DAVOS, Switzerland (CNNfn) - Microsoft Corp. Chairman Bill Gates Monday brushed aside speculation that his company intends to quickly pursue a merger with a major communications or Internet company as a counter to America Online Inc.'s agreement this month to acquire Time Warner Inc.|
Speaking to a packed conference hall at the World Economic Forum, Gates reaffirmed his intention first and foremost to keep Microsoft (MSFT: Research, Estimates) as a software-oriented company.
"The strategy that my company is pursuing . . . is a very different strategy," he said. "I think there is room for a company whose mantra is to create software. The strategy we've got in place is to stick to our roots."
Still, Gates, who called the AOL/Time Warner merger "a fantastic thing," said Microsoft has been "challenged to say what kind of relationships we can have" with Internet or communications companies. Analysts and industry officials have speculated that Gates might have to purse a merger with a company such as AT&T Corp. (T: Research, Estimates) or Yahoo Inc. (YHOO: Research, Estimates) to effectively challenge the reach AOL will possess after its merger with Time Warner (TWX: Research, Estimates), the parent company of CNNfn.
"We certainly look forward to partnering with those companies," he said. "But when it comes to what we come to work everyday and think about, I have to admit: the technology goop, we love it.
""I think it would be fun to own a movie studio, but I don't have the expertise, so I'm going to stay away from that. We're not going to go out and buy magazines or other traditional content things," he said.
AOL, Case set pace
AOL (AOL: Research, Estimates) Chairman and Chief Executive Stephen Case, who sat on the same panel as Gates, called his company's combination with Time Warner "symptomatic of the trend that will define the next wave of the Internet."
"For us, [this merger] has never been about broadband access," he said. "The real driver was to create a whole new experience."
Case said AOL Time Warner's unparalleled distribution capabilities effectively give the proposed company a head start in leading the transformation of the Internet "from a novelty to being a part of people's everyday lives."
Despite the recent consolidation among major American technology and media firms, Case said the Internet essentially remains an untapped resource in most of the world -- meaning other mergers will follow.
"We still think the big journey still lies ahead because the vast majority of people aren't connected and the ones that are connected aren't on very long," he said. "It's going to require more and more combinations because I think any company trying to do this unilaterally will fail."
Redstone mum on Microsoft rumors
The panel, which included Viacom Chairman and CEO Sumner Redstone and Michael Dertouzos, director of the computer science laboratory at the Massachusetts Institute of Technology, was convened to discuss winning strategies for the Internet.
The discussion ultimately evolved into a debate over whether technology or content will drive the Internet's future growth.
With acknowledging the enormous technological advantages presented by a company such as AOL Time Warner, Redstone said the deal only further validated that "content is king."
"What will ultimately propel the entertainment industry on the Internet is creativity, not technology," he said.
In an interview with CNNfn following the panel discussion, Redstone sidestepped rumors that Viacom, which is in the process of merging with CBS Corp. (CBS: Research, Estimates), was involved in merger discussions with Microsoft.
"I don't think we need to do something," he said. "But I would consider anything that made a lot of sense and that was good for our stockholders.
"I like Bill a lot," he added. "He does appreciate content, that's for sure."
Gates said he believes the next phase of the Internet, in addition to tapping into new markets around the world, should be oriented toward enhancing online technology's positive impact on society.
"You've got to put health and education first," he said. "You can't say 'OK, you don't feel well, but here's the Internet.'"
The comments came as Gates, already one of the world's largest philanthropists, announced a $750 million donation to an international effort to make vaccines available to children in the developing world.