Microsoft Corp Chairman Bill Gates on Friday said that investors had created a "mini-bubble" by driving Internet stocks sharply higher.
"We are sort of back in a mini-bubble era in terms of people expecting a lot in terms of these valuations, but I don't think we'll see the same exit rate of companies that we saw back in the real bubble.
There are some strong companies who are doing things right," Gates said. Gates, who was responding to a question about the prospects for independent e-commerce companies, said Yahoo Inc, along with other big Internet names such as Match.com owner InterActiveCorp, and online sellers eBay Inc and Amazon.com Inc had built critical mass and would continue innovating in the years to come.
"These people are there, they have an area of strength, a business model that lets them sustain themselves," said Gates.
Yahoo is a rival to Microsoft's MSN online services unit.
Gates predicted that the boundaries between the Web companies would get "fuzzier" and that "healthy competition" between them would increase as the companies mature. Shares of Yahoo, eBay and Amazon have shot up sharply since their lows of late March and April last year.
Yahoo shares have more than doubled; eBay is up 58 percent and Amazon has gained 73 percent.
By contrast, shares in Microsoft, the world's biggest software company, are up just 6 percent since bottoming out in June.
Microsoft set to launch Web search engine
Microsoft Corp is set to launch its push into the Web search market currently dominated by Google and Yahoo Inc, Chief Executive Steve Ballmer said on Thursday.
Speaking at an online advertiser conference sponsored by Microsoft's MSN Internet division, Ballmer said the Redmond, Washington-based software giant will begin rolling out its own Internet search technology within 12 months.
Microsoft currently gets its Web search results from Inktomi, and Overture Services supplies its lucrative paid-search advertising. Both of those companies are now owned by MSN rival Yahoo.
Ballmer conceded that Microsoft made a strategic mistake when it chose to use outside companies for Web search rather than making its own investment in the up-and-coming technology.
"That's probably the thing I feel worst about," he said.
Nevertheless, Ballmer vowed that Microsoft would more than make up for lost time. "We're committed to do it very, very, very well. I think you'll see a lot of good competition in the area," he said, vowing that Microsoft would become "absolutely the best" in search.
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