Microsoft's Sights Set on New Windows, Office VersionsBy Peter Galli
REDMOND, Wash.Microsoft Corp. plans to introduce a number of new versions for Windows and Office, including an enterprise version of the upcoming Windows Vista and a premium version of Office 12, Microsoft CEO Steve Ballmer said at the company's annual financial analyst meeting here on Thursday.
These new SKUs will come in at a higher price point and will help drive growth in that traditional business segment. Along with those new versions will come a new Premium Client Access License for both Windows and Office.
"Our product pipeline over the next six months is strong and will also, over the next year, double that of the past three years. I refer to this as Moore's Law of product innovation," Ballmer quipped.
While some people were questioning whether Windows Vista marks the end of the current software generation from Microsoft, Ballmer said he sees it as "the beginning of a new world of software."
Microsoft will also grow this anchor business, and sees a growth opportunity on the Web server front. In addition, the company barely plays in the HPC market today, which is mostly a Linux play. There are also opportunities in database and e-mail, and Microsoft has gained share against both Oracle and Lotus with its Notes product.
"The world is changing and so is Microsoft," Ballmer said. "While the PC and Windows remain at the center of people's technologies, they are also using new devices and Internet services in a very rapid way and in large numbers. We will tackle these new areas with growing enthusiasm and vigor, as these new world products are growing faster than the PC side of the business.
"A No. 1 priority at Microsoft is to not only keep up with that change, but to drive it," he said. But there are risks and challenges to Microsoft's businesses, from open source, "which is almost behind the company," to the challenges of protecting intellectual property as piracy in emerging markets is very high.
"There are certainly risks to any view of growth, but we are enthusiastic about the opportunities and the investments we are making around them. Innovation is at the center of that," Ballmer said. "Microsoft will deliver software services, expand its innovation portfolio, and grow its anchor business of Windows and Office. The notion of software as a service will bring great growth for Microsoft going forward.
"In some ways this is a competition with open source as well as with IBM. But we do more of the selling to businesses of all sizes today," Ballmer said, adding that for Microsoft to grow, it will invest in terms of operating expenses in the future of its business and will drive that hard to create growth.
"We can also make acquisitions, and we have dialed up the pace of that. We are unlikely to do blockbuster acquisitions and, while we're not closed minded about that, it's less likely. We could spend up to $2 billion a year in acquisitions as we believe in that future and we will invest in that future," Ballmer told the analysts.
True to his usual form of not downplaying Microsoft's successes while papering over its failures, Ballmer said that over the last 10 years "we have won on the desktop, in the business market, and we will win on the Web. There will be a software services transformation, from the client to the server, from the consumer to the enterprise. This is a companywide commitment," he said.
Ballmer also briefly referred to the pilot Microsoft is running with Energizer Holdings where it is running managed services for all of its desktops. "We will span the gamut and do our damndest to be the pioneer and transform our businesses using the transformative power of the Internet," he said.
It has been five years since Ballmer took the reins as Microsoft's CEO, Ballmer said, over which time spending on research and development has risen from $4 billion in 2001 to $4.9 billion in the 2005 fiscal year. Revenue over the same period rose from $25 billion to $40 billion, with operating income up from $12 billion to $19 billion over the five years.
On the execution front, Ballmer said Microsoft is innovating in the right areas and, to prove his point, he showed a slide of total operating income from the top 25 industry IT companies, including Apple, SAP, Sony, Yahoo, Novell, Red Hat and Sun. Microsoft's share of the $62 billion total in 2000 was 18 percent, which grew to 23 percent by 2005.
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