However, Ballmer said that Microsoft remains open to the possibility of a more narrow deal that would have the software giant tapping into Yahoo's online search business.
Ballmer's remarks come days after Yahoo's (YHOO:Yahoo! Inc
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YHOO 9.34, -2.21, -19.1%) announcement that CEO Jerry Yang will be stepping aside, a move that many have interpreted as meaning the Internet company is seeking to pave the way to another round of merger talks with Microsoft. See full story.
While Yang's resignation provided a short-term boost to Yahoo shares, news of Ballmer's comments Wednesday helped send the shares tumbling more than 17% lower to $9.60. Microsoft (MSFT:Microsoft Corporation
In comments made during the meeting, Ballmer said that his company is not interested in once again pursuing Yahoo, which declined an acquisition bid that reached as high as $33 a share earlier this year. Microsoft eventually walked away from the talks in May, after failing to come to an agreement with Yahoo on price.
"Let me be as clear as I think I've tried to be publicly: We are done with all acquisition discussions with Yahoo," Ballmer told shareholders. "We have moved on."
Ballmer added, though, that he still sees an "interesting opportunity" for a potential search deal with Yahoo. Microsoft earlier this year made a separate offer for that company's search business, after talks about a full acquisition broke down.
In addition, Yang said earlier this month at a technology conference in San Francisco that he remains "open minded" about a possible search-only deal with Microsoft.
While Yahoo has previously said it's reluctant to split its search advertising business from its graphical display advertising business -- arguing that the two will become more inter-dependent over time -- some observers have long been pressing for such a move.
Those observers believe that Yahoo went astray in recent years, by pouring resources into a futile effort to keep pace with rival and online search market leader Google Inc. (GOOG:google inc cl a
Yahoo "should have been investing in the other assets," said Mike Leo, a co-founder of online advertising company aQuantive Inc., which was acquired by Microsoft last year, and current chief executive of Operative Inc. "The more they can simplify their business, the more they can do for advertisers."
Collins Stewart analyst Sandeep Aggarwal has estimated that a search-only deal with Microsoft could mean an "$8 to $10 per share lift to Yahoo."
While Microsoft has made such an offer before, Yahoo's situation has now changed, Aggarwal wrote in a note to clients.
For example, Yahoo previously hoped to form a search advertising partnership with Google, which would have netted it hundreds of millions of dollars in additional revenue. That proposed deal, however, fell apart earlier this month due to scrutiny from antitrust regulators at the U.S. Department of Justice.
"A search deal or opportunistic Yahoo acquisition by Microsoft may work this time," the analyst wrote.
John Letzing is a MarketWatch reporter based in San Francisco.
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