REDMOND, Wash.--In the wake of Microsoft's search deal with Yahoo, online chief Qi Lu outlined why the business is so important to Microsoft and how the company hopes to make headway.
For one thing, he promised the crowd of financial analysts, it can be a huge money maker.
Lu
"When you are at scale it can be a hugely profitable business," Lu said.
The problem is that many of the costs are the same even if you are not operating at scale, which is the place Microsoft has found itself. "Even if you have one user you have to crawl the whole Web."
But the challenge goes further, he said, noting that smaller players, by their nature, have fewer ads to show, meaning those ads are less relevant and the search experience is not only less profitable, but less desirable for users.
The Yahoo deal will help Microsoft in the scale arena. Combined, the two companies would have more than triple the search share that Microsoft has on its own. That said, the combined entity still has less than half of Google's share.
"With larger scales there are several important advantages," Lu said. "There is an almost immediate lift in the quality of user experience."
For example, suggested searches are based on a fairly simple algorithm, but one that gets much better the more queries a search provider sees.
But, even beyond the scale issues, Lu acknowledged that Microsoft also faces a brand challenge. He said that studies show that given a choice between Google's brand with another provider's results and Google's results with another provider's brand--users will choose the Google name, which has become synonymous with search.
"People will prefer the Google brand because of the strength it has," said Lu, who joined Microsoft from Yahoo at the end of last year.
Answering those challenges won't happen overnight, he said.
"We want to be brutally honest about where we are," he said. "It's going to take time."
Microsoft relaunched its search engine as Bing in June and has seen a slight bump in market share, though it remains to be seen whether it can hold onto and build on that initial interest.
"Overall the early feedback from the market has been encouraging," Lu said. "It's a good step, but it's the first step in a long, long journey."
(Credit:
Microsoft)
Microsoft Chief Research & Strategy Officer, Craig Mundie, demonstrates natural user interface technologies during Thursday's Financial Analyst Meeting in Redmond.
(Credit: Robert Sorbo/Microsoft)REDMOND, Wash.--While gesture recognition, such as that seen in Project Natal can help gaming, Microsoft's Craig Mundie showed how it will also transform the office.
In a demo, Microsoft's top research and strategy officer showed how the desktop computer of the future will use an entire office as both display and input device, with voice and gestures augmenting a number of touch screens.
Mundie
"The real question is what killer apps (will mark the) new era and what will be the user interface that people use to get at them," Mundie said, speaking at Microsoft's financial analyst meeting here.
His demo included hologram-like video conferencing, a virtual digital assistant, and multiple surface computers along with voice, touch, and gesture recognition. The desk was a multitouch surface computer, and the office's walls were also a display that could easily switch from being a virtual window and collection of digital photos to being a corkboard of sticky notes to various workspaces.
In one case, Mundie also used Natal-like depth cameras to put himself in the middle of an architectural demo, essentially putting himself inside a building that was not yet built. His talk followed entertainment chief Robbie Bach demoing the gaming potential of Natal, playing a breakout-like game called Riccochet, where one uses their body to push, block, and kick balls at various bricks. Microsoft showed Natal at the E3 trade show earlier this year but hasn't said when the Xbox 360 add-on will be commercially available.
"I'm not playing the Riccochet game, but I am using these technologies," Mundie said. "This is our dream, but it is really not that far away. We see a pretty direct path to make this happen. We have all of the technologies to make this happen in our research labs."
In an interview earlier this month, Bill Gates told CNET News that Microsoft plans to use Natal far beyond the Xbox, including with Windows.
The demo was similar in some respects, but more advanced in others, than the one shown by Office chief Stephen Elop earlier this year.
REDMOND, Wash.--Kicking off a financial analyst meeting on Thursday, Microsoft CEO Steve Ballmer addressed the threats to Microsoft's biggest economic engine, its Windows business.
In addition to the usual issues of piracy and emerging markets and Netbooks, Ballmer acknowledged another challenge: rivals to Windows.
Ballmer
"We've got competition coming from a lot of different places," Ballmer said. He talked about the competition from Linux and Apple and the looming threat from Google's Android and Chrome OS.
"I don't know what Chrome OS is yet," Ballmer said. "Right now I just put it on the list for competitive completeness."
That said, he said he does expect more competition overall for Windows.
"We are going to come under attack," Ballmer said. "Any business that is as big...as Windows deserves competition."
However, he said that he expects Windows 7 to be a strong answer to all of those threats, noting that Microsoft understands that Windows is its flagship product.
"That is absolutely job one around here," he said.
Ballmer said the Windows business should grow roughly in line with the overall PC market in the coming year, although he declined to give a specific forecast.
He also walked through the economics of the Windows business, addressing all of the different segments.
"Many of you think we have problems we don't have in the Windows business," he said.
On the Apple front, Ballmer noted that the year was roughly a wash, with Apple gaining some share in the beginning of the year and Windows regaining some at the end of the year.
However, he noted that the company still had work to do with the analysts, counting up the significant number of Macs in the crowd.
"Don't hide it," he said. "I've already counted them. I've been doing it since we started talking...Feel free. As long as you are using Office go right on ahead."
Ballmer's comments follow a disappointing quarter in which Microsoft's revenue was hundreds of millions of dollars less than many analysts were expecting.
"It was kind of a wild quarter," Ballmer acknowledged. "It was a bad economy and we still had a pretty good year."
The company has said it sees the overall economy and its business to be challenging for the rest of the calendar year.
Earlier in his talk, Ballmer also walked through the economics of the search ad deal with Yahoo, highlighting its benefits to both companies, calling it a win-win.
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Microsoft)
REDMOND, Wash.--Microsoft CFO Christopher Liddell said Thursday that Yahoo is a "declining asset" and that the chances of a full-on acquisition are now "negligible."
Liddell elaborated on CEO Steve Ballmer's earlier comments, saying the company went into its bid "totally genuine" but soured on a deal because it was taking too long. He called Yahoo a "declining asset."
"Time passed and value eroded," he said. "I think the chances of us buying Yahoo...are so small that they are essentially negligible."
A search deal, he said, is still possible, but suggested there too the clock is running. Liddell said that Microsoft would reach a point in its organic growth strategy where even that would stop making sense.
The CFO's least favorite chart: Microsoft's share price.
(Credit: Microsoft)Liddell started off his presentation to financial analysts gathered here with what he said was his least favorite chart: Microsoft's share price.
"It is an incredibly frustrating chart, particularly when you look at the year we just had," Liddell said, pointing to the fact the company grew revenue 18 percent and per-share earnings by 26 percent (excluding legal charges).
The stock, he noted, was broadly in line with major indices. But he said, acknowledging what everyone in the room was clearly thinking, "Clearly that's not a satisfactory level of success."
He said that the stock price was "doubly frustrating" since in the middle of its fiscal year, Microsoft's stock was up 20 percent and performing ahead of the broader trends.
Liddell pointed to continued growth in Microsoft's core business as well as improvements in some of Microsoft's emerging business, but then turned to the big disappointment: its online efforts.
"Clearly in online it's tougher," he said. "It's the one to which, at least at this stage, we've made the least tangible progress."
Microsoft plans to use this robot receptionist to handle the task of reserving interoffice shuttles for its employees.
(Credit: Microsoft)REDMOND, Wash.--Microsoft's receptionist of the future is a robot.
Chief Research and Strategy officer Craig Mundie on Thursday demonstrated a software-based robot that uses a combination of visual and voice recognition as well as speech synthesis to handle basic tasks. Microsoft itself plans to use the software robot to handle shuttle requests in its own buildings, which typically have a pair of receptionists to handle visitors and shuttle requests.
In a video, two Microsoft employees approach the robot, who said (in a rather robotic voice) "Which building do you want to go to?"
After checking that she heard the visitors correctly, and double-checking both workers want to take the same shuttle, the robot declares: "It should be here in four minutes."
"This is what a natural user interface is all about and it won't be just a receptionist," Mundie said. "This is just the tip of the iceberg."
Microsoft has launched a robotics effort, though it is still in its early stages.
The demo came as part of Mundie's presentation at the company's Financial Analysts Meeting here. Mundie is one of two executives (Ray Ozzie is the other) tasked with filling the very large shoes left by Bill Gates, who stepped down from full-time work at Microsoft last month.
Ozzie also presented Thursday, promising the rest of Microsoft's cloud computing strategy will be revealed over the coming fiscal year (which runs through June), although he gave little in the way of new specifics.
"FY 09 will round out the story with some significant announcements," he said. Microsoft is widely expected to expand on its Live Mesh product and discuss its developer strategy at its Professional Developers Conference, which takes place in October in Los Angeles.
REDMOND, Wash.--Microsoft's annual culture clash takes place Thursday as the software maker tries to dazzle and delight with technology and long-term plans, while a crowd of financial analysts presses the company for profits they can take to the bank.
Although Microsoft has continued to return solid profit and earnings, the company has also been spending more than some analysts would like, particularly in its online services area. There were already grumblings over the company's plans on last week's earnings conference call and I'd expect that to be an area of discussion on Thursday, especially in the wake of the departure of Kevin Johnson, the president of the division that houses both Windows and the online business.
I'll be covering the event and blogging frequently, but here's a preview of what to expect.
CEO Steve Ballmer kicks things off, followed by Entertainment and Devices boss Robbie Bach. Expect Microsoft to point to its Entertainment and Devices unit as an area where long-term bets are paying off. The unit turned its first annual profit for the fiscal year that ended in June, amid strong Xbox 360 sales as well as had the beginnings of returns on other investments such as in-car computing and IP television.
After a talk from Chief Operating Officer Kevin Turner, Bill Veghte will take center stage for a discussion of Vista. Expect him to point to evidence that Vista is both selling better and is better accepted than everyone thinks. Also look for detail on how Microsoft plans to use marketing to try and change some minds. I'll be keeping an ear out for a mention of Project Mojave, first reported in this space earlier Thursday.
New business division head Stephen Elop follows to discuss Office, unified communications, and Microsoft's Dynamics line, followed by server and tools boss Bob Muglia.
After lunch it's research head Craig Mundie, followed by oft-talked-about-but-rarely-seen Ray Ozzie, who will talk about how services are important across the company as well as where efforts like Live Mesh fit in.
Chief Financial Officer Chris Liddell wraps things up, followed by a Q and A with Ballmer and Liddell.
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