Ballmer: Innovation Requires Bold Bets

PALO ALTO, Calif. — Steve Ballmer says he’s wild about Microsoft’s latest passion: innovation.

The CEO of the largest software vendor said his view from the top of the hyper-competitive software marketplace is that

his company thrives on change — the bigger the idea, the better.

“We are going to see more innovation in the next five years than we have seen in the past decade,” Ballmer told students,

faculty, alumni and press at Stanford’s School of Business. “If we are not innovating fast enough, if we are not innovating

big enough, then we miss an opportunity to win.”

Ballmer was invited by faculty to share his insight as part of a speaker series at Stanford. Now one of Microsoft’s most

influential executives, Ballmer attended Stanford’s School of Business but left after his first year to become the bookkeeper

of Microsoft in the early 1980’s.

“Not bad for a company that grew from $23 billion in revenue in 2000 to $40 billion this year with a market capitalization

of $270 billion,” Ballmer said.

Ballmer said Microsoft’s gambit in the innovation game is that the company doesn’t build products that wear out. “I

hesitate to say that it doesn’t break, but our previous products are often our biggest competition,” he quipped. The top exec

also said Microsoft’s other advantage is that the company has no debt and is “not cash-constrained.”

“There are about 1 billion PCs sold and Gartner says that number will double in 2008. What those second billion PCs look

like depends on us,” Ballmer said. “In the 20 years after the release of Windows, we’ve gone from a single use interface to a

foundation of which developers and engineers have built ubiquitous computing.”

But to be a company that leads, Ballmer said, requires that Microsoft continue to try different things, hire the brightest

minds and take chances. For example, Microsoft is set to debut its next-generation Xbox gaming system this month. Ballmer

said the chance to innovate in both the games space and with the growing number of Windows-powered Media Centers is


“We want to make a new digital world that will blow people away,” Ballmer said. “We want you to take those experiences

anywhere you want in any room in your house.”

The CEO also said Microsoft is keenly focused on helping customers think about their computing experience in different

ways. Ballmer reiterated Microsoft’s push for global search regardless if the information is on the PC, in the network, at

work, on the Web, at home, or on TV.

Ballmer said Microsoft’s next-generation of Windows known as Longhorn will have the ability to let customers organize and

visualize their information and allow the guts of the OS to become a database where every little scrap of information is

tagged and organized.

“We have only scratched the surface. People will be mind-blown in five years to see how easier it has become to search in

these different areas,” he said.

Microsoft is also eyeing other opportunities with its SharePoint collaboration software and its Live Communication Server

Project, which lets Microsoft use Voice over IP (VoIP) for more than just cutting long-distance costs. The executive also

said that he was very encouraged by Microsoft’s joint productivity software relationship with SAP ,

especially since the old model of one-size-fits-all in software no longer applies.

Microsoft’s other focus area is in the realm of social software and noted that his MSN team is hard at work combining the

forces of blogs, wiki, IM and other communication tools under one platform.

Ballmer also took the opportunity to jab at Stanford’s other illustrious alumni Sergey Brin and Larry Page who, unlike

Ballmer, finished Stanford grad school and went on to build Google .

“The company that everyone thinks can do no wrong may be a one hit wonder,” Ballmer said.

Microsoft’s CEO also defended his position on allowing innovation to come from other sources such as with the open source


“There are more applications written to Windows than any other operating system,” he said. “If openness is measured by the

number of applications written to it, then Microsoft is the most open system in the world.”

As for his future at Microsoft, Ballmer said he had no intention of slowing down but did say his retirement from the

company would come 12 years from now.

“That is when my youngest will be graduating from high school,” Ballmer said. “I want my boys to see that I enjoy going to

work every day. I don’t have to do what I do, but I have the chance to work with amazing people and be a part of something


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