THE INCREASED competition provided by Microsoft's proposed acquisition of Yahoo will actually benefit Google, a senior Microsoft executive claimed yesterday.

"We think that having a very strong competitor in the marketplace would be good for Google. Today they are a very dominant player in that space," said Kevin Turner, Microsoft's chief operating officer on a visit to Dublin.

At the end of January, Microsoft made an unsolicited $44.6 billion cash and shares bid for the struggling internet company.

However, Yahoo's board rejected the offer, saying that it substantially undervalued the company.

"We believe we have made a very good offer to the Yahoo board and we are certainly awaiting their response," said Mr Turner.

He said that by combining the two companies, Microsoft could double their efforts on research and development of internet technologies which would enable them to close the gap on Google in online advertising.

Currently, the internet search giant dominates the $40 billion (€26 billion) global internet advertising market.

Microsoft would be able to make savings by "reducing the overlap" in areas where it and Yahoo have common services such as a search engine, instant messaging, web mail and portals according to Mr Turner.

"How do we make sure we leverage the synergies across both companies and then double down in the R&D efforts to make sure we can become a world-class digital advertising company?" he asked. Microsoft's pursuit of Yahoo is designed to give it a lead in consumer internet services.

Mr Turner said that the building of a $500 million data centre in west Dublin was to support Microsoft's corporate internet strategies.

Despite last week's imposition of an €899 million fine on Microsoft by the European Commission for non-compliance with anti-trust rulings, Mr Turner described the company's relations with the EU as good.

"We've worked very hard to ensure we are in compliance, both in terms of what got closed out recently and we are moving forward," he said.

In advance of the commission's fine Microsoft had announced "a set of broad-reaching changes" to its business and technology practices, which primarily revolved around freely providing information to competitors about how its key products work.

The commission saw this as being central to enabling fair competition in the software market.

"We have embraced interoperability in a big way," Mr Turner said.

Microsoft will shortly release the first service pack for its Windows Vista operating system, which has been criticised by used due to problems with compatability.

Service packs are a bundle of fixes for issues with software packages and corporate customers generally do not move to a new operating system until after the release of the first service pack.

"Our pipeline looks very healthy for Service Pack 1 deployments of Vista in the commercial business," said Mr Turner.

He said that the reason there were compatability issues was because the Windows platform provides a choice, with thousands of third parties providing hardware and software products that work with it.