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Microsoft this afternoon is hinting at a revamped strategy for taking on Google, with or without some sort of Yahoo deal. In a message to Microsoft employees, Microsoft platforms and services chief Kevin Johnson wrote that the company will announce "a major new initiative" from its search team at its advance08 advertising conference in Redmond this week. Among other things, Johnson acknowledged the confusion caused by the company's MSN and Windows Live branding, and said the company will try to fix the problem. Here's an excerpt from his message.

We have many options that support acceleration of our strategy. As announced earlier today, we are also considering new alternatives for a transaction with Yahoo! which do not involve a full acquisition. At this time, we have not made a new bid to acquire all of Yahoo!, but we reserve the right to reconsider that alternative depending on future developments and discussions that may take place with Yahoo!, shareholders of Yahoo! or Microsoft, or with other third parties.

Regardless of the outcome of any new discussions, it is important that we continue to move forward to strengthen our online services business. The fact is that we are not where we want to be in this business yet and we've been in this position longer than we'd all like. To that end, we will be accelerating elements of our core strategy, and breaking ground in new areas. ...

On Wednesday, we will be announcing a major new initiative that our search teams have been driving. We are getting better and better with our core algorithmic search, and at the same time, we are investing to differentiate in vertical experiences and to disrupt the current model. You'll hear more about our plans Wednesday.

advance08 will underscore our commitment to search and online advertising, and you'll continue to see announcements demonstrating our progress in this space. Earlier this week, I spoke to leaders across our online services business about our core strategy, the importance of acceleration and a set of actions we are taking, including:

1. Innovate and disrupt in search -- We will disclose some elements of our plans with this week's release of search and sharpen our focus on user experience and business model innovation. The work we have done over the last 4 years on search has established a solid foundation to build upon.

2. Win targeted distribution -- With this release of search, we are now ready to throttle up broader distribution initiatives.

3. Reinvent portal and deliver new experiences across PC, phone and web -- We are building our new releases of Windows 7, Windows Live wave 3, Windows Mobile 7, Internet Explorer 8, Search and MSN with an eye towards optimizing and unifying experiences and scenarios.

4. Fix our online branding -- Our brands are fragmented and confusing today, and we recognize a need to clarify and align our online branding. We are now driving forward to address this opportunity.

5. Win in display advertising -- We have an advantage in tools, agency assets/relationships and a team laser-focused on capturing the display ad platform opportunity. As we build from a position of strength, we will increase engineering resources to drive even more innovation.

6. Build on our strengths in Europe -- As measured by comScore in March, our online business in Europe is doing well. We have over 3 times the page view volume and nearly 7 times the minutes of usage compared to Yahoo!, and 68% reach to internet users throughout Europe. We will double down on our investments in Europe and expand on this strong position.

7. Expand strategic partnerships – In addition to our organic innovation agenda, we will expand strategic partnerships that increase inventory on our display ad platform, enable new paradigms in search and accelerate growth in key geographies.

8. Pursue small, targeted acquisitions – Looking forward, we will focus on small, targeted acquisitions that support our work in search, complement our value in the ad platform and help us grow scale in key geographies. Recent acquisitions including Rapt and YaData are examples of these types of acquisitions.

The PSD leadership team is actively working on the FY09 budget, including resources and investments to support the actions above. Additional elements of our work will be revealed in the coming weeks, leading to our Financial Analyst Meeting in July where I will share more details on our strategy and business/financial outlook.