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Exclusive Interview With Steve Ballmer: Products, Competition, The Road Ahead September 26, 2009

Posted by hruf in Internet & Communities, Mobile & Gadgets.
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Microsoft CEO Steve Ballmer visited Silicon Valley on Thursday for his annual meeting with top venture capitalists to talk about Microsoft product strategy. This was his first visit to Silicon Valley since announcing the search partnership with Yahoo in July.

I had a chance to sit down with him just after that event for a hour-long one-one-one interview. In the first 10+ minutes of the interview Ballmer gives his high level thoughts on major Microsoft products and strategies (including Windows, Windows Mobile, Internet Explorer, Bing, Azure, Mesh, Natal and others), competition, the future of search and search marketing, Microsoft’s “three screens and the cloud” strategy, the recent acquisition of Interactive Supercomputing and, yes, even his thoughts on Twitter.

A few interesting points from the video interview:

– On Microsoft’s “three screens and the cloud” strategy: Ballmer says it’s a “fundamental shift in the computing paradigm.” He added “We used to talk about mainframe computer, mini computer, PC computing, client server computing, graphical computing, the internet; I think this notion of three screens and a cloud, multiple devices that are all important, the cloud not just as a point of delivery of individual applications, but really as a new platform, a scale-out, very manageable platform that has services that span security contacts, I think it’s a big deal.”

He also says that Microsoft obviously won’t be the only player in the new market, and joked that some people “for whatever crazy reasons don’t want to be on windows, might want to be on linux:”

Ballmer: Now in our own case, you know we’re going to try to share technologies, so that we get kind of synergy from a developers perspective. Windows on the phone, you know, Windows PCs controlling TVs, the Windows PC of course itself, Windows Azure in the cloud, so we have a lot of work that’s trying to share technology, but obviously you don’t want exactly the same experience on a little screen and a very big screen and a mid-size screen.

Arrington: Ok, does it work – you talked about Azure in the cloud, but does it work if somebody’s using Amazon web services or something like that. Although we’re talking more about the developer side now, but are you planning to interoperate as much as possible.

Ballmer: As much as possible implies that infinite complexity’s a good thing. Of course, it’s unreasonable to say that you’re going to completely support only your own three screens and only your own cloud. I wish that it were true. We have to make our screens and our cloud first and best, but clearly there are going to be people for example who don’t want to be in the cloud, that want to be on premise, that for whatever crazy reasons don’t want to be on windows, might want to be on linux, for gosh sakes.

Arrington: Yeah, crazy.

Ballmer: For me, I’m allowed to say that. And we need to interoperate, but we do need to be first and best in support and in integration of our own platforms.

– On search innovation: Ballmer says that search innovation, both as a product and a business model, has largely stagnated over the last five years. He also thinks competition will drive more innovation in the future. “I think if you look out the next 10 years we’re going to see more innovation in search,” he said.

– On Why Microsoft won’t build a branded phone, as they have with the Zune and Xbox: Smart phones, like desktop and laptop computers and televisions, are “non-niche devices,” which he defines as 300 million or more units per year. These markets are large enough that there will be multiple manufacturers, and it’s unlikely that any single vertical vendor will dominate the market. It makes sense, he says, for Microsoft to be a vendor of the platform and services for these types of devices. So, don’t expect a Microsoft branded phone.

I’ll call anything that’s north of 300 million a year non-niche. PC’s are not niche devices. Part of the reason I think they’re non-niche devices is, multiple people can manufacture them, they all interoperate, they work together, etc. TVs are not niche. You know, there’s more than, well over 300 million of those sold a year. They interoperate in that case mostly based on standards, but with some innovation. Phones are not niche. The categories where, I think, a single player can control a large percentage of the volume are the smaller categories. What does Apple sell every year of iPods: 30 million, order of magnitude, something like that. What is the whole video game market is maybe 30 or 40 million in units a year. But when you get these categories that are 300 million, 500 million, a billion, a billion-five a year, the truth of the matter is you’re gonna want multiple points of manufacture, with a lot of innovation around it whether its supply chain, for geographic diversity, and our basic play with our software is to try and be super high volume. So I think you can have an Apple in the phone business, or a RIM, and they can do very well, but when 1.3 billion phones a year are all smart, the software that’s gonna be most popular in those phones is gonna be software that’s sold by somebody who doesn’t make their own phone. And, we don’t want to cross the chasm in the short run and lose the war in the long run and that’s why we think the software play is the right play for us for high volume, even though some of the guys in the market today with vertically oriented solutions may do just fine.

– On Microsoft’s acquisition strategy: Microsoft acquired 15 companies in FY2009. Ballmer says to expect roughly the same level of activity in the future. “I’m guessing we’re gonna want to buy about 15 companies again next year,” he says. He says most of those will be smaller transactions ranging from $50 million – $400 million. And those companies will have to “really fit well with our technology platforms and distribution,” he added.

– When I half-jokingly asked if Twitter fits well with Microsoft’s technology platforms and distribution, he responded “Twitter would be great, yeah. I mean, not that we’re talking about buying Twitter…” And he then went on to say that he thinks the Twitter guys are “fiercely committed to staying independent.”

For the rest of the interview we took a deep dive into each of these topics, and over the next few days we’ll have a few follow up posts on each area of discussion in detail. There is some absolutely amazing content to come. The full transcript of the video is below.

via Exclusive Interview With Steve Ballmer: Products, Competition, The Road Ahead.



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