Ballmer: I'm long on Microsoft and remain a big believer

In his last appearance at a Microsoft analyst gathering, Steve Ballmer offers full-throated endorsement of the company he's led during a time of transition.

Microsoft CEO Steve Ballmer addressing financial analysts. Microsoft
Steve Ballmer strode onto stage, facing an audience of financial analysts who haven't always given him rave reviews and didn't mince words.

"We've built a heck of a good company," said Ballmer, making his last appearance at the annual financial analyst meeting as Microsoft's chief executive on Thursday.

This was part status update on the company's current business and part occasion to set the record straight -- as interpreted by a CEO who has never been bashful about waving the Microsoft flag.

"I won't talk as a CEO. I want to talk as an investor. After I retire I'm just a guy that owns 4 percent of Microsoft, and that's about 65, 70 percent of what I've ever owned. I think I've sold five times in my life and bought once, and I hold on and treasure my Microsoft stock. I know some of you wonder if I treasure it like a crazy founder who can't let go. I treasure it as an investor, too. I'm a believer in Microsoft. I'm a believer in the company and what we can do. I don't normally give you the sales pitch. Not today. Today -- all of you get up. You all own Microsoft stock. Cheer for it. We all want it to go the same direction, up. "

He also offered a status report on the search for the person who will inherit his job.

"I know our board is in the process of going through a process to evaluate candidates from within and outside of Microsoft to be open minded. We made this decision to announce before we had a replacement so we could run the absolute best succession process on the planet. It's kind of a little weird for me to come to work and have that known. And yet when we talked it all through, we said this is absolutely the best way to ensure that the company gets the leader that it deserves for this incredibly talented team. Whether it's one of our people who works here or somebody from outside. We want to be able to do that incredibly -- thoughtfully."

During the subsequent Q&A, Ballmer commented indirectly about the CEO search without showing Microsoft's hand.

"When there's something to say, you'll hear it from the full board. Not from me. I do think that whoever you put in this seat, my seat, will have some things they're stronger on and some things they're less strong on. That is inevitable. And the key will be for the board to evaluate who it thinks can be most effective. And when there's something to report you'll hear it."

Microsoft versus the competition. Microsoft
Throwing up a slide with financial comparisons between Microsoft and Amazon, Google, Apple, Oracle, IBM, and Salesforce, Ballmer said the company had bested its competition based on the last decade's worth of results.

"We have been very successful," he said. "We make a ton of money. We're very proud of that...I'm proud that we've made more money than anybody on this list in the last 10 years."

There wasn't much give during his remarks, though early on he did allude to weakening demand for the Windows operating system as more customers bought tablet computers and smartphones running non-Windows operating systems.

He said Microsoft will need to make sure that "the PC stays the device of choice when people try to be productive in life."

"We know that we've got to do a great job," he said, allowing that while Windows 8.1 "is, I think, a great improvement," Microsoft needs to do a better job branding Windows.

An introspective Ballmer?
"We have to make absolutely clear to people what the value proposition is," he said, holding out a hint that would extend to people accessing Windows on non-Microsoft devices.

Ballmer also offered a blunt assessment of Microsoft's record in the mobile market.

"We have almost no share," he said. "I don't know whether to say that with enthusiasm or kind of uncomfortable tension, but I'm an optimistic guy...Low market share sounds like upside opportunity to me."

That was an unusual departure from the usual rah-rah routine analysts and media have come to expect from Ballmer over his long tenure at Microsoft. And it was only a brief detour as he stepped up the hard sell: that Microsoft remains as potent as ever and is ready to take on the next big industry shift.

"But the other thing I want you to understand just before I move to wrap up is how uniquely poised I think Microsoft is to drive the next big thing," he said. "Now what is the next big thing? Well it's the next big thing. And you say, 'Tell us, Steve, what is the next big thing?' And of course there aren't that many next big things. I mean I know people say our industry changes all the time and blah, blah, blah and the thing is always flipping.

"...Bill Gates and Paul Allen realized that Microsoft and processes went well together. We bet and succeeded on the graphical user interface. We got serious about the Intel architecture...the data center in [1988], and today people say we're an enterprise company after about 15 years of saying we'd never get it right in the enterprise. And almost all the value in our company was created essentially on those three insights. If you look at our competitors, most of the wealth and value were created on one or two key insights. Getting search right first. Understanding the power of small form factors and low-power processors. Really understanding the value of an enterprise relationship. Getting databases figured out before anybody was there."

He said that the companies that best exploit the next major innovation in technology will need to understand natural user interface and hardware.

"Somebody, whether it's wearables or what is going on with screen or input technology, without the right hardware and software skills, without the right machine learning and cloud infrastructure, without the right focus on applications and flat forms, without the right appreciation of consumer and enterprise, I think it's hard to do," he said. "And when you write down the list of companies that have the capabilities that I listed, you'd certainly put Microsoft; you'd probably put Google. We have certain different strengths and after that -- Apple is there in many dimensions. They don't have the investment in cloud infrastructure or machine learning, and it starts to slide from there."

Ballmer told the assembled investors that Microsoft is well positioned for the short and long term, and is capable of shooting the moon, which is perhaps a nod to Google's penchant for moon shots, such as self-driving cars.

Microsoft

"With Microsoft not only do you get what I would say is incredible short-term upside albeit with some managed and focused areas of risk," he said. "But you also get a company that has unique capabilities to shoot the moon, if you will, for the thing that would really create something that might generate $30, $50, $100 billion of new economic value, which at the end of the day when you invest in a company with enterprise value of $200 billion plus, those are the kind of opportunities that have to look interesting and attractive to you.

Google and competition

Ballmer also alluded to the company's continuing battles -- both in the markets and in the legal corridors -- with Google. He also said Microsoft has discussed Google with the "competition authorities."

"I don't think their practices are getting less meritorious of discussion," he said. "We highlighted some bad practices in our advertising and discussions with regulators, the bundling they're doing with You Tube and Google maps. I think they need pressure from competition. I think they need pressure in the marketplace with product, with investment, with scale."

And since there's one less tomorrow for Ballmer as Microsoft's CEO, he saved the best for the last question of the day.

"I regret in early 2000 being so focused around Windows that we couldn't apply research to phones," Ballmer said. The effort to get Windows Vista out basically took attention away from Windows Phone at that time, and Microsoft is still paying for it.

 

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