Oct. 16 (Bloomberg) -- Microsoft Corp. Chief Executive Officer Steve Ballmer said a deal with Yahoo! Inc. may still make economic sense for shareholders of both companies, pushing Yahoo stock up 11 percent.

While there may be ``continuing opportunities'' to pursue a partnership for Internet-search advertising, there are no discussions now, Ballmer said today at a Gartner Inc. conference in Orlando, Florida.

Microsoft, the world's largest software maker, offered as much as $47.5 billion for Yahoo this year to close the gap with Google Inc. in Internet advertising. After Yahoo asked for a higher price, Microsoft walked away from the bid in May. Yahoo shares had fallen 61 percent from their peak in February.

``It's clear that Yahoo did not want to sell the company. It didn't want to sell when we offered $33,'' Ballmer said. ``They probably still think it's worth at least $33 today.''

Yahoo jumped $1.24 to $12.99 at 4 p.m. New York time in Nasdaq Stock Market trading. Microsoft, based in Redmond, Washington, rose $1.53 to $24.19.

Ballmer is ``trying to set the stage for a lower valuation'' on Yahoo, said Colin Gillis, an analyst with Canaccord Adams in New York. He has a ``hold'' rating on Yahoo shares, which he doesn't own. ``I hope there's real strategy behind the comments and they're not just casual.''

Microsoft has no interest in an acquisition and there aren't discussions between the companies, according to a statement from Microsoft after Ballmer's remarks. Yahoo spokeswoman Tracy Schmaler declined to comment.

`Declining Asset'

Microsoft Chief Financial Officer Chris Liddell said in July and reiterated in September that Yahoo is a ``declining asset'' and the chances of a full acquisition are ``negligible.'' After walking away from the deal in May, Microsoft said it was exploring a transaction short of a full takeover.

Microsoft and Yahoo sparred over what happened during the negotiations, with Microsoft accusing Yahoo at one point of ``attempting to rewrite history.''

Yahoo director Carl Icahn, who took a seat on the board in August, said Yahoo has to ``do something'' with Microsoft or face being crushed by Google, in an interview on CNBC last month. Icahn had threatened to oust Yahoo CEO Jerry Yang and the board after they turned down Microsoft's bid. Icahn didn't return a call seeking comment.

Microsoft would have used Sunnyvale, California-based Yahoo to bolster its Internet advertising business. That industry will grow to $65 billion this year, according to IDC, a researcher in Framingham, Massachusetts.

Google Fight

``Google is the best-financed, most ambitious company in the business,'' said Ballmer, 52. ``It's really about getting good at advertising, because if we're good at advertising, we'll compete with them on anything in the consumer business.''

Because investors are struggling to find earnings-driven stocks during the economic slowdown, they may be more willing to support buyouts that give them a guaranteed gain, said Tony Ursillo, an analyst at Boston-based Loomis Sayles & Co., which owns Microsoft shares.

Shareholders are ``going to think twice now when they're getting taken out at any price,'' Ursillo said.

Yahoo shareholder Mithras Capital LP on Oct. 10 proposed the Internet company sell itself to Microsoft for $22 a share.

Google accounted for 63 percent of U.S. Web searches in August, compared with 19.6 percent for Yahoo and 8.3 percent for Microsoft, according to research firm ComScore Inc. in Reston, Virginia.

After spurning Microsoft, Yahoo forged an agreement to show some ads sold by Mountain View, California-based Google. The deal ran into opposition from advertisers, competitors and consumer advocates, and Oct. 3 the companies delayed the partnership while U.S. regulators investigate whether it hurts competition.

To contact the reporter on this story: Amy Thomson in Orlando, Florida at athomson6@bloomberg.net

Last Updated: October 16, 2008 16:08 EDT