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Ballmer: Calling on mobile

Microsoft's CEO shares his big plans in mobile software, and why he thinks the iPhone is "quite nice."

SAN FRANCISCO--Will Microsoft one day dominate the mobile software market as it has the PC market for the past two decades?

CEO Steve Ballmer clearly sees big opportunities for the software giant. As millions of consumers acquire cell phones, and as cell phones become more capable, it's a natural extension of Microsoft's core business selling PC operating systems and applications.

But then there's Apple and Google and Symbian and others with big plans for the mobile software market. Ballmer sees Microsoft's unique role as bridging the consumer and business markets to provide a more compelling "experience" for phone buyers.

At this week's CTIA conference here, Ballmer told CNET News.com about some of Microsoft's plans, what he likes about the iPhone, and why he thinks Vista is already a success, no matter what you might have heard.

Q: You mentioned that for many people in many parts of the world, their first computing experience is going to be a phone. That seems like it would have some pretty broad implications for Microsoft. What does that mean for the company?
Ballmer: I think in most parts of the world people will aspire to have a phone and a PC. And yet if you look at the bottom of the emerging middle class in places like China, the 800 millionth richest person in the country, you're going to find somebody who might have, you know, $50 or $100 they'll be able to scrape together for a capital expense. We're going to want to work on experiences that, it may not be a PC but it will be able to dock and become part of the way people think about PC infrastructure. When we have something to announce we'll announce it, but it's a very important concept to us.

I would say Apple has done a nice piece of work in the ability to gesture and have it mean something.

You talked at CTIA about Apple not being an enterprise company and IBM not being a consumer company. Some might say it's hard to do both. Why is it important for Microsoft (to do both)?
Ballmer: I think what most consumers want, what most end users want, actually, is things that do help them bridge the gap. I don't really think most people want to live in a world where there's parallel kind of universes--my universe at home, my universe at work. It's simpler if I can learn one thing. I actually think that's a feature, an advantage. Certainly you see that in the PC. Windows PCs, they're quite popular compared to anything else precisely because they do span the kind of work/home gap.

From CTIA, Ballmer talks about the importance of Windows Mobile and how he sees it evolving.

Is it fair to say you guys are farther ahead on the business piece of that than on the consumer piece?
Ballmer: In the mobile area, there's no doubt. We started first by focusing in on productivity, and in the enterprise space we've moved now to kind of enterprise devices also having a consumer side to them. With the HTC Touch device, you're starting to get something that's more purely a consumer type device. We're putting more and more emphasis on the kind of entertainment-style applications.

You mentioned it's not necessarily a good thing that people are carrying around multiple phones just because one does one thing well and one does something else, such as e-mail. What do you think Microsoft and the industry have to do to improve that situation?
Ballmer: We have to work on software that can support the experiences that are important in both places. We've got to have distribution (and) sales models that let consumers pick somehow what they want. Or, at least have enterprises give them some range of choice, the way people do on PCs, to participate in enterprise infrastructure and yet also be able to store and keep people's personal information. I think that's a key part of it. We may wind up in a world where a number of people carry two devices if they want to, or if their businesses want them to, which is fine also.

Google, Apple and RIM stand out because they're primarily software players, Ballmer says.

Do you see the need for Microsoft to have a more purely consumer-oriented phone?
Ballmer: Would I expect us to have enterprise and consumer phones whose primary characteristic is, in some cases, productivity and in some cases entertainment? Yeah. I'd expect us to have Windows Mobile in devices that have all four of those personalities.

Will you approach the consumer market with something from the Windows Mobile brand, or do you think that's something you might see from the Zune side of the house?
Ballmer: I think you ought to think about Windows Mobile as the direction we're headed in terms of these phones.

Obviously, there's a lot of talk around the iPhone. When you look at the iPhone, what are the things that you say to the team, 'OK, this is an area we need to focus on'?
Ballmer: They've (Apple) done some nice work and they've got their own set of challenges. And we note both of those. Many people think they did a nice job with the gestures UI, you know, hats off to them. That doesn't mean it's perfect. But there is some stuff that they've done that's quite nice.

So multitouch is something you can imagine seeing on mobile devices?
Ballmer: Multitouch is yet another issue. But I think the most important thing...I would say Apple has done a nice piece of work in the ability to gesture and have it mean something.

What about full Web browsing? I mean, that seems to be the one feature of the iPhone that would also benefit business users.
Ballmer: It sure would.

How big of an issue is security on mobile devices as they are getting more powerful?
Ballmer: I think both for people in their personal lives and in their professional lives it's actually pretty important, for different reasons. You know, I don't want my personal data all over the place, I don't want people looking at my bill, I don't want a lot of things on the personal side. On the professional side, of course, all the issues of corporate compliance and security etc. all come into being, so I think security is a big deal both in the personal and professional context.

This week's announcements were around manageability and deployment, seemingly things that really play to the IT crowd that in many cases is not only buying the devices, but saying which devices can come into the network.
Ballmer: Most phones would not be bought today by IT. Most phones today would have a consumer buying aspect to them. As increasingly people want to use these in enterprise processes, IT comes into it.

One of the distinguished engineers on the Windows team briefly talked about this MinWin project, the idea that the Windows core could be much smaller. Do you see a need for a full version of Windows running on smaller devices? Or is the MinWin idea something that could help?
Ballmer: We've got a great platform for mobile phones today in Windows CE and Windows Mobile and we are going to continue to push it hard.

When you look at the mobile space, who do you see as your biggest competitor? A few years ago, I know you would have said Nokia. Where do they compare with, say, Google, Apple?
Ballmer: I think that today we probably say Symbian, not Nokia, but Symbian is a competitor, certainly an important competitor. Then, I think you look at the new cast of characters--RIM, Google--potentially--everybody says they'll be a competitor, but we'll see what that looks like. You know, Google, Apple and RIM would probably shine out because they are primarily software plays in some ways.

Microsoft CEO talks about Vista's critics and the European Union's regulatory rulings.

How important is Live to the Mobile strategy and Mobile to the Live strategy?
Ballmer: The Mobile strategy better work independent of Live, and the Live strategy better work independent of Mobile, and Live and Mobile better be better together. You could say that's a tall order, but that's what we get paid to do.

You guys have seemed to strike partnerships along those lines, bringing competitive Web services on to Windows Mobile, and bringing Live on to competing devices.
Ballmer: We've been through this before in some senses with Windows. Office was important for Windows, and Windows was important for Office, and they had to be better together. But, particularly, Office has to be better than anything else running on Windows and, you know, we took Office to the Mac. So there was a lot of familial love, and yet people have to be able to stand for themselves.

In terms of mobile devices, I mean, most of the attention is around Windows Mobile, but you have launched this Zune effort to go after the music player market. It seems like Apple with the iPod Touch and some of the things they've done since the Zune came out, has delivered more innovation in that 12 months than the Zune team. Is there a concern with that, since Zune was already coming a little bit late to the market?
Ballmer: I probably wouldn't agree with you that they've done more in the last 12 months than we've done in the last 12 months. And I think we'll continue to pick up share. I mean, we launched Zune a year ago. In the first year, at the price points where we compete, we've taken 10 to 15 percent share. We've got new models at other price points. I think we'll continue to take share. I think it's a long-term deal. We could have left it alone and let Apple have free run of the market. We think we've got some innovative ideas and we'll see whether the market agrees with us.

Why is it important to compete in dedicated music player market?
Ballmer: There's really no such thing as a dedicated music player. There's music services that may run on dedicated players. There's music services and an entertainment service. I mean, clearly, one of the keys for the iPhone is that it runs the Apple music services. And I think that will be an important direction.

There's a service pack coming for Vista, but there hasn't been a tremendous amount of buzz around that since you guys said it's basically going to be a collection of patch rollouts. Was that a missed opportunity? Wouldn't you rather see more excitement around Vista?
Ballmer: We have a lot of activity. And certainly, Vista is very popular right now in the marketplace, particularly in the consumer side. And when we actually ship the service pack, I suspect that would be the appropriate time to continue to dial up the level of energy and excitement around that on the business side.

Are you pleased with where Vista is? I mean, a lot of people have criticized it in the last few months saying that instead of building momentum, it seems to be getting less mind share, particularly on the consumer side.
Ballmer: That's certainly not true on the consumer side. I mean, it's ironic. We have a lot of momentum on the consumer side. Yes, there's one or two models you can find someplace in the world of PCs that don't run Windows Vista. But the machines that sell all run Windows Vista. We have a lot of consumer interest and enthusiasm around it. And, as is normal with a new OS release, there are some issues we're going to have to continue to polish and make it more and more appealing.

Microsoft recently announced a final settlement with the EU. What does settling that mean, and why did it take as long as it did?
Ballmer: Well, we didn't settle. We're in compliance. We moved to be in complete compliance with the 2004 decision that the commission took, and that's good. We've been trying to comply, but we are glad we were able to meet the issues the commission laid out in terms of compliance with its 2004 decision.

The other thing we decided to do was not appeal to the European Court of Justice. We've had our most important appellate opportunity. We got a fairly clear signal back from the Court of First Instance. I think we have to recognize we are where we are and we're going to work very constructively with the commission going forward.

Do you think it sets any dangerous precedents for the industry?
Ballmer: I'm not a sort of geopolitical strategist. I'm not going to sort of speculate what it might mean to others. I think I understand what it means to us, and we're moving forward.

One last thing. Does Microsoft have any interest in the enterprise software consolidation that's going on? Oracle said they want to buy BEA Systems. They've had a strategy of pretty much gobbling up lots of companies. Is that an area where you see Microsoft needing to acquire to grow?
Ballmer: I wouldn't see us buying some companies. But, you know, we continue to do acquisitions. Whether we'll do a large acquisition, I'm not so sure. You know, we've seen Business Objects and Hyperion and Siebel and some other things. In every case, we had a look and decided we liked where we were better than where we would have gotten. We're quite happy with our position.

What do you make of Oracle's growth strategy through acquisition?
Ballmer: I'm not an expert. If it works, power to them. It's tough, but sometimes big executions can make good sense. We'll have to see how they execute.