Seattle - Microsoft intends to invest heavily in developing its search business after being freed from the 47.5-billion-dollar bill for buying Yahoo, company chief executive Steve Ballmer said Thursday.

Ballmer's comments at Microsoft's annual meeting with financial analysts were his first detailed assessment of the software giant's plans since the deal died in May, when Yahoo rejected the offer as too low.

A Yahoo acquisition would have helped Microsoft's bid to overtake Google in search, but any current merger plans are dead, Ballmer said Thursday.

"Yahoo, for us, was always a tactic, not a strategy," Ballmer said. At this point, however, "there's nothing under discussion between the two of us," Ballmer said. "It didn't work out; we're done."

But Microsoft is confident it can win what Ballmer called a "two- horse race" with Google for the search market, as the company "antes up" its bet.

"We're going to have to innovate, we have to reinvent, but we also have to ante up," said Ballmer.

"I think there are really only two companies that have capability and staying power - Microsoft and Google," Ballmer said. "Despite the fact that they're the big footprint guy, and we're just the tiny little Microsoft in this one, working away, we at least have the wherewithal to remain in the game."

He predicted that search was only in its infancy, as ever more information migrates to the internet.

"Everything in the world that can move to be delivered and embraced over an IP network, over the Internet, will be," Ballmer said. "Everything you read, everything you watch, everything you want to communicate, all of those experiences are going to happen over the Internet."

"We're comfortable proceeding on our own," Ballmer said. "Does that mean that no one will ever talk to anybody again? I suspect the answer is no." (dpa)