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Microsoft has big growth plans even as economy limps

Microsoft CEO Steve Ballmer touts Win 7 for netbooks, low-cost server OS, new database versions

By , Network World
February 24, 2009 01:50 PM ET

Network World - Microsoft CEO Steve Ballmer told financial analysts Monday that the weak economy and declining PC sales would continue to challenge the company but that Microsoft would focus on growing market share within its seven core businesses.

Ballmer, pulling a page from his infamous "developers, developers, developers" rant, said despite the down economy that Microsoft is telling its employees the focus is on "share, share, share, share."

Ballmer made his remarks at the company’s annual fiscal mid-year update for financial analysts. CFO Chris Liddell, who joined Ballmer at the meeting in New York City, said the revenue side of Microsoft would be difficult going forward and that the company was working hard to cut expenses. "We are looking to manage that side more intensively," he said.

The message was similar to the one Microsoft gave a month ago when it cut 1,400 employees and "reset" it’s business and financial outlook..

Ballmer framed his share message with strategy details for all of Microsoft's "seven big businesses." He said those seven areas are Windows, Windows Mobile, desktop productivity especially Office, server, enterprise software especially SQL Server, search/advertising, and entertainment/TV.

Ballmer gave hints to developing product road maps and timeframes for upcoming software including adding a netbook version of Windows 7; a 2010 release for Office 14; a new server version and a new version of System Center tools when Windows 7 ships; a low-cost, low-functionality server version called Foundations slated to appear in the next year or so; a high-end version of SQL Server called DataCenter; and a version that runs on the cloud OS Windows Azure. He said Windows and Windows Mobile would become closer in many ways.

"There is still a real distinction between what is a phone and what is a PC, yet the amount of technology that can be shared across that border continues to go up," he said.

Ballmer graded all the businesses in terms of profitability calling Windows profitable, Widows Mobile somewhat unprofitable, desktop productivity very profitable, server very profitable, enterprise software very profitable, search/advertising very unprofitable and entertainment/TV profitable.

He then ran down the strategy with each business.

* Windows: Ballmer said the economy would continue to put pressure on PC sales as consumers cut back on "big ticket" items. "It will impact revenue," he said.

He said the slowdown in corporate spending will hurt both PC sales and sever sales, and he added that the No. 1 competitor for Windows was pirated versions of the software.

He said that was a tough battle because the pirates have a "good price and a heck of a product."

But Microsoft is also focusing on Linux and Apple, which Ballmer predicted would "increase share somewhat."

And he predicted that "we will see Google as a competitor in the desktop operating system market more than we ever had before," with Android-based devices including phones and laptops.

Ballmer also noted a continued push into netbooks and said a full Windows 7 version for netbooks would be offered next to Windows XP versions, which are slimmed down so they can run on the device.

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