SAN DONATO MILANESE, Italy (Reuters) - Microsoft Corp is prepared to walk away from its $43.6 billion bid for Yahoo Inc if the two sides can't agree on a price, Chief Executive Steve Ballmer said on Wednesday.

Speaking at a technology conference near Milan, Ballmer said Yahoo's better-than-expected first-quarter results, reported on Tuesday, have not changed Microsoft's view of Yahoo's value.

Microsoft sees Yahoo as a way to compete with arch-rival Google Inc in the Internet search and advertising arena, but it has limits to what it is willing to pay to get a deal done.

"We're prepared to move forward without a merger with Yahoo," Ballmer said. "We think the best way to move forward quickly (and gain critical mass against Google) is to come together with Yahoo."

Rueters [news.yahoo.com]