Yahoo sets up new lab in India

BANGALORE, INDIA – As its buyout battle with Microsoft continues, Yahoo is establishing a lab in Bangalore, India, where the search company already has research and development operations.

While the current R&D done by Yahoo in India is focused on new products and engineering, the focus of the new lab will be on long-term research, a spokeswoman for the company said Tuesday.

Yahoo Labs Bangalore will be a center of excellence for next generation search and advertising technologies, focused on making the Web more relevant and simple for users and advertisers, Yahoo said.

The company has hired Rajeev Rastogi, who has moved from head of Bell Labs India to lead the new lab, and assemble a team of scientists and engineers to focus on new approaches to information extraction and machine learning, multimedia and query processing, the company said.

It did not provide details of the number of staff it plans to hire for the lab. The company plans to hire sociologists, micro-economists, and computational scientists among other categories of staff for the lab, the spokeswoman said.

Yahoo already employs some 1,500 staff in India, which it plans to take to over 2,000 by the end of this year. Yahoo Research & Development is involved in the development of some of Yahoo’s key products and services such as mobile Internet and search.

Yahoo has similar labs in New York, Santiago, and Barcelona, along with Santa Clara, Burbank and Berkeley in California.

Meanwhile, Microsoft CEO Steve Ballmer would not say whether the company plans to pursue a proxy fight to remove Yahoo’s board.

In Germany at the CeBIT conference, where he gave a keynote address, Ballmer confirmed “a range of dialog” and “alternatives” under discussion with Yahoo, whose executives spurned Microsoft’s initial US$44.6 billion cash-and-stock offer, posing the question of whether Microsoft would pursue a hostile takeover. The worth of Microsoft’s offer has declined by several billion dollars as the company’s share price has dropped over the past few weeks.

“I think it’s important for me not to get into the detail,” said Ballmer. “We still think the deal makes sense. We hope over time that becomes a reality.”

Ballmer, whose company presented the unsolicited offer for Yahoo on Feb. 1, said the bid has merit for the companies’ shareholders, advertisers, publishers and consumers. Microsoft hopes that a deal will bring it the engineering resources and Web savvy that has made Yahoo one of the most recognizable Web brands and eventually allow Microsoft to better compete in the online advertising market with Google.

Yahoo has also been struggling against Google and been plagued by mediocre financial results in addition to turmoil in its management ranks. However, CEO Jerry Yang has told employees not to be distracted by the bid and to stay focused.

Ballmer said Microsoft remains “fully engaged” with Yahoo and maintained the two companies together have the potential to create a lot of value. “Ultimately, Yahoo’s management’s going to have a perspective on that, Yahoo’s board will have a perspective on that and Yahoo’s shareholders,” Ballmer said.

“We are trying to have appropriate levels of engagement with all three of those constituencies as well as with other industry participants.”

On Wednesday Yahoo said it lifted next week’s deadline for nominating directors to its board, an attempt to discourage Microsoft from launching a proxy fight to replace the current board with members willing to approve its Yahoo acquisition bid.