Microsoft CEO Steve Ballmer said Thursday in the US that its on-again, off-again talks with Yahoo were firmly in the "off-again" phase.

The two sides have talked on and off, he said, first about a purchase and then about a search deal.

"Now we aren't (talking) and that's where things are," Ballmer said, speaking at Microsoft's financial analyst meeting. "There is nothing under discussion between the two of us."

Ballmer's comments followed an earlier discussion of the continued investment (losses) that Microsoft expects as it spends money in its online business.

He repeated his familiar refrain that Microsoft will ultimately be able to rival Google with or without Yahoo.

"At the right price and with the right speed of operation it was a heck of good (option)," he said of Yahoo. "Yahoo for us was always a tactic, not a strategy."

Ballmer did acknowledge Microsoft faced a bit of a Catch-22 with search. With lower query volume, it attracted fewer advertisers and thus got less revenue per query. That hurts its relevance with its ads.

He said there were other options around this Catch-22, but said he wasn't going to go into those yet.

Ballmer did reopen the Yahoo door a crack. "Does that mean nobody will ever talk?...I suspect not."

Search unit head Satya Nadella said that Microsoft is also expanding its Facebook relationship into search. Microsoft will deliver an API (application programming interface) that Facebook can use to integrate both Microsoft's Web search and its paid search results into the social-networking site.

Windows 7 on track
At the same meeting, Windows unit head Bill Veghte said that Windows 7 development remained on track.

The company has officially said it would ship by January 2010, but top executives have also said from time to time that it would be done by the end of 2009.

"The product is tracking very, very well," Veghte said. "We are committed and looking good, relative to our commitment [shipping Windows 7] three years from general availability of Windows Vista."

Microsoft has released few details on the product, largely assuring customers that it would not be making big architectural changes and that it would have a new multitouch user interface.

Most of Veghte's talk, as expected, was on Windows Vista and how Microsoft sees a large perception gap. Veghte showed the Mojave Project, in which users predisposed against Vista reacted favorably when shown Vista when it was presented under the guise of being a new version of Windows, code-named Mojave.

Even outside focus groups, Veghte said that not only were customers buying the operating system, but more are liking it, pointing to recent internal figures showing that 89 percent of users said they were "satisfied" or "very satisfied" with the product. Some 83 percent said they would recommend Vista to a friend or family member, Veghte said.

He also demoed Internet Explorer 8, which he said would be released in final form later this year. An early beta was shown off at the Mix '08 trade show in the spring.