahoo's search unit, two people familiar with the talks said this week.
Microsoft is working to consolidate brands, attract advertisers and expand partnerships, online business President Kevin Johnson said in a letter to employees this week. The unit lost $228 million last quarter. Johnson said the Redmond, Washington-based company will discuss its strategy in more detail at its annual advertising conference.
Google handled about 61.6 per cent of US internet search queries last month, compared with 59.8 per cent in March, Lehman Brothers's Doug Anmuth said in a report today. The New York-based analyst cited data from researcher ComScore.
Yahoo, based in Sunnyvale, California, fielded 20.4 per cent of searches, down from 21.3 per cent, while Microsoft's share slipped to 9.1 per cent from 9.4 per cent.
