Ballmer praises Sinofsky, promises aggressive innovation

SANTA CLARA, Calif. -- It's been a busy couple of months for Microsoft, what with two of the company's more important product launches, not to mention the surprise resignation of its Windows chief just this week. But for CEO Steve Ballmer, it's pretty much business as usual.

In his first public appearance since the resignation of Steven Sinofsky, Ballmer did "the vision thing" for a Silicon Valley audience as he fielded questions from LinkedIn co-founder Reid Hoffman during a discussion about the state of the technology industry at the Churchill Club.

Ballmer got the Sinofsky topic out of the way right from the start of his hour-long chat with Hoffman, referring to his former lieutenant as having made "one of the most amazing contributions anyone's made to any company," adding, "I wish him well."

Some further observations from the world according to Ballmer:

• Partners will build the lion's share of Windows-based products, but Microsoft intends to fill the gaps when it sees the need. "It is absolutely clear that there is an innovation opportunity on the scene between hardware and software and must not go unexploited at all by Microsoft." Ballmer said that if Microsoft spots an opportunity where it can bring innovation to that "hardware/software boundary, we're not going to cede that."
• Windows 8 is off to a spectacular start. "Windows 8 is just better than Windows 7," he said, ticking off a list of improvements in the new operating system. Also, speaking about Windows Phone, Ballmer said that the company sees strategic opportunities in myriad markets, from consumer to enterprise, but didn't get into specific targets.
• Ballmer returned to a theme he's sounded before, saying that Microsoft had re-imagined Windows.
• Ballmer took a couple of easy shots at Apple and Google, calling the Android ecosystem "a little bit wild from an app compatibility perspective, a malware perspective -- it's uncontrolled." Apple, he said, offered a more controlled ecosystem, but one that was "quite high-priced."
• When it comes to Silicon Valley, Ballmer said he thought there actually were several Silicon Valleys -- the infrastructure players, the consumer Internet and application innovators (who he said were congregating around San Francisco), the enterprise players, and "the big companies."
• In the last 10 years, he said, the cloud was the biggest "innovator's dilemma" challenge for Microsoft.
• The tech business is still in the early stages of the cloud, and understanding its transformative effects on the enterprise.
Ballmer dismissed suggestions that the industry was in danger of running up against a wall when it comes to hardware innovation for pocket sized devices. "I think that's just nuts," he said.
• As the least-understood big idea in technology, Ballmer singled out machine learning.
• When it comes to content, there will be markets for people who want very expensive content and very inexpensive content. "Believe me, Halo had a big production budget. And the only way to make money on it is to charge people for it," he said to the audience's amusement. "Having a mix of these things is very important...and there will be role for interesting subscriptions in between [those two].

Ballmer listed three entry points into the tech world: Devices, enterprise services and consumer services. "We came in through devices," Ballmer said, noting 400 million PCs that are expected to ship this year. Google comes from a consumer entry point, SAP and Oracle through the enterprise, and Apple via devices, he said.

"It's not clear anybody can be successful in attacking the problem in all three ways, but you have to play all three. Our devices and enterprise services plays are pretty clear. Our highest-volume consumer service is Skype," Ballmer said. "It's a foundational element. Bing is also foundational and growing well, and we have a lot of work to do. It is going to be partly about making devices better, and some independently blow in the wind against Google." He said Bing has close to 30 percent U.S. market share for search when combined with Yahoo, which licenses Bing for its search.

Asked about key risks to Microsoft's future, Ballmer said that talent and culture are very important, placed in the context of three questions: Are we on the right path? Can we go faster? Where is the new place to go?

"We have to reinvent ourselves every 5 to 10 years and that has to come from leadership," Ballmer said.