UPDATE 1-Microsoft CEO says done talking to Yahoo, for now

(Adds CEO comments on Yahoo, byline)

By Daisuke Wakabayashi

REDMOND, Wash., July 24 (Reuters) - Chief Executive Steve Ballmer on Thursday defended Microsoft Corp's (MSFT.O: Quote, Profile, Research) need to make heavy investments in its Internet businesses but said the company was "done," for now, with pursuing Yahoo Inc (YHOO.O: Quote, Profile, Research).

"There's nothing under discussion between the two of us," Ballmer told investors of how six months of various talks had reached an impasse earlier in July. "Yahoo was always a tactic not a strategy," he said, repeating a frequent line.

The Microsoft leader was speaking at the opening of its annual analyst meeting with Wall Street analysts, an all-day affair at its headquarters in Redmond, Washington.

"We had a set of principles, we talked about them, it didn't work out," he said. "Fine, we're done. We can move on."

But Ballmer suggested he would never say never to reviving talks: "Does that mean nobody will ever talk to anybody again? I suspect the answer is also no," he said.

Ballmer described Yahoo, the world's second-largest provider of Web search and related advertising, as a quick way for Microsoft, a distant No. 3 player, to gain scale in order to compete more effectively with leader Google Inc (GOOG.O: Quote, Profile, Research).

"A lot of our discussion around Yahoo centers as much on this issue as any other issue," he said, adding later: "This is a two-horse race. It is about Microsoft and Google."