Gates, Ballmer tout corporate strategy

Microsoft (MSFT) executives Bill Gates and Steve Ballmer came armed to their annual meeting with financial analysts--in one hand they held the "digital nervous system" hammer, and the "Web lifestyle" in the other.

But it has yet to be seen if their buzzwords

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Gates delivered the "Web lifestyle" pitch. Speaking about the company's interactive media group--the umbrella division for its content and online services, downplayed concerns that Microsoft is evolving into a content-driven company.

"Our center of gravity is to be a software company, but we?re willing to mix some content in," he said.

Meanwhile, Ballmer pointed to Microsoft's near-term growth centered on its enterprise system business, where it serves up its BackOffice software, including the NT Workstation and Server operating systems.

Ballmer explained how the company wants its entire line of high-end server, operating system, and application products to become the "digital nervous system" of large and small businesses.

And he announced the formation of a new support group--the application developer customer unit, which will have over 600 people worldwide.

"We need to reach out to developers to build around BackOffice, and establish it as the enterprise platform," Ballmer said.

Ballmer identified strategies for taking on the major competition, known informally around Redmond by the acronym N.O.I.S.E.: Netscape, Oracle, IBM, Sun, and everyone else.

"There's no competition we find ourselves in today where we not only feel challenged but are poised to make progress," said Ballmer. "We have the product line in each and every case to turn on the competitive pressure."

Ballmer said the company has four major competitive goals in the coming year:

Increase its Internet Explorer market share to 70 to 80 percent of the browser market.

Defend its position against the network computer, which could cannibalize PC growth.

Defend itself against Java, which Ballmer called "Sun?s middleware OS."

Build developer interest in DCOM, Microsoft?s component architecture.

One analyst had this to say about Microsoft's focus on the enterprise market:

"They'll get much more money per unit selling NT Server and all that goes with it than they will selling traditional desktops," said Jean Bozman, research manager with International Data Corporation.

And speaking of desktops, Gates outlined some of the future direction of its Windows software.

Windows will eventually fall into a yearly upgrade cycle, with major upgrades coming every two years, Gates said.

He also noted that "service packs" that users can download from the Internet every quarter loom on the horizon.

The company also wants to add natural language recognition at the operating system level as a "substantial portion of code," instead of adding it to specific applications, Gates said. Such additions are several years away, but to whet the appetite, Gates led a demonstration of a computer that responded to visual input through a computer.