"Software is becoming a service," Ballmer said at the company's financial analyst meeting being held here. "Embracing advertising and subscription-based models and Internet-based delivery across Microsoft's product line is an important part of what we will do."
Ballmer likened Microsoft to a multicore processor, saying the company is trying to add two new cores, entertainment and Internet services, to its existing cores, desktop and server software.
He pointed out that in the 1990s, investors questioned whether the company could even manage those two.
"We were a desktop company," he said. "That's what we were thought of for many years."
In the new areas of entertainment and Internet-based services, Ballmer said Microsoft may not succeed overnight, but he is confident that in the long term the company will profit.
"We're not afraid to (encounter) initial resistance to our ideas," Ballmer said, adding that the company will "put even more bright people" behind those ideas. "Sometimes things take a really long time."
Earlier this month,, told a meeting of the company's business partners that Microsoft is "shifting from being a product-centric company to a services and solutions company."
At Thursday's meeting, the big question on financial analysts' minds was when Vista, the next version of Windows, will ship. Kevin Johnson, co-president of the company's platform unit, said the product will ship when it is ready, but did not offer a firm date.
Johnson said there was no data that suggested the company can't wrap up development in time for a launch to business customers in November and to consumers in January. He didn't, however,. "We will ship Windows Vista when the product is ready. Quality is job No. 1. We go milestone by milestone."
Johnson did not announce pricing for Vista, but said Microsoft will charge roughly similar prices as it does for the comparable Windows XP flavor. "We don't expect significant changes in our pricing strategy," he said. "However, Vista Ultimate is a new (product) and we will sell that at a modest premium to today's offerings."