Ballmer Still Tilting at Linux

At Microsoft's Financial Analyst Meeting, the company's CEO said Microsoft has gained in most markets over the past year-but acknowledged the open-source OS has also picked up points.

REDMOND, Wash.—Microsoft Corp. has grown its market share in almost all of its businesses over the past year, CEO Steve Ballmer said Thursday, while acknowledging that Linux had also grown its market share over that period.

Speaking to financial analysts, media and investors at its Financial Analyst Meeting here, Ballmer addressed the competitive situation facing the company. "The issue is whether software is a business of innovation and value or will it be commoditized? Microsoft has a chance to create great value and is investing in that," he said.

On the issue of the competitive threat from Linux in general and IBM Corp. in particular, Ballmer said the issue was between proprietary and open software. Big Blue now supports WebSphere on Linux, he said, but questioned exactly what that meant.

"Can IBM give you a product roadmap for Linux? Can they deliver new features and fixes to Linux? Does it indemnify the intellectual property in Linux? No, no and no," he said.

Many customers and analysts are also aware that there were issues around Linux, open source, and patent and intellectual-property issues, Ballmer said.

At a Q&A after Ballmers address, Chairman and Chief Software Architect Bill Gates said that Linux is not covered by many of the cross-licensing agreements in the software industry, leaving an opening for new IP disputes. Linux is a form of Unix, not a new operating system environment, Gates said, and Microsoft products achieve a level of innovation beyond Unixs.

"Our innovation reminds people that our operating system is not standing still," Gates said. "Over the next four or five years people will understand more about the intellectual property issues around open source software and Linux and that will address the open ended liability without indemnification for customers. There is going to be some friction around that side of the system."

How has the work, innovation and value that Microsoft offers competed with the open-source community? "Very effectively. Im not happy that Linux grew at the server level at a greater rate, but we grew our share, too," Ballmer said.

But if Microsoft did not innovate and add value, it would find its business in trouble. "We dont have to get into new products and develop new products, we just have to innovate and add value to those we have. This was a barn-burner year; we have hired more senior IT guys—from Sun, IBM, startups and Microsoft returnees—to senior positions over the past year ever before," he said.

The new staff-compensation system is also very important to Microsoft, Ballmer said, since it will better allow it to attract and remunerate staff without having a negative impact on shareholders.

"This was a very good year for us. Fiscal 2003 was a very good year in absolute terms as well as financially. We believe the next few years will also be very dynamic," he said.

If users are the new world, innovative scenarios are the center of that new world. To optimize long-term profits from Microsoft, "we have to win new customers for new scenarios. We think of Microsoft as a high-volume, low-cost company, we have to drive customer satisfaction and grow short-term profitability," Ballmer said.

Among the companys next goals: delivering the version of Windows code-named Longhorn, which will be a "big bang release" for Microsoft; making its platform the best for developers; offering simple, high-value propositions; the best-in-class customer responsiveness; productivity and efficacy; as well as broad enthusiasm and strong messaging.

And what of the enterprise-applications market? Dont wait for a greater Microsoft presence: During the Q&A session, Ballmer said Microsoft has chosen not to focus on that part of the market.