Microsoft's Week Involved Ballmer Mea Culpa, Google Dump

Microsoft's week centered largely on CEO Steve Ballmer's comments during the D8 conference, where he admitted that Microsoft had fallen behind in smartphones but that the company would continue to be a presence in multiple other segments, including tablets and traditional PCs. Microsoft also responded to Google's reported dumping of Windows from its employees' computers, supposedly out of security concerns, by insisting that its flagship operating system was as armor-clad as possible. Meanwhile, market share for Microsoft's Internet Explorer 8 continued to rise, even as users fled previous versions of the browser.

Microsoft's week climaxed with CEO Steve Ballmer taking the stage at the D8 conference June 3 to admit that the company had made certain crucial mistakes in the smartphone space. At the same time, Ballmer also suggested that Microsoft was well-positioned to take advantage of the mobile market, along with the cloud and tablet spaces-a note of public optimism at a time when the company finds itself facing strong competitors such as Google and Apple.

Accompanied by Microsoft Chief Software Architect Ray Ozzie, Ballmer explained to The Wall Street Journal's Walt Mossberg that a generalized movement toward the cloud did not threaten Microsoft, whose power base is consolidated on the traditional desktop.

"There's nothing bad for us in the trend. It's all good," Ballmer insisted, according to a rough blow-by-blow of the conversation posted on the All Things Digital Website. "But it's a transition and as such it's a period of tumult. So we need to be smarter and more vigilant. But not because we're moving from a world that's fundamentally good for us to a world that's not. We're moving [from] a world that's good for us to a world that's potentially even more good for us."

Ballmer also defended the traditional PC, despite the rise of mobile devices such as smartphones and tablets.

"The real question is, -What is a PC?'" Ballmer asked the audience. "Nothing that's done on a PC today will get less relevant tomorrow. I think there will exist a general-purpose device that does anything you want because [some] people don't want multiple devices or can't afford them."

However, Ray Ozzie suggested that the era of multiple device form factors is, indeed, upon us. "I think there's going to be success in a number of form factors-in the pad form factor, in the tablet mode," Ozzie said. "I think there will be appliancelike screens that will be in our living rooms. ... There are certain fundamental differences in productivity in consumption and creation experiences, though. Both must exist on these devices."

But Ballmer also acknowledged that Microsoft had lost substantial ground to Apple, Google and other competitors in the smartphone space.

"We were ahead of the game, and now we find ourselves No. 5 in the market," Ballmer said. "We missed a whole cycle. I've been quite public about the fact that I've made some changes in leadership around our Windows Phone software. We had to do a little cleanup."

Nonetheless, he insisted that the dynamic nature of mobile could translate into an opening for Microsoft; presumably once it launched Windows Phone 7, the total revamp of its smartphone operating-system franchise, later this year.

"We're driving forward in the phone business," Ballmer added. "The market leaders here have shifted twice in the past few years ... so we've got to have real ideas and we've got to execute consistently."