Newsmaker: Feeling the heat at Microsoft

For a man who just got fined more than a billion dollars for antitrust violations, Steve Ballmer is feeling plenty of competitive heat.

In an interview, the Microsoft CEO pointed to tough competitors in every part of the business. Longtime foes like Oracle and IBM remain, but Google, Apple, and Linux all loom large.

Against that backdrop, Microsoft is locked in a protracted battle to acquire Yahoo. Ballmer spoke to CNET News.com shortly after the launch of new server software in Los Angeles.

Microsoft announced a broad set of interoperability moves last week. When you guys made the announcement, did you know that the EU was planning to levy further fines against Microsoft?
Ballmer: We knew it was pending, we didn't know it was this week, but we knew it was coming at some point. This is not news today. We are in compliance, they agreed we are in compliance. This is a fine for activities that predate the compliance activities that Ms. Kroes talked about last fall. So this is not new news in terms of compliance. It says there was a past transgression and they assessed a fine for that past transgression.

So are you fairly confident that your EU regulatory hurdles are behind you?
Ballmer: I think as a company with a big market footprint, we will constantly be looked at by regulators in all parts of the world. That's part of what we do, and that's kind of our world.

Do you expect Europe to be the biggest regulatory hurdle if the proposed Yahoo acquisition happens?
Ballmer: Oh, I don't know. I have nothing interesting to say about that. I think regulators will look at that in all appropriate jurisdictions, and I'm sure they'll give us a fair shake in all appropriate jurisdictions.

Bill Gates said about a week or so ago that Microsoft isn't looking to unilaterally up its bid for Yahoo. What's the next step? Is it nominating your own board of directors? Where do you go from here?
Ballmer: In this process, you've never been through one until you've been through one. Everybody prepares you and tells you about all the different stuff that goes on. If there's news, I'm sure you guys will be the first to know.

Are you surprised that it's taken this long?
Ballmer: No. Many acquisitions take this long.

Apple said today that they're going to have some iPhone stuff, including some more enterprise connections. I'm curious, are they partnering with you guys at all to bring Exchange connectivity?
Ballmer: We continue, under our new interoperability principles, to license both the trade secret information and the patent information that anybody needs to interface with either Outlook or Exchange. So Apple--we don't comment specifically about whether they're a licensee, but certainly it would be consistent with our interoperability principles to enable Apple to do that work.

What's the biggest benefit to Microsoft from Windows Server 2008? Is it improved competitive position versus Linux? Better virtualization software? Something else?
Ballmer: Yes (laughter). What is virtualization all about? It's really about management, superior management. We get to bring what we've already done with System Center in high-quality management tools together with great underlying support for Windows Server, virtualization support, interoperable virtualization. So we can run Linux, we can run Windows.

We don't think virtualization is an island--maybe VMware does; at least that's their current strategy. We think it's a big step forward.

I think in a virtualization-slash-management perspective, we take a little different perspective on that. We don't think virtualization is an island--maybe VMware does; at least that's their current strategy. We think it's a big step forward.

In terms of the workloads, if you look and say where in the server market are we weaker, we'd be certainly weaker in Web applications than we are in most other (areas, such as) Web and high-performance computing with IIS-7, with the improvements in Visual Studio, with the hardening we've done in server core that makes it easier to put up our rugged Windows Server. We think we've done a lot of work that's going to help us drive share against Linux, particularly in the Web workload (area).

A lot has been made about the consumer side of Web services, but Microsoft's enterprise business is undergoing a pretty radical transformation as well, with a move to support a mix of Web-based services and on-premise software. On the enterprise side of things, do you see the services world being as good a business, as profitable as the on-premise-only world was?
Ballmer: I think it's better. I mean, if you do it right, it's better. If we do it right, it should be better. My basic thesis, and what I tell our folks--and it's got to be proven in the market--is if we add more value for our customers, it ought to allow us to make at least as much money as we make today, if not more.

We can have service-based offerings that essentially line up with our information worker infrastructure products--Exchange and SharePoint, Office Communications Server--if we have instances that sort of line up to what people do, development and deployment applications, database applications, etc. That is more value. We can help people reduce management costs, deployment costs, operations costs, data center costs...Somehow, if we can help our customers avoid cost and complexity that they have and give them all the value we give them today, there ought to be a trade in there where we get to make a little bit more money and our customers get a lot more value.

How quickly is that transition happening? Are there specific areas where people are really clamoring for a high-services component, and are there some you can point to where it's going to remain on-premise as far as the eye can see?
Ballmer: Well, in the enterprise, I think the stuff that we might expect to see actually move most quickly is probably some aspects of the desktop infrastructure, for lack of a better term. We've announced some customers--I don't know who's public and who's not public, though. But we've announced some customers for our Microsoft online offerings for Exchange, for Office Communications Server, for SharePoint, and I certainly show a lot of demand there. That's probably where the offer is clearest and the demand is highest.

Somebody might say, well, what about CRM? You see some (CRM), but you see it more in pockets. You see it more departmentally. It's not quite the same, enterprise-driven demand that we're seeing for some of the information worker productivity infrastructure.

Any that you see just pure on-premise as far as you can see?
Ballmer: No. No. (Though) some I think will take longer. You know, when will trading applications--proprietary trading applications on Wall Street--run on the Internet cloud? Probably not tomorrow. Might take a little bit longer than some of the other things we're talking about.

More Newsmakers

[onlyauser]

filler...

Nope, this is not news. Most of these issues Microsoft is facing were known current/future issues before Balmer took over. Even given that it is all rehash.

[R. U. Sirius]

Who Cares?

Microsoft is so yesterday.

[bobby_brady]

Ballmer needs to go!

I think MSFT has a lot of talent, their employees are just tied up. I think msft could be a world class leader in software if Ballmer was to go.

[cyberDJ-2038765336053745013836]

No questions about Vista

Vista's dismal failure and the subsequent market share shift to Apple was not addressed.
No questions about X-Box 360 and HD-DVD's demise.

I don't care about Microsoft on the enterprise-side.
They will always be superior.

It's the consumer-side I worry about.

[Sumatra-Bosch]

Steve Go Duh ! Who Cares What This Pinhead Thinks ?

If there every was an imagination-free corporate drone that should count his blessings its ape-boy Ballmer. No real technical skills. No real communication skills. No understanding of how to develop technology or the people who create it. Ozzie must regard Ballmer as a strange embarassing house pet he inheritated.

[Seaspray0]

You'd be surprised

When you become a CEO of a multibillion dollar multinational company, people listen to what you think because you affect the price of the stock, if for no other reason. You know what the stock market is, right?

[boe_d]

Uncle Fester is driving MS into the ground

I've been reasonably happy with MS's products for the past 20 years. Granted Clippy, BOB and Windows ME were pretty miserable. However since Windows ME was a turd, MS just said - OK - no more work on Windows ME - no service pack - we dump this product and give you Windows 2000 instead. Not the same with Ballmer at the helm - his answer is to just deny all the bad press, all the benchmarks and just tell us that Vista is great, ignore what IT professionals, the press and the public tell you - I'm Ballmer I know better than everyone else in the world.

Another little treasure from MS - Exchange 2007 - the programmers who developed it openly admit - they didn't have time to finish the interface - MS's answer - run commands through DOS instead of using a GUI - it's better - yeah - Maybe the next version of Windows will require you to use commands like mem, xcopy, dir and other things that are "better" than using a GUI since MS doesn't think people really like a GUI.

Ballmer is destroying MS and will probably get a several billion dollar severence check when they finally boot him.

[JBSimmons]

Once One Works for Intel....

I don't think it's a Ballmer problem. Worked at Intel with him. He's applying Intel housecleaning to MSFT, which needs it BAD. Intel has "constructive confrontation" plus an annual termination of the lowest performing percentage each year along with fast elevation of good staff to the front faster than normal. MSFT is just a freewheeling enterprise that has lost focus a long time ago.

I did a multi-user, multi-task, multi-CPU project in 1987 at Intel using FOUR 386 CPUs with custom microcode, which wasn't released to the public until many years later, based on our successful multi-user, multi-task, single-CPU model that sold well using our own iRMX O/S. We ran a special SCO Xenix 386 build on it as well as a special BSD Unix build. It was very successful and patented / copyrighted. I still do remember those 80 hour weeks on that project, which only IBM had on their mainframes on JES 3.

Well, here we are 21 years later. 2 weeks ago Gates said, "we need more horsepower stuff from the chip guys". Now Intel is in essence saying, "hey, wait a minute here, we've been waiting for MSFT to write an O/S for this 21 years ago as we had our own iRMX-x86; if MSFT hadn't gone hell bent on GUI and focused FIRST on a multi-CPU kernel in addition, we would have everything now, including the GUI and multi-everything; XP is simply a PARTITIONED single-user, multi-task, single-CPU system - no matter how many cores are on the CPU itself. There is NO code to address multi-CPUs on a single chip. So WHERE is the multi-CPU code? It ain't there in Vista. Not in any consumer version. How about all those IBM and VAX O/S artchitects you hired? They had multi-task, multi-user, AND multi-CPU designs under their belts. Where are they now?"

Ballmer is fully aware of this. He's got to take MSFT to task, yet keep the shareholders happy, prevent mass exodus of needed talent, and has got to get rid of the 1,500 projects MSFT acquired / adapted / developed that MSFT doesn't need. Those 1,500 projects were buy-outs of other companies, talent, and assets initiated by Bill Gates to get 91% of world share market, even if they didn't fit into the MSFT strategy. Gates extracted a 54 Billion dollar profit from America's middle class, which he now gave away not to Americans, but to countries that don't deserve / need it (some of which did 100% of MSFT piracy). Now America has NO middle class anymore. Who started it all? And who started this DMCA/DRM nonsense?

Let's give credit where credit is due. Ballmer is going to houseclean MSFT good. Just give him the time to do it - the Intel way. It's about time it happened. On Feb 28, 2008, Shrink wrapped Vista packages has undergone huge price drops for the first time in MSFT history. It's about time. Gates thought he was going to make new users pay for his $1.4 billion in EU anti-trust fines. That was built in to the Vista price. Ultimate is just $219 now, instead of $299+. (I still won't buy it). Nothing like this has happened in MSFT history for the public. Ballmer is doing the right thing. He isn't done yet. More is coming - sans Bill Gates.

Once one works for Intel and is exposed to this concept of "constructive confrontation", which is an absolute shock to many at first, I have NEVER forgotten what I learned from it and still use it today, even though I'm employed elsewhere. I've been called on the carpet, and once I explain what it is and how it's used and the results it produces, given time, it's spot-on. Intel wouldn't be where it's at today without it.

[t8]

This is about as interesting...

This is about as interesting as the IBM mainframe business.

Microsoft are now out of touch with what the cutting edge is today.

They are really only about preserving legacy products. Meanwhile we are moving onto Web 2.0 and weblications and services via the Web.

Mobiles also outnumber PCs and PCs are starting to look like those big brick cellphones in the 80s.

[Stomfi]

Competition, what competition

Because each eye sees a different target, it seems like Balmer is saying they haven't really got any competition. Probably because they know that with their closed source systems, they can move the playing field as well as the goal posts.

I'd say, that like IBM before them, their biggest competition is coming from a world wide desire for Open Systems, something that can only be achieved with standard communication protocols running on all platforms and architectures using standard data formats.

They've had their chance at world domination, but have been far too narrow minded in limiting their desktop and server OS to the one CPU. The very fact that Linux works on multiple CPU architectures right now and has done so for years, puts MS into a minor player position in this important technological arena.

They had another big chance years ago when Bill Gates realized that peer to peer networking was an important feature of office and in reality any group computing work, but instead of going with the robust industry standard of the day, worked out by his own countrymen at DARPA for the Vietnam war, he had to create a closed system with the less than secure SMB protocol.

I think, like IBM before them, it is going to take a complete replacement of their board before they will realise that going against the needs of the whole world is not going to build their market any further than the 90% in their current space they have now achieved, and the costs of maintaining it at 90% will increase to the point that continual release of new sales products with only incremental improvements will only drive customers to look for a more robust and Open Systems solution, as they did to IBM.

Even their current quarterly profit of $14Billion represents only $14 per customer, hardly enough to justify the production and release of free security patches.

If people see and sense that Balmer is no longer focussed on the desktop in his quest to dominate other markets, this will also drive customers to somewhere they can identify with the sort of personal interest Bill Gates used to give them.

What end users need as CEO is not a salesman but another geek type, even if it's all pretense, otherwise Microsoft will go the way of old big blue.

[Seaspray0]

Get your facts straight

"but have been far too narrow minded in limiting their desktop and server OS to the one CPU."

Microsoft has supported multiple CPU's for many years. Windows NT (released 1992) supported multiple CPU's. Windows 2000 workstation supported 2 cpu's. Windows XP supports 2 cpu's. Windows server has always supported more than one cpu. Windows datacenter server software supports 32 cpu's. When did linux start support for multiple cpu's?

"with the less than secure SMB protocol."

Yes, that's what was used in windows NT. Since windows 2000, they have used kerberos authentication, which is an industry standard. SMB's are only kept for backward compatability with operating systems like linux. Samba uses SMB's to interact with windows.

[JCPayne]

Cool article on what a Yahoo-Ebay would look like.

http://www.evsionlab.com/2007/08/01/speculation-a-yahoo-ebay-merger-makes-sense/