Ballmer: Adoption and Competition

By eweek  |  Posted 2006-11-30

Ballmer: Adoption and Competition

Microsoft announced the availability of Windows Vista, Office 2007 and Exchange 2007 for businesses on Nov. 30, an event company CEO Steve Ballmer said was the "biggest launch weve ever done."

After delivering a media address at the Nasdaq Stock Exchange in New York to celebrate the product availability, Ballmer sat down with eWEEK Senior Editor Peter Galli and talked about, among others, projections for Vista adoption, the recent deal with Novell and non-deal with Red Hat, as well as the threat Google poses going forward.

This is part two of that interview. To read part one, click here.

A lot of reports are saying that much of Vistas adoption will be through new computer sales rather than through upgrades to computers within the existing ecosystem. You have also said before that Microsofts own products are sometimes the biggest inhibitor to getting those people to upgrade. Are you aggressively targeting the existing ecosystem with marketing dollars and other programs to try and get them to move?

We will upgrade millions of machines, but you have to remember that analysts estimate we sell between 100 million and 200 million copies of Windows a year, and I dont think they expect 100 million upgrades a year.

We are going to do a very good job on upgrades but, yet, the most typical thing that will happen when people want to move to Vista is that it will be more common that they get it with a new machine, either at home or at work, than buy the upgrade.

But that doesnt mean we are not going to be pushing upgrades. While it is true that most people will upgrade when they replace their hardware, some will accelerate their hardware upgrade cycle because they are excited, and I think there is hope that we will also see a pick-up in PC sales.

Take our PCs at home. We got those PCs in 2003. Can I put Vista on them? Sure, I can put Vista on them, and it will work. But the machines are real slow, and we have a lot of digital photographs that we didnt have before, and we are starting with the digital videos and the price looks reasonable.

So getting new hardware will be our preferred upgrade path for most of the computers in our home.

My son is lobbying for a new school PC; they all carry laptops, and it really doesnt have as much memory as he knows he wants to have. But he probably wont get a new PC, hell probably get a software upgrade.

Microsoft has actively been collaborating with companies that previously were pretty much off the radar screen, with interoperability the new buzzword coming out of Redmond. But, at the same time, you have created some controversy and even hurt some of those partners, Novell being an example of that by your statements that the recent patent deal between you was a recognition that there could be some patent issues with open-source software. So what is your intent with deals like this, and what does interoperability really mean to you?

That was not what I actually said, but we live in a world where we [Microsoft] have a very big presence. But there are other products and services in the marketplace, and our customers expect us to make the stuff they do and dont get from us by and large work together.

Sometimes that is a pure technical issue, and sometimes that involves, what we refer to with the open-source community, as an IP bridge between what happens in the open-source and commercial world, neither of which is going to go away and which are going to both try and deliver value.

We have to make sure that not only the parts work together, but that a customer can have confidence they are properly licensed.

We spent many millions of dollars paying for patent licenses with third parties, and we provide that indemnification to our customers.

So we said rather than do something cuckoo, why dont we work together with the Linux distributors—of course we still want to sell Windows instead of Linux—and make sure that sort of patent confidence can exist in the open-source world.

Click here to read more about Ballmer saying Microsoft is open to talks with Linux distributors.

Sure, we may have one view of the current situation and Novell may have another, and everyone else can have another.

In a sense, thats not the important part: The important part is how we create a bridge that lets people move forward from an IP perspective with confidence, with either Windows or Linux.

And we are actually going to be quite constructive, and the whole deal with Novell, both for them and for us, was an attempt to get constructive relative to some issues on our minds and on our customers minds.

I think we are going to achieve that. There is still more work to be done, and it would have been easier for us not to do what we did.

We did what we did to be constructive, relative to customer need and their desire to support both Linux specifically and Windows systems.

Next Page: Linux.


But we both know that the majority of those customers running Windows and Linux are running Red Hat Linux. So you now have this odd situation where one small set of customers running Novells SUSE Linux have patent "confidence," while the larger group of Red Hat Linux users do not. And Red Hat is refusing to do a similar deal with you and appears to be almost defying you to sue them for patent infringement.

We wanted to, and still want to, do a similar deal with Red Hat. I have spent a lot of time with [Red Hat CEO] Matthew Szulik. I flew into Raleigh and spent time there, and we have a good personal relationship. We just havent yet managed to find common ground on the professional front.

But what about those Windows users running Red Hat Linux?

They are undoubtedly talking to Red Hat about this, and some of them will probably move off Red Hat Linux and onto SUSE Linux. We hope to do a similar deal with them to bring patent confidence to those mutual customers. But, if not, some of their customers may choose to move to SUSE.

On the competitive front, Google has a share price of about $500 and is offering Gmail, Gdocs and spreadsheets for free, delivered over the Web, and speculation persists of its plans for an Office-like productivity suite. How seriously do you take them as a competitor in this space, and what is Microsoft trying to do to address and compete with their model and possible threat?

We take all competitors seriously, and certainly any competitor who has proven they can do some things right, and Google certainly has done a good job in advertising in search. So, of course we take them seriously.

With that being said, we have been competing with free productivity software, downloadable over the Internet, basically for 10 or 15 years, with StarOffice that became OpenOffice.

The stuff was essentially free for a long period of time and the truth of the matter is that, just like with Linux, if we offer a better value proposition, people are interested.

So we are going to continue to drive our value proposition hard, whether its with Office 2007 and the business infrastructure we announced today, whether its Office and Office Live for consumers and small businesses.

We have brought prices down on the home and student version of Office 2007, which is just over $100 a year.

Our guys like to joke that you cant do footnotes with the alternatives today, and thats just a small case in point. We are dedicated and will be world class at, you know, sort of ad-funding as a revenue model in addition to subscription and transactions.

What are your favorite features in Vista, Office 2007 and Exchange?

In Vista it is clearly the search capabilities. My favorite feature in Office is the ribbon, but more specifically comments, reviewing and annotating documents of all forms: spreadsheets, Outlook presentations, Word processing documents.

I find it so much easier to both comment and to receive comments than I ever have before. And my second favorite is the calendaring stuff we have done in Outlook.

In Exchange, I think it is the way search works across the Exchange back-end as well as the Outlook front-end.

Check out eWEEK.coms for Microsoft and Windows news, views and analysis.

Rocket Fuel