Microsoft CEO Holds Court on Vista, iPhone & Yahoo

Steve Ballmer answers questions from an old nemesis about where Microsoft's future lies and why.

For tech veterans, it must have seemed a little odd to see such virulent former adversaries sitting onstage together, joking about the past and chatting seriously about the future. The occasion was day two of Mix 08, Microsoft's annual conference in Las Vegas for Web developers and designers.

The speakers, Microsoft (NASDAQ:MSFT)CEO Steve Ballmer and former tech evangelist for Apple (NASDAQ:AAPL), Guy Kawasaki, have known each other as fierce competitors for many years. As one of the main marketers for the Macintosh when it was introduced in 1984, Kawasaki and Ballmer, who has been with Microsoft for 28 years, "have history," as they say.

However, both spent a good amount of their hour onstage together laughing, even as Kawasaki asked Ballmer blunt questions about where Microsoft is going. At one point, at the request of an audience member, Ballmer even did an abbreviated version of his now infamous 'Monkey Boy' routine – dancing around the stage and repeatedly shouting, "Web development!"

In between copious amounts of good natured teasing between the two – at one point Ballmer made a grab for Kawasaki's MacBook AIR notebook and quipped that it had no DVD drive – Ballmer did give some glimpses into his vision for Microsoft's future and challenges ahead.

He admitted that, in building Windows Vista, the company had decided to emphasize security over backwards compatibility with existing applications and device drivers. That caused a lot of users to put off upgrading and cost the company a lot of customer good will.

"[By now], a lot of the applications and drivers have been upgraded," Ballmer said. The company has repeatedly said Vista has been popular with consumers, who have mostly gotten it on new PCs. However, he reiterated earlier statements that the company expects the advent of Vista Service Pack 1 to help kick off major adoptions by big business.

Asked, on the heels of yesterday's beta launch of Internet Explorer 8, whether the company would make a version for the Mac, Ballmer said no.

"At this stage, we think it's smarter for us to be doing new things, instead of bringing another browser to the Mac," he added.

The same may not be said for Microsoft's Silverlight cross-browser, cross-platform media streaming technology, the other big hit at the conference. The company already has a version for Mac OS X, but what about Apple's iPhone?

"Silverlight is interesting … we want to see Silverlight everywhere."

Indeed, on Tuesday, Nokia, the world's largest cell phone manufacturer – announced it will support Silverlight on its S60 smartphones as well as on other mobile device lines. The company also has a version for Windows Mobile devices.

While Ballmer hinted that an iPhone port might be in the works, he did throw a little sand on the fire when he noted Apple's 30 percent tariff on applications that will be written for the iPhone using the iPhone Software Developers Kit, which was announced today by Apple CEO Steve Jobs. "It's a good business if you can do it [but] I'm not sure they can do it," he added.

As for Apple's announcement today that it has licensed Microsoft Exchange Server's ActiveSync technology to tie corporate e-mail into the iPhone: "We'll be glad to see Apple participate and make ActiveSync more powerful."

Ballmer talked about other devices as well. One high on the list of many developers' minds is the company's support for high-definition video, and the recent demise of HD DVD. "At the end of the day, obviously we're going to support Blu-ray in the appropriate markets," he said.

Although he did not specifically mention the company's Xbox 360 gaming consoles, Microsoft recently said it is discontinuing its HD DVD add-on drive for the Xbox. Rumors have also been circulating recently that Microsoft is in talks with Sony for a Blu-ray drive for the game console.

Search is the killer app

Of course, Ballmer couldn't get through a Q&A without being repeatedly asked about Microsoft's hostile bid for search firm Yahoo. He declined to talk about the deal itself but again gave a rationale for why the company is making the offer.

"Search is the 'killer app' for online advertising …. We have to have a strong position in online search and online ads if we're going to be a serious player [in that market]," he added. "We're just the 'little engine that could'."

He was also asked about what may be the impact of the pending retirement of Bill Gates, who will leave full-time duties at Microsoft at the end of June in order to work full-time at his charity, The Bill and Melinda Gates Foundation.

"The company has evolved in many ways that I don't think are appreciated," Ballmer said, noting Gates went out of his way to hire the smartest people he could find. "Most of the innovation doesn't come from Bill."

He also noted Gates said he plans to do some part-time work for the company. "We don't know exactly what 'part-time' means."

One thing that Ballmer flatly refused to discuss were questions regarding stories today that he is one of the investors trying to keep the Supersonics basketball team in Seattle by buying out the current owners, who have said that, without a new $300 million stadium, the team will go to Oklahoma City.

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