MS exec fights back

SANTA CLARA, California--Microsoft's (MSFT) No. 2 executive today called Sun Microsystems' high-profile lawsuit little more than a publicity stunt, but he also found himself on the defensive before a high-tech gathering rife with anti-Microsoft sentiment.

Steve Ballmer, executive vice

Steve Ballmer

president for sales and marketing, labeled this week's lawsuit filed by Sun Microsystems (SUNW) over Microsoft's use of Java a PR stunt, addressed Microsoft's public image, shared thoughts on Apple Computer's (AAPL) future, and called for government legislation to address concerns about privacy on the Internet.

At a Churchill Club public affairs forum today, Ballmer answered questions from journalists and worked the crowd of several hundred high-tech movers and shakers, deflecting criticism with his disarming manner.

"It's not clear if the [Sun] lawsuit is about legal [issues] or PR," he said. "My assessment is that it's about PR."

Asked whether he expects the suit to be settled, Ballmer responded: "If somebody files a lawsuit instead of talking to you about a problem, it'll probably be a lawsuit for a long time."

Sun claims it tried to negotiate with Microsoft on the Java issue for six months, but Ballmer said, "That's different than I would have perceived the nature of the discussion."

On the subject of Apple's troubles, Ballmer said the company can either innovate its way out of its current troubles or seek to tap the brand equity in its name, adding that Apple's future depends on strategic and investment decisions it makes now.

"I think there's a lot of untapped potential in Apple, but realizing that potential is a very hard job," Ballmer said, adding that he is not personally interested in taking that job. "I think Apple's brand is worth more than its current market capitalization."

On privacy, Ballmer said legislative guidelines would be helpful. "The government needs to set clear rules," he noted.

Ballmer also expressed some surprise over Microsoft's negative reputation in Silicon Valley.

"If I really understood why, we would certainly take some action," he said. "In point of fact, it's not good for us, our partners, potential partners, or customers.

"I think it's unusual that we would have such a negative reputation in the Valley, when most companies in the Valley have thrived with the success of Intel, Microsoft, and other companies," Ballmer added. "This [session today] has been even more eye-opening than I thought.

"We do want to reach out, build relationships, deal with tough issues--because there are tough issues," he said. "How we do that in a way that helps people who are innovating is very important."

Government inquiries and CEO Bill Gates's personal fame and fortune "taint our reputation," he added. But he admitted legitimate concerns about what future markets Microsoft may pursue.

"There are many, many people who aren't quite sure where the boundaries are between what kinds of products we build and what kind they build, and frankly, we aren't either," Ballmer said.

Ballmer also predicted the PC penetration of the home market, which he put today at 41 or 42 percent, would reach 70 to 75 percent within five years, then continue to grow.

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