Microsoft's proposed purchase of Yahoo would establish the world's largest software maker as a "strong No. 2 competitor" against online...

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SAN FRANCISCO — Microsoft’s proposed purchase of Yahoo would establish the world’s largest software maker as a “strong No. 2 competitor” against online search leader Google, Microsoft Chief Executive Steve Ballmer said today.

Speaking to a group of analysts in New York, Ballmer said the deal, valued at $44.6 billion when announced Friday, would raise competition, rather than eliminate it, in the Web search and advertising market.

“Google’s clearly got a dominant position. They’ve got about 75 percent of paid search worldwide,” Ballmer said. “We think this enhances competition. Anything else would be less good from that perspective.”

On Sunday, a Google executive said Microsoft could use the acquisition to gain too much control over the Internet, underscoring the online search leader’s queasiness about its two biggest rivals teaming up.

Google’s opposition isn’t a surprise, given that Microsoft views Yahoo as a crucial weapon in its battle to gain ground on Google.

“This is about more than simply a financial transaction, one company taking over another. It’s about preserving the underlying principles of the Internet: openness and innovation,” Google Chief Legal Officer Michael Drummond wrote in the company’s blog.

Yahoo so far has had little to say except that its board will carefully examine Microsoft’s bid — a process that “can take quite a bit of time,” according to a message posted on the Sunnyvale, Calif.-based company’s Web site.

Also today, Microsoft Chief Financial Officer Chris Liddell said he expects a deal with Yahoo to be completed by the end of the year.

Bloomberg News reported that Liddell expects the company, for the first time, will borrow money to help finance the deal, though he didn’t specify how much.

Yahoo shares closed up 95 cents, or 3.4 percent, at $29.33 today. Microsoft slipped 26 cents to $30.19. Google shares sank $20.47, or 4 percent, to $495.43.

Since announcing its unsolicited bid early Friday, Redmond.-based Microsoft has been trying to depict a Yahoo takeover as a boon for both advertisers and consumers because the two companies together would be able to compete against Google more effectively.

But Google is painting a starkly different picture, asserting that Microsoft will be able to stifle innovation and leverage its dominating Windows operating system to set up personal computers so consumers are automatically steered to online services, such as e-mail and instant messaging, controlled by the world’s largest software maker.

In a move that illustrates just how badly Google wants to torpedo the deal, Google Chief Executive Officer Eric Schmidt called Yahoo CEO Jerry Yang on Friday to offer his help in repelling Microsoft, according to a report Sunday on The Wall Street Journal’s Web site, which cited anonymous people familiar with the matter.

The assistance didn’t include a counterbid, but may have included supporting other potential suitors, or a revenue guarantee in exchange for an ad partnership with Yahoo, the people said, according to the newspaper.

If they get together, Microsoft and Yahoo would have about 16 percent of the worldwide Internet search market — still far behind Google’s 62 percent share, according to comScore Media Metrix. But Microsoft and Yahoo already are far bigger in than Google in e-mail and instant messaging, and conceivably would be in a better position to squash rival services if they combined.

In its Web site posting, Yahoo has said its review of the proposal “will include evaluating all of the company’s strategic alternatives, including maintaining Yahoo as an independent company.”