Ballmer: Microsoft needs to do a better job of explaining its plans to customers

By DAVE GUSSOW

© St. Petersburg Times,
published October 15, 2001

[Times photos: Fred Victorin] “The bulk of our effort used to be just for the knowledge worker. Now we’ve got offerings for the knowledge worker, the home user, as well as the small business,” Ballmer says.

ORLANDO -- Steve Ballmer held up his index finger, signaling that he wants Microsoft to be No. 1 in everything it does.

But Microsoft's chief executive told an audience of tech executives at the Gartner Symposium/ITxpo here that drive comes from a motivated staff selling products it believes in, not a desire to be an 800-pound gorilla monopolizing the computing industry.

And, Ballmer added in an interview with the St. Petersburg Times, it bothers him when the company is called the "evil empire."

"I don't think it's right and I think it causes people to make decisions which are not even in their best interest," Ballmer said. "A, we're not evil. B, we're not an empire."

Ballmer's body language tends toward the exuberant and emphatic, and he occasionally slapped a table for emphasis during the interview. It reflects the 45-year-old CEO's role as the supersalesman and tough administrator alongside his less demonstrative boss and longtime friend, company chairman Bill Gates.

This year has been busy for Ballmer and Microsoft: The world's leading software company released Office XP, a new version of its popular Office software suite, in the spring. It recently came out with its new operating system for Pocket PC handheld devices, and next week, Windows XP, the latest version of its flagship operating system, will go on sale.

Next month, it will introduce the Xbox video game console. Upcoming is a tablet PC and a combination phone and personal organizer. And Microsoft is aggressively pushing its .Net (pronounced dot-net) and Hailstorm strategies that will move more computing onto the Internet and, eventually, may provide most of Microsoft's revenues through software subscriptions rather than sales.

Ballmer sat down with the Times last week to discuss the company and its products. The CEO's aides warned that he would not answer questions about the stock market (Ballmer created a tempest two years ago when he said tech stocks were overvalued) and the Sept. 11 terrorist attacks. He also didn't want to talk extensively on negotiations to settle the antitrust case in which the company has been judged a monopoly.

Here are edited excerpts from the interview:

Q: You said Microsoft had to do a better job of reaching out to its partners and its customers in explaining itself. What does it need to explain about itself?

Ballmer: It's not just a question of reaching out. I'd say that we also need to make sure that we are being a good partner to our partners. In the old days, the basic view was if we had enough technical information out there, all would be okay. And we got hit doing a very good job of getting technical information out to our industry about what we're doing.

There's a lot more (that) people want these days. They want a sense of where we're going so that they can, if they want to, dovetail their efforts with ours or compete with us. But they'd actually like to understand where we're going. They'd like help in the marketplace with promotion and kind of mutual support. And you can't partner with everybody, but you've got to have a much broader touch.

We're not a small guy. I don't know that we're as characterized, but there's just even more people that need to touch us. If you take just the state of Florida, we have 22,000 just in Florida alone. There are 22,000 small companies that serve the IT needs of a variety of typically smaller businesses here in Florida, if it's a medium-size account. Every one of those has to be part of our outreach program. We've got to touch them on the Web, we've got to touch them in person. They've got to know enough about, not just our technology today, but where it's going and then they can decide how they want to intersect, complement, add on, or partner somebody else and compete with us, but they need to know the framework. We need to put a lot more energy into that.

Q: Let's talk a little bit about some of the perceptions of Microsoft. It was referred to this morning as the 800-pound gorilla. Put on a different hat. If you were competing against Microsoft instead of leading it, would you be intimidated by its size and its wealth?

Ballmer: I ask myself, do I have a better idea? First thing is, how am I going to compete? What does it mean to compete? Do I have a better idea? If I had a better idea and I was particularly competing with us in an area where we're emerging, if I really thought I had a better idea, I'd probably go after it. I'd want to go after it with some other partners because, you know, it helps to have a little bit of critical mass, but there's plenty of areas.

Let's say I had a product that helped companies put up e-tailing sites. Microsoft has such a product. But if I thought I had a better idea, yeah, I could compete and I'd just go after it. And I could do that as a start-up, I could do that as an existing company, I could do that through a partnership, too. You know, we've plenty of good competitors out there -- big guys -- and then we have plenty of emerging businesses where we have competition as well as cooperation, smaller, start-up companies.

Q: You said you're not a visionary. Why do you think that? And if you're not a visionary, how did you get to the position you're in now?

Ballmer: My job is to try to help put in place and coordinate a team of very talented people who run Microsoft and really to take a look at Microsoft, you sort of need to take a look at the top 10 guys or the top 30 guys or the top 100 people, and really for our company to succeed we need a strong leadership team. We've got people who are very visionary -- guys like Bill Gates, a great engineer and technical talent; guys like Jim Allchin. You've got a range of skills that it takes to make this railroad hum. I am not the guy. Around our place, I'm very low on the pecking order of visionaries, but making sure people have a framework in which they can work together is a very important part of my job. Yeah, I think I can speak with vision because of the environment in which I work. I don't claim to be the originator of those ideas.

Q: Two years ago at this conference, there was a session called "Microsoft at 25: Golden Age or Decline of an Empire?" When you made your appearance, you said you were still trying to figure out where you were going. Talk a little bit about how you see the company's focus now and where you are headed as a company.

Ballmer: I think we're in good shape. We have essentially finished the transition: seeing ourselves as a company whose mission was a computer on every desk in every home to a company whose mission is empowering people through software any time, any place, any device.

Now, that sounds very high level, but there's a lot that goes with it. Windows is still with us, controlling a new platform. It's called .Net. It helps people take advantage of things which are important to the new vision. We used to only focus on the PC; now we focus on PCs, servers, TV-attached devices and handheld devices. That's been a big transition. The bulk of our effort used to be just for the knowledge worker. Now we've got offerings for the knowledge worker, the home user, as well as the small business. And realizing the full value, the full opportunity in that transformation, that'll take us years, but we know what's the nugget. The nugget is our .Net platform.

We know what we're trying to do with Windows, with Office, with servers, with MSN, with our mobile stuff, with our Great Plains stuff (a financial and accounting software company Microsoft bought in 2000). The other question is one of really successfully executing.

Q: Let's talk about Windows XP, since that'll be coming up.

Ballmer: I love Windows XP. It is, by far, the best operating system we've ever put in the market: stability like a rock, like a rock, which for a lot of people, that, in and of itself, is an interesting phenomenon; fresh, nice, new user interface; great support for digital media, photos, video, music, built-in. Most people have a very hard time with their digital cameras or if you actually wanted to, heaven forbid, keep your music on your computer and, you know, distribute it from there, it's very hard. It's not hard anymore with Windows XP.

We've built in an infrastructure for real-time collaboration, which I think is very, very important. It'll make it a lot easier to share a computer among multiple users in the household, at least in the Ballmer household. We have two computers but we got four people who use them, my wife and three boys, and that means everybody uses everybody else's computer and somebody screws up somebody else's desktop or environment. "No, no, Dad, Dad." Now everybody can have their own world and switch quickly. It's really, really, really a great piece of work.

Q: You've already gotten some criticism about the bundling in XP, similar to the complaints that have been lodged against previous versions of Windows, such as the Windows Media Player. Do you think you've done too much bundling?

Ballmer: I don't think we've integrated, to use my word, I don't think we've integrated too much in the capability. That's our job. Our job is to provide consumers with better products, with more integrated capability every year. And so, in some sense, unless somebody tells us we're not supposed to do our job anymore, our job in service to the customer, not in service to anything else, but to the consumer, not the competitor, the consumer. No, I think we're doing the right stuff.

Now, obviously, there's a court case that's ongoing, part of what it will do is discuss the framework under which we can do ongoing integration, but we have been absolutely fighting for our ability to continue to integrate and build new capabilities into our products on behalf of the consumer. And there's a court ruling which says we have to allow our distribution partners, the OEMs (original equipment manufacturers), to disable end-user access to some of the icons.

Okay, fine, that's the framework, I guess, given the market position that the court has determined that we have, and so we move on in that framework. And by the time all's said and done, we'll have a little bit more meat on the bones of the framework. But that framework -- we are allowed to integrate new capabilities in Windows, and in fact the government was quite clear they weren't even going to push the point. They agreed that we're allowed to continue to integrate.

Q: Do you see any prospects for a settlement?

Ballmer: Yes. That's why we're having a gentleman's discussion, and we really wanted to get this thing settled and we're putting our best energy into trying to make that happen.

Q: For years, the term "Microsoft tech support" has been an oxymoron for a lot of computer users -- the blue screen of death, the fatal exception errors. In XP, you have remote assistance and an expanded help function.

Ballmer: I think there's probably four things worth highlighting. No. 1, you just won't see the kinds of failures and system crashes that people see on Windows 98 or Windows Me. Big tech support improvement. No. 2, the remote assistance stuff is fantastic, and we'll start using it in our own support in the future. For right now, it lets users help users. I use it for my mother-in-law now and, you know, my mother-in-law is not a sophisticated computer user, but no sweat. I take control of her computer. I can diagnose, I can fix. No. 3, the help system. It's well worth highlighting the work that's going on in that area. And the No. 4 thing I highlight is our Windows update service, which the consumer can subscribe to from the Windows XP system. Gives them new drivers, keeps them up to date, fixes patches, etc. And we're not done. When we get Windows XP Plus 1, the next release, there will be a set of additional things that we'll do to help improve the consumer support experience.

Q: Let's talk about the activation process, which has been getting heavy criticism. (It requires registering Windows XP by phone or over the Internet and reregistering if many changes are made in a computer's hardware.) Is that the best way you're going to stop piracy? Is it simply, as some suggest, another way for Microsoft to get more information?

Ballmer: We are trying to help (put) . . . at least speed bumps on the road to software piracy. I mean, do users really want to be using stuff that they're not legitimately licensed to use? I don't think so. I think most people want to do the proper thing, which is to buy the licenses they need, and I think the product activation stuff is our way of putting enough of a process in place to help users help themselves, so to speak. It's not just about "gouging the user." We want to make it easy to be legal, and it is important to be legal. We need to have proper enforcement of our intellectual property.

Q: What if you upgrade your computer with too many peripherals and Microsoft has to be notified?

Ballmer: Now you're just talking about a technology issue, just how much change someone can make before the software can't technically recognize it's a new computer. And we did our best, and some people say we can do better, we probably will do better in subsequent releases. But the goal was not to try to make something hard on the user.

Q: A number of consumer groups, such as the Consumer Federation of America and Consumers Union, have accused Microsoft of overcharging for Windows, suggesting that the realistic price for it should be in the $60 to $70 range. Is the price of Windows too high compared with the rest of the PC since hardware costs have fallen?

Ballmer: Windows lives in the competitive marketplace. People have choices. There are other operating systems out there, like Linux. Anybody who could buy the upgrade already has a copy of Windows, so there's competition simply with the version of Windows they have. If Windows XP is priced too high, you know what? You aren't going to upgrade to it, which is black and white. So we live in a competitive world in which the market prices this stuff, lets us price this stuff, in a fair and reasonable way. Do I think $99 for a Windows upgrade is a fair price? Absolutely. It's a fair and good price and, more importantly, it's driven by a set of competitive dynamics and market pressure.

Q: You've also been discussing subscription plans for software. Where is that and how might that affect the consumer market?

Ballmer: Well, it's hard at work. I think the consumers are kind of used to paying subscriptions for a variety of things that are software-like. When someone subscribes to AOL, heaven forbid, or MSN, they pay a subscription, and for that subscription you get a couple things. You get access to the Internet, but you also get access to software, whether it's the e-mail service or instant messaging service or other services. But the subscriptions have been 90 percent, let's say, access, 10 percent software. And I think over time the value of that subscription will be 90 percent software, 10 percent access.

Q: Microsoft has been criticized in the past for having a lax sense of security or having too many holes in its software. What was the impetus for the recent initiative to increase security features available, and how will it work?

Ballmer: We've done a lot on security, both in terms of improving our products, providing patches, security alerts for customers, etc. But it was clear that for all the energy we were putting in, our ability to get a successful result deployed with our customers wasn't where it needed to be. We said, this is it. Too much has gone on. There's too many issues here. We have to step up to do better. We can't say we've done anything on security unless, essentially, our customers are all taking advantage of it. (Unless) our customers aren't getting the kind of ramifications they get, as many did, under Nimda (a computer worm that attacked machines using Windows).

The patches all existed, so that Nimda didn't have to occur. But we're not doing enough to help our customers, actually, sort of, affect a secure environment. So we announced our new security tool kit, a new set of programs for corporations to stay secure in the future, new free technical support for virus-related issues. There's a whole set of things.

Q: A question from the Tampa Bay Computer Society: It wants to know when voice recognition will really work.

Ballmer: It's unfortunately not a black and white question. If you're saying when will the primary form of control of the computer be voice, I'd probably say four more years, five more years. If you're asking when will voice be important in certain scenarios like dictation, etc., then I think it's more like the next year or two. I type slowly. Office XP, actually, I can speak and it can recognize and I can fix mistakes it makes in the recognition of my voice faster than I type.

Q: About the Net dance. (Also known as the "monkey dance," it's a video available online that shows Ballmer running, dancing and clapping around a stage at a company sales meeting. It's available at www.msnbc.com/news/618348.asp.) What did you think about it when you saw yourself on the Net? Do you do that often?

Ballmer: (Laughs.) No. 1, I didn't look at it. No. 2, you want to get people excited and I have a bit of natural energy anyway. A combination of being a little nervous and natural energy and an environment trying to get people pumped up, I get in a situation like that, probably once or twice a year.

Q: And your wife puts up with that?

Ballmer: My wife's never there.

Q: So you don't do that at home?

Ballmer: Well, it's different. When my 9-year-old basketball team's playing and I'm coaching, it's (clapping), I've got to get some enthusiasm for that. It's different, it's very different.

Steve A. Ballmer

Job: Chief executive, Microsoft Corp. Joined company in 1980

Age: 45

Education: Harvard University, degree in applied math and economics

Company revenues: $25.3-billion for 2001 fiscal year ended June 30

Earnings: $11.72-billion, or $1.32 a share

52-week high stock price: $76.15

Friday's stock close: $56.38

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