July 26, 2007 11:42 AM PDT

Ballmer: We are 'hell-bent' on succeeding in ads

Hefty investments in online services and consumer electronics will let Microsoft maintain its historically rapid growth rate, CEO Steve Ballmer told financial analysts on Thursday.

The largest software company is hosting its Financial Analysts Day at its Redmond, Wash., headquarters, where Ballmer described Microsoft's strategy as making several big bets on emerging businesses while drawing more revenue from its mature desktop and server software franchises.

Microsoft is transforming its product development and business models around "software plus services," or software complemented with online services, he said. The company has been criticized by financial analysts for being slow to capitalize on advertising revenue as search giant Google has done.

"We are hell-bent and determined to allocate the talent, the resources, the money, the innovation to absolutely become a powerhouse in the ad business," Ballmer said.

Company founder Bill Gates, who made a presentation before Ballmer, announced that Microsoft is opening a dedicated center to research online advertising and search called the Internet Services Research Center. Headed by Harry Shum, the center's research will focus on search relevance, spam prevention and searching scanned images, such as book pages.

Ballmer said that the company is tackling disruptive technology changes head-on, namely the shift to advertising-supported Web services. Its commitment to online services and consumer devices are necessary because they provide avenues for the company's software.

He defended continued investments in two unprofitable divisions: Online Services and its Entertainment and Devices division. Microsoft's multiyear commitment in server software for corporate data centers diversified the company and created a multibillion dollar revenue engine.

"We're bringing the same kind of vision and tenacity that is in our DNA that drove us into the enterprise business into consumer devices and online services," Ballmer said. "We are going to be an advertising company, and we are going to be a devices company."

Even coming off a strong fiscal 2007 performance, Ballmer said he has "never been more optimistic" about Microsoft's prospects, outlining areas for more revenue. Those included stepped-up sales of Windows through PC manufacturers, Xbox game consoles, Windows Mobile phone software, increased market share of server software, office worker productivity software for small and medium-size businesses and advertising from online services.

Giving some upbeat reports on its mature business, Microsoft said it has sold 60 million copies of Windows Vista since its launch earlier this year and that its SharePoint Web portal business has grown to $800 million. Ballmer said that by the end of its fiscal year 2008, there will be over 1 billion copies of Windows installed on PCs.

Furthering its strategy to court Web developers and designers, Microsoft said that by the end of the week it will release Silverlight 1.0 Release Candidate. Silverlight is a download for displaying media and interactive content in Web pages. It competes with Flash and other plug-ins that add interactivity to Web sites.

During Gates' presentation, he described Microsoft's vision for improving users' computing experience with online services; better user interface technology, such as speech and cameras; and a smooth transition among handheld devices, PCs and other devices.

He said that broadband is allowing Microsoft engineers to reconsider the computing paradigm, where resources typically confined to a single machine, like storage, can be done in the Internet "cloud."

Microsoft is building a platform for that new computing paradigm with Chief Software Architect Ray Ozzie "driving the revolutionary new platform that is service centric," Gates said.

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24 comments

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Ballmer = Stodgy
Ballmer needs to retire and leave someone else in charge at msft. Msft could do way better without him.
Posted by bobby_brady (765 comments )
Reply Link Flag
Ballmer = Psycho
He needs to be sedated and quarantined.
Posted by Sumatra-Bosch (526 comments )
Link Flag
Tough act to follow
Stepping into a role once filled by Bill Gates would be a tough assignment for most CEOs. Wait until Steve Jobs decides to step down. Whoever steps up to take his place will be criticized even more that Ballmer has.

Having said that, MS hit $50 billion in revenue with Steve at the reigns. Not too shabby. That is more than what Apple and Google brought in combined.
Posted by NewsReader_ (280 comments )
Reply Link Flag
Inertia is a wonderful thing
Balmer is right on one thing, Enterprise business is king.
Unfortunately, thanks to Vista many corporations are rethinking
their MS IT approach. Also, note that last year MS active
developer population declined over 10% (moving to Linux and
other OS).

MS will be today's Shell Oil s/w monopoly bust. I give them 20
years.

Also, it will be interesting to see what happens on Apple's side
when Jobs steps down.
Posted by weegg (849 comments )
Link Flag
Circle of life
Both Bill and Steve started it, built it, owned it, gave their employees and shareholder investors a hell of a ride. Ballmer is just an administrator. A bureaucrat. Trying to work a plan, plan some work. No vision. Could work for the government. Its been a rare company that outlasted its founders by a generation. IBM. Shell, Exxon. The bright people at Apple and MS will leave and start something else - the next MS, the next Apple.

This is not necessarily a bad thing. Except for the leached who will have to find another host. The circle continues.
Posted by gggg sssss (2285 comments )
Link Flag
Microsoft's great vision is to copy Google
OK, we are going to copy Google.

One problem Microsoft, how do you google something with Microsoft?
Posted by t8 (3716 comments )
Reply Link Flag
coldmast
"We are hell-bent ..." Ballmer said.

finally!
Posted by ColdMast (186 comments )
Reply Link Flag
Massive Bologna!
The only time M$ can succeed in anything is when they have no real competition! They may have used their huge bank account to subsidize X-Box but that won't work against hard-ball players like Yahoo and Google.

The same old hot air and then after a whipping they quietly back crawl into their hole to feed off of their monopoly.
Posted by Mister C (423 comments )
Reply Link Flag
Heh
You guys are funny...
Posted by KTLA_knew (385 comments )
Link Flag
Feeding Off Their Monopoly...
A monopoly which is being slowly eroded in small chunks, at a rate so slow that no one notices it... until suddenly the tipping point is reached and that slow rate becomes insanely fast.

And then people will start asking why no one noticed it.

Monopoly is temporary. If you can't innovate, you will eventually fall. And Microsoft hasn't done any real innovation in years (if ever).
Posted by DarkPhoenixFF4 (206 comments )
Link Flag
Throwing Money at Problem-Worked REAL well for war on drugs & poverty?
Yea, throwing a crapload of money at something MEANS NOTHING. The Soviets spent a lot of money to prop up their economy but communism was doomed to fail just like MS's path.

Shareholders should revolt. They have spent around $30 BILLION dollars on Xbox, & MSN as an ISP (not to mention watches, cable TV, webTV, talking barney's & the Zune) - their return - about $7 BILLION.

There are probably 100 bankrupt companies who were not a culmulative $23 BILLION under water when all 100 went under.

Why are MS shareholders so willing to let Ballmer not just run a sinking ship but throwing off gold and currency?

How many startups can you fund with $23 BILLION?

Instead, MS spent $4 BILLION losing to AOL ... putting it in fine company with CompuServe & Prodigy.

And the Xbox sales are down 60% this quarter because not only are they failing at an alarming rate and most of the manufacturing is going to replace them, the name Xbox is now synomous with poison - what consumer is going to buy a product with a failure rate of 40% and is not marked that it's the new revised version?

When you are clueless, throwing money at it is simply that - hell bent on throwing money at it.

Ballmer is NOT smart enough - no one likes to believe or admit it but do shareholders let him deliver NEGATIVE results year after year.
Posted by jbelkin (167 comments )
Reply Link Flag
sinking ship?
I see a lot of comments on this in the cnet forums. I am sorry, but I just don't see it. The company has record profits every year...44 Billion in revenue against only 7.6 Billion in cost of goods sold in 2006. I agree that most of that revenue comes from windows and office sales. Maybe those two sources of income will eventually dry up as most ms haters seem to think. but if so, wouldn't the prudent thing to do be to take a look at other emerging technologies? The zune clearly hasn't been a massive success, but clearly Apple's stranglehold on the mp3 market is enticing to other companies, right? Sony loses money on ps sales too. Supposedly, this year will be the turning point for xbox sales...we'll see. However, it is a bit ironic that ms haters criticize the company for expanding the warranty. Sure the real problem is that the hardware is failing at a high rate, but isn't it a good thing that ms is fixing that hardware? isn't it better than if they did nothing? Maybe it isn't a perfect solution, but it is still a step in the right direction, imho.

I think Microsoft, like all companies, is looking for that next technology to sustain their revenue stream. 30 Billion is a huge amount to spend, but it amounts to R&D for ms. And frankly, spent over 4-5 years, it really isn't much compared to their gross profit over that same period. It would be a windfall to a startup, but all things are relative.

I don't know if Ballmer is doing a great job or a poor job in terms of finance. The stock price has been stagnant for many years. However, stock prices are a representation of future value for a company, it would seem that microsoft is meeting the market's expectations...not sinking.
Posted by gp2792 (176 comments )
Link Flag
This shows that Microsoft is lost
This claim of doing whatever it takes to take over a market that MS has little experience and success is a symptom of a larger problem.

Anything comes along and MS feel that they have to crush even when it really isn't competition. Google is far removed from the only profitable divisions of Microsoft and no threat.Microsoft attempted to copy OSX is poor results, why do they think that copying another success will yield different results?

They are in different marketplaces. It is like saying Red Hat is a competitor to Intel.

Web services solve no problems, they simply transfer the problem and add a few new ones in the mix.

This is indicative of the illnesses festering at Microsoft. They have this irrational need to copy anything and everyone that is profitable, and then try to crush them. Someone else got monstrously huge in the computing world and Microsoft can't deal with that rationally.

Microsoft needs to jettison this attitude and the only way for that to happen is to oust Ballmer. I don't think it is a coincidence that Gates announced his retirement when it was clear that Vista was going to be Windows ME v2.

Despite its technical failures, Microsoft does have some truly gifted people that could lead Microsoft out of its technical funk and ethical problems, but with people like Ballmer in high positions, nothing will change.
Posted by The_Decider (3097 comments )
Reply Link Flag
Agreed with your last paragraph
I saw the photosynd demo and it is amazing. The MS table ... meh.

MS is on its long slide now (as long as Balmer stays in). MS stock
flat, Apple stock soaring (now they worth more than HP). Linux is
making more inroads. More companies are now rethinking their MS
IT approach. Where would you put your money in?
Posted by weegg (849 comments )
Link Flag
If you can't dazzel them with brillence...
Baffel them with (Ads)

In other words they failed in softwar, but the may succeed in making us think it its good.
Posted by Ted Miller (305 comments )
Reply Link Flag
LOL!
...MArketing is pretty much all they have left. They hosed-up their products (and promise to do worse), they have yet to make any real profit outside of Windows and Office, and so they're stuck with resorting to their last hope... marketing.

Well, you can polish a turd, I guess, but...

/P
Posted by Penguinisto (5042 comments )
Reply Link Flag
yep
Microsoft has been polishing the xbox gaming studios department for some time now, soon, the will pop a fat nut and have nothing left to polish.
Posted by RompStar_420 (772 comments )
Link Flag
Polishing a turd...
Isn't that how they make the brown Zunes?
Posted by Llib Setag (951 comments )
Link Flag
Ballmer to investors : Be patient...(not)
July 26, 2007 5:50 pm ET
IDG News Service
Microsoft?s Ballmer asks investors for patience
By Nancy Gohring, IDG News Service

Microsoft?s CEO emphasized the importance of attracting talent
and urged shareholders to be patient with the amount of time it
might take the company to pursue its various business models,
speaking during Microsoft?s annual financial analyst meeting on
Thursday.

?Vista doesn?t get done by three people in a garage in three
days,? said Steve Ballmer.

The company is making big bets and some of them will take
time to develop. ?A great misconception in the tech industry is
that most successes happen overnight,? he said.

The two main areas that Microsoft aims to expand into are
advertising and devices. While Microsoft once was largely
defined as a desktop company, it has proved that it can expand
into new sectors, Ballmer said. Around 18 years ago, Microsoft
decided to get into the enterprise market and now is a major
enterprise software company, he said.

?We are hell bent and determined to allocate the talent,
resources, money and innovation to become a powerhouse in
the advertising business,? he said. Microsoft is currently in third
place in online advertising, behind Google and Yahoo, but he
pointed to some Microsoft successes like deals to provide ads
for Facebook and Digg as evidence of potential to improve that
position.

On the devices side, products like Windows Mobile, set-top
boxes, Zune and Xbox will be key to Microsoft?s growth in the
devices market, he said. ?We need to have this business outlet
for our software creativity to continue to grow and innovate and
be relevant,? he said. Microsoft will continue to use a variety of
models in which it will provide a mix of software, hardware and
services, while sometimes relying on partners for some of those
components.

Ballmer emphasized how important it is for Microsoft to
continue to attract leading talent in order to drive these
initiatives forward. In its fiscal year 2007, Microsoft hired almost
13,000 people, including 4,000 in product development areas,
he said. Those hires continue to work in offices around the world
and they come from many different countries. As an example of
the type of people working at just the Redmond, Wash.,
headquarters, 1,000 employees there speak Russian, he said.

Those workers will help bring about new innovations during the
next ten years, a period that Microsoft Chairman Bill Gates said
he expects will be more exciting than that past 30 years of the
company?s history. That?s because the processing power of
computers and the speed of broadband networks is enabling
new types of applications. Computers aren?t self-contained
devices like they once were. Instead, storage and applications
can be handled remotely and users can access them from a
variety of different types of devices, he said. That opens up the
potential for new devices and applications, he said.

Advances in user interface models are key to those future
innovations, he said. ?Typing and using a mouse is only one way
to interact,? he said. Cameras, pen-based systems and now
touch-based user interfaces will lead to new possibilities in the
future, he said.

He demonstrated Microsoft?s Surface computer offering. Of all
the demonstrations that he has done over the decades, this is
one that he?s been most surprised about how people respond,
he said. People very quickly envision complex things that could
very easily be done with the technology, he said.

Microsoft executives are spending Thursday talking to a group
of financial analysts. The annual meeting comes a week after the
company reported that for the first time its yearly earnings
surpassed $50 billion. That milestone comes after the company
recently took a $1 billion charge related to fixing faulty Xbox
game consoles. It also comes at a time when the company faces
the challenges of adapting to a marketplace that is shifting
toward hosted services and away from PC-based software.
Posted by Llib Setag (951 comments )
Reply Link Flag
Gates : Ballmer
Franks : Beans
Bolts : Nuts
Brains : Brawn
Hardy : Laurel
Mickey : Dumbo
Tablet carrying : Chair throwing
Stealthy : Schwetty
Tactical : Tacky
Billionaire : Worthless
Retired : Extinct
Posted by Llib Setag (951 comments )
Reply Link Flag
Nice
Nice
Posted by gggg sssss (2285 comments )
Link Flag
Over development
A dump truck is a wheel barrow built to MS specs and MS wants us to buy ever bigger dump trucks to handle wheel barrow jobs.

Now they want to embed the ability to examine our personal files in our hard drives so they can tailor advertising that appears on our computer screens, as well as require that we be online to do anything at all with our computers.
Posted by Phillep_H (497 comments )
Reply Link Flag
 

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