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Microsoft Expects Slow Economic Recovery

Chief executive Steve Ballmer said Friday that the company expects to have to deal with a weak economy for up to four years before it sees growth again.

COLOGNE, Germany (AP) -- Microsoft CEO Steve Ballmer said Friday that the company expects to have to deal with a weak economy for at least the next several years.

"We are planning essentially for the economy to contract," Ballmer said at a media forum in Cologne, Germany. "That may take two, three, four years, partly depending on government policy to ease some of the pain. Then we will see growth again."

The comments came the day after Redmond, Washington-based Microsoft Corp. reported its quarterly revenue fell from the previous year for the first time in its 23-year history as a public company, while its profit dived 32 percent.

The declines illustrated the toll the recession has taken on the world's largest software maker, even though Microsoft remains one of the richest and most profitable companies.

In January, Microsoft said it needed to resort to its first mass layoffs, cutting 5,000 jobs, and on Thursday it announced it would do away with merit pay increases for employees in the next fiscal year.

In other comments, Ballmer suggested that he expected American regulatory authorities to examine this week's announced $7.4 billion takeover of Sun Microsystems Inc. by Oracle Corp.

"There is a lot of overlap in their software products -- Oracle is dominant in databases. Are they allowed to buy another database? Oracle is dominant in job application servers. Are they allowed to buy another job application server? I don't know," Ballmer said. "I'm sure that will be looked at by appropriate authorities."

Regardless, he said, "we compete with Oracle and we compete with Sun -- we'll compete with Oracle and Sun if they come together."

He also said that Microsoft was continuing to look for ways to compete with Google, and suggested his company was in a good position.

"Google dominates search. But have they won? They have only won if there is no opportunity to innovate," he said. "Because we have less to lose, we have permission to change the model more then the market-leader."

He reiterated that Microsoft is no longer interested in acquiring Yahoo, but did not rule out working with the search company.

"We see the potential to create real value by partnering with Yahoo," he said.

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