CNBC News Releases


Jennifer Dauble
Steve Ballmer, Microsoft CEO



Following is the unofficial transcript of a FIRST ON CNBC interview with Microsoft CEO Steve Ballmer. Excerpts of the interview will run throughout CNBC's Business Day programming today, Thursday, October 22nd beginning at 6AM ET.

All references must be sourced to CNBC.


JIM GOLDMAN: Steve Ballmer, the chief executive of Microsoft, it's a very big day, very big week, very big year for Microsoft, no question. The-- the big Windows 7 rollout. Thanks very much for being with us.


JIM GOLDMAN: So-- give me a sense about Windows 7. We've all seen it. Some of us have had the chance to play with it. The reviews are generally very good. Your sense of the upcoming Windows 7 juggernaut. How big a deal is this?

STEVE BALLMER: Well, I think Windows 7 will be one of-- one of the bigger, maybe the biggest product to hit the technology industry this year just because, you know, Windows is used on about a billion computers around the planet. There'll be another 300 million machines that ship this year. And the diversity of PCs that ship with Windows 7, with the added simplicity that Windows 7 brings, I think it's-- a pretty banner year.

JIM GOLDMAN: This has been under development obviously for a very long time. What were the marching orders? When Windows 7 was gettin' ready, I mean, you know, we saw XP and-- and then we dealt with Vista and we'll talk about Vista in a second, but-- when the Vista sort of development ended and that was in the marketplace and you started workin' on Windows 7 what were the marching orders for your team here to make Windows 7 the operating system that Microsoft really wanted in the marketplace?

STEVE BALLMER: A couple-- three things. Number one, we said let's-- let's make sure we have regenerated our team, 'cause-- at the end of Vista, you know, people wanna move, do other things. And we really have a first class team that-- that-- was put in place for Windows 7. And the team said to-- to me and I said to them, "We're gonna try to refine this thing. We're gonna try to support the new hardware, refine what we set out with with Vista and enable some-- some new things in user interface," and the team just did that I think very well.

JIM GOLDMAN: Looking at-- now that we have Windows 7 out there-- what are consumers, what's the enterprise going to notice first. What is the big innovation leap that this brings to the table that Windows hasn't seen in iterations past?

STEVE BALLMER: Well, I mean you're always responding to changes in the hardware and input from customers and your own vision. And I think that things everybody's gonna react to are, "Wow, this is simpler. Wow, this feels snappier. More responsive. I think that's the-- the stuff everybody's gonna respond to."

And then on top of that it's loaded with, you know, kind of the ability to support a range of new hardware. New features. And everybody'll find little gems, features, things that they fall in love with. But speed, responsiveness, simplicity. That was kind of what customers told us they wanted and that's what we focused on givin' 'em.

JIM GOLDMAN: Looking at the adoption curve of what you anticipate for Windows 7, how significant it is going to be for Microsoft? I mean in-- again, in years past, when Microsoft has come out with an operating system, it-- you know, you have owned the market. And there-- we always talk about competition, but it seems like nowadays-- and maybe we say this every few years or so, that the competition is getting stiffer.

That we are moving to the cloud. That we are seeing Apple make inroads in the marketplace. We're seeing Google start to dip its toe into an OS and get involved. We're seeing Linux-based systems I guess out there but certainly not gaining the momentum that people thought that they would, but they're still out there nonetheless. Do you feel more of a competitive threat now or is 95-plus percent market share still good enough and everybody else is an also ran?

STEVE BALLMER: Well, I mean we've had a lot of good competition for a lot of years and we continue. The competitors change, but we've had good competition. And people were pushing and doing various things and-- and we've done a good job, by and large, and we continue to have a very strong position. I think most estimates would say we're about the market shares that-- that you cited.

So-- you know, despite the-- the efforts of others-- people like the diversity. People like the application base that Windows provides. And-- if we do our job well in (CHUCKLES) Windows 7-- we have a-- I think a very-- and I think we have. You know, we have to get in the market and show the range of new hardware and software that will be available. But I'm expecting pretty good adoption.

JIM GOLDMAN: We are seeing a pretty big transitional shift in hardware right now. I mean the whole world is mobile. The whole world seems to be goin' after the cloud. The whole world seems to be looking at aps on the go. Entertainment on the go. Digital this, that, on the go. It all seems that. Does Windows 7 address that in a fairly compelling way so that Microsoft can seize on all of these trends and the moment-- the momentum that we're seeing in hardware?

STEVE BALLMER: I think the trend really is to see, you know, more and more intelligence in the client and more and more intelligence in the cloud. And then to access that, as you say, wherever you are. And when you see the range of small PCs, light PCs, long battery life PCs. In addition to on the other end when you're not on the go and people were tryin' to enjoy digital entertainment, all in one, big screen-- PCs, I think the range of alternatives is phenomenal.

And we are hitting the sweet spot of this notion of-- let's call it the digitization of entertainment. And-- I think we're in the sweet spot of that. Mobility. You aren't gonna find lighter, faster-- PCs on the market than you will running Microsoft Windows.

JIM GOLDMAN: Is too much made of the competition? I mean I guess all of us in the media and analysts on Wall Street are always lookin' for the horse race. You-- you love the David and Goliath story. We're not really talking about David and Goliath though when you're talking about Microsoft versus Google. You know David there.

You're not talking about David and Goliath when it's Microsoft versus Apple. Ain't no David there with $36 billion in cash sittin' in the bank down there in Cupertino. Do we make too much of the competition? And if so, how do you get over that? Because it just seems like that-- that message of Microsoft innovating, Microsoft dominating-- gets lost out there in the noise?

STEVE BALLMER: Well, I don't I know. I think at the end of the day it's all-- you know in a sense that is the-- for investors, who I-- would assume you consider your primary audience, (LAUGHTER) for investors they-- they do wanna know where value's gonna get created and-- and not. And the truth is it'll-- value gets created by innovation widely adopted.

And the innovation part, you look at the products. You evaluate 'em. You can talk about 'em. The widely adopted is the quality of the innovation and whatever the competition brings to the table. And sure, we've got good competition. We're tryin' to give Google a little competition with our Bing search engine. They deserve a little competition.

There tryin' to come into our core turf. And so far they haven't had a lot of success and, you know, we're edgin' up, but slowly in their core turf. But, you know, it doesn't surprise me. You focus in on the competition, I have to focus in on making sure we get the right products in the marketplace. And that we do very well versus the other guys.

JIM GOLDMAN: So is Windows 7 the right product in the marketplace? I mean if you read the reviews everybody keeps talking about this being the most robust, the simplest, the most intuitive-- operating system that Microsoft has come up with that it has closed the gap if you will between what Microsoft has offered and say what Apple has had on the marketplace in years past. Are you confident that this is the right product at the right time for you?

STEVE BALLMER: Oh, I-- look, I think Windows Vista was right the product, not-- without-- not without-

STEVE BALLMER:--some issue.

JIM GOLDMAN: I mean but-

STEVE BALLMER: But also Windows 7's the right product. I mean we-- there's a reason why 96 out of 100 people pick a (CHUCKLES) Windows PC versus a Mac. And I think we've got the right formula. We have a better execution than ever against that formula according to reviewers. And certainly I have pride in the work that we've done. But at the end of the day you can't beat the diversity of applications, the diversity of hardware, the diversity of price points that the Windows PC has to offer. And the-- you know, that's-- that's fundamentally important.

JIM GOLDMAN: Let's talk about a-- little bit about the competition out there because-- we do spend a lot of time talking about this. And Apple does generate an enormous amount of headlines. And you and I have talked about this in the past. Google as well. You mentioned that they are starting to-- encroach upon your turf-- in small steps, as it were, as you try to go after them too.

Give me a sense from your perspective what's happening in the industry right now, because it seems like everybody is partnering. Everybody is working on strategies. Everybody is dealing with this Google threat. Is too much made of this Google threat or is there real, palpable concern that Google sets its sights on a market and goes after it and will become a serious threat?

STEVE BALLMER: Well, I think you have-- sort of-- search and things that are not search. You know, in the area of search it's clear Google has a dominant market share globally. Very strong position. One of the strongest I've ever seen in the tech business, but-- but, you know, we're hopeful that through innovation maybe we can-- we can-- make a bit of a dent in that.

On the other hand, you say what about Google in these other markets and so far Google has really no proven track record of success outside the area of search. Now they're a well financed company and, you know, we'll see what happens. And we certainly take them very seriously. But their-- their real success record is with search where they are dominant. And now they're tryin' to, you know, elbow their way into adjacent markets, distributing their browser with their search and, you know, YouTube and the like.

And, well, you know, we'll see what happens. In our areas of strength we certainly feel like we understand our customers with Windows 7 and our products, we listen very well to those customers. End users as well as hardware vendors and software vendors. We're gonna continue to push down that-- that path and we think we got some really innovative ideas with Bing that we'll use to-- to push the pace of innovation in the search business.

JIM GOLDMAN: Let's talk about Bing-- while we're on the topic of search and Google because-- there-- there seemed to be some good market penetration when you were right out of the gate earlier in the summer of this year. And then you read the market data and there's these incremental increases. Then there was news from Nielsen or Coms Granner (PH), I don't remember which. But somebody recently said that-- there was actually a decline. That maybe Bing had peaked.

Again, we go back to the horse race situation. You told me in May, "Look we'll be very happy with incremental improvements and this is a long-term strategy. Don't watch the month-to-month." And look at what we're all doing. Watching the month-to-month. Frustrate you and your team or is it still head down and we're doin' exactly what we set out to do?

STEVE BALLMER: Head down, we're doing exactly what we set out to do. You know, I'm-- at the end of the day the question you have other ask yourself is will there be innovation over the next several years in search? I think the answer can be yes. Now there needs to be some competition because as, I think we all would probably agree, the user interface and experience for search hasn't changed much in the last four or five years.

And our opportunity's to push the pace. And we pushed it with Bing 1.0. And there'll be a Bing 2.0 and a Bing 3.0 and a Bing 4.0. Bing, Bing, Bing, Bing, Bing. We're gonna keep pushin' the-- the pace of innovation and the-- and the user experience and the business model. And we'll see where we get. We're gonna give it a run but there's no question Google's got a-- you know, quite a dominant position.

JIM GOLDMAN: And how important is Yahoo! In that equation? I mean now that we have a little time behind us since the deal, such that it was-- was struck-- you know, the-- people out there suggest that Microsoft made out like a bandit with this deal. No cash up front. Access to what you needed access to. Yahoo! was kind of on the ropes. What's your sense?

STEVE BALLMER: Well, it's a-- I think it's a win-win deal I think. Folks who-- who say to the contrary just-- aren't getting it. I mean in-- if you say, "Where's Yahoo!?" YahoO! still has a position from an economic perspective in the search business. They get 88 percent of the revenue that they ever got without any of the costs. It sounds like a great way to play search for them.

For us what we get is a scale of search queries in the U.S. which we think will enable us to improve-- the-- both the algorithmic side, as well as the relevance of our advertising. So we think it's a win for us, it's a win for Yahoo! and hopefully-- well, as soon as we get through our regulatory process, you know, we want to-- move forward quickly.

JIM GOLDMAN: Let's talk about-- we'll get to regulatory process. I got some other questions for you on that front. But let's talk about Apple for a second. We talked about Google. You know, there's a lot of focus on Apple and innovation and the company's-- Macs are selling exceptionally well. Still a-- a flew on the elephant's butt, if you will, if you look at what the--

STEVE BALLMER: It's still four percent. I don't know why anybody thinks they're selling incredibly well. They-- I admit they've gone up from-- whatever it is, 2.5 percent to 3.2 percent. And they're doing well.

JIM GOLDMAN: That's a 50 percent increase.

STEVE BALLMER: They're doing well. That's right. They're doing well.

JIM GOLDMAN: So I mean does it-- this has gotta get under your skin. I-- I mean-- here we-- we focus on Mac sales and, you know, we-- we talked about the 2.5 million that they sell a quarter. Their retailing strategy is robust to say the least. I mean go by an Apple store, I'm sure you have. iPhone continues to gain momentum in the marketplace. They're banking an enormous amount of cash. Snow Leopard got great reviews. Do you even care about what happens to Apple?

STEVE BALLMER: Well, sure. We compete with Apple. I mean ap-- Apple's a good competitor. It's a good competitor. One we compete well with. I mean it's amazing people can say, "Apple-- Apple says tell-- sells 10 million PCs." There'll be 300 million Windows PCs sold in the same timeframe. So it is interesting to me that people spend so much time talking about the three percent of the market in that case.

Now it's different in phones and in-- in portable-- entertainment devices. You know, Apple's-- again, a number three player in smart phones. But certainly the most talked about number three player. Nokia, REM (PH), we with our Windows phones, we're kind of neck and neck. Probably just a shade behind Apple on-- on that. And it is interesting.

But-- and it doesn't frustrate me. Apple does-- you know, does interesting work. The market wants to talk about it. I just wanna compete with it well. And-- I wouldn't trade our 300 million new users a year for their 10 million. I just wouldn't do it. I-- I kind of like what we're doin' and the way we're servin' the market.

JIM GOLDMAN: The ad campaigns seem to resonate. That you've-- you've finally hit Apple where it hurts. Let's talk about price. You've made famous the so called Apple tax or the Mac tax. It worked. And it came at a-- at a really good time in the economy. It came at a good time for Microsoft.

Is that still a success? Is that message beginning to resonate? Do you look at that and say, "Finally people are getting it. We have Windows 7. We have the better price. We have the dominant market. And then there's Apple." And finally the consumer is coming around to that? Or is it more of a case where Apple still has the cool factor, we beat 'em on price and people settle for us?

STEVE BALLMER: I-- I don't think so, Jim. I think the consumer really gets it. I mean consumers aren't-- you know, are very smart. In aggregate they buy what they wanna buy. With-- with our ap-- with our advertising or without our advertising, with Apple's advertising, without Apple's advertising. They buy what they wanna buy.

And 300 million of 'em-- a year choose to buy ours because there is choice. There is a variety of price points. There's a variety of form factors. And that doesn't take anything away from Apple. They do-- a nice job I'm sure. For their user base. And, you know, we'll tell the story in our advertising 'cause the imp-- story's important to be told.

But the consumer had this figured out. It didn't matter what-- we said or competition said, the consumer sees right through it. They seem to the quality of the software. They seem to the variety of hardware and applications. And-- and they vote with their feet every day.

JIM GOLDMAN: Let's talk about the mobile idea here because-- we-- we mentioned iPhone. Google obviously seeing some traction now with-- with Android. Signing deals with Verizon and we're expecting now a Dell phone on Android with AT&T sometime next year-- if you believe the hype.

There seems to be an enormous amount of competition on the mobile side. Lots of dynamic innovation in that sector. Are you confident that-- mobile-- the mobile OS at Microsoft is gonna address that when you come out with your-- I mean I know you just came out with 6.5. But when you come out with mobile 7.0, when you deal with, you know, sort of the-- the new innovations that are out there, are you confident that Microsoft is in the right place to take advantage of all of the growth that we're seeing on the wireless side?

STEVE BALLMER: Well, let's have the phone side. You can get wireless PCs--


STEVE BALLMER:--these days, so really let's say on-- on the phone side. On the phone side I think-- you kkw, they're-- it's a-- it's-- the wild wild west, so to speak. It's a wide open opportunity. Nokia's the market leader globally. Not so present here in the U.S. We did a partnership with them to do some things this-- this last summer. You know, Apple, us, Google.

You know, but if you look at the strategy, I like our strategy for Windows phones. Again, we're emphasizing diversity. We're emphasizing choice. That's really important to us. We're working with the broadest set of hardware manufacturers and the broadest set of operators of anybody in the-- in the-- in the marketplace.

You know, some guys-- a couple of our competitors build software, service and phones. We choose to s-- focus in on the software and enable the services and the phones, which I think is the right path for it. I think it's a strategy that'll lead the highest volume, but we've gotta prove it in the marketplace.

And-- we'll see. The next-- this generation that we just launched of Windows phones, more complete than ever before in terms of providing a nice kind of experience right out of the chute from the phone manufacturer. New marketplace-- available on top of Windows phones. And-- and we'll push forward. But it will be competitive. There's no question. A lot of work to do.

JIM GOLDMAN: You look at the handsets that HBC (CLEARS THROAT) and Samsung. I mean these are really nice, slick devices. Again, we focus on iPhone and Blackberry and whatever is runnin' Android nowadays because that makes for interesting, you know, media. But you look at-- at-- sort of the impact that Android is having, does-- does that become more of a threat to you or is it so much of an also ran down there low on the totem pole that you're not worried about it yet. Or is it over the horizon? Give me your sense of-- I don't imagine there's a lot of handwringing about Android up here in Redmond, but maybe there is?

STEVE BALLMER: Well, it's a-- it's another, you know, form of good-- form of competition. We'll see what happens with it. I mean we have been competing in the mobile world against Linux the whole time and Android's just a-- kind of another form of Linux. Right? It's-- it's completely open source, which means you don't have to get compatible systems from different vendors.

It's-- it's not what we're buildin' with-- with Windows Mobile and Windows phones, which is something which is adaptable, extensible and flexible. But at the same time provides kind of a standard level of functionality for developers and end users to count on. But-- but we'll see.

I mean every day, you know, we get to come to work and try to build new products and talk about 'em and sell 'em and promote 'em and-- we've had good success. You know, Android's a-- recent entry. I don't know. Maybe-- maybe we'll see other entries come in and-- based on Linux. I don't know. Chrome. There's the thing called Lemo. There'll be a lot of Linux-based entries. I think our strategy-- has-- has real merits versus those strategies and versus strategies of the guys who are doing everything in one. Hardware, software, service.

JIM GOLDMAN: So back in May when we asked you about the Zune phone the last time-- you told me pretty categorically that there wasn't going to be a Zune phone. So here we are in October, just a few short months later, and if you believe the media-- jeez, the-- the Zune phone is-- is-- is gettin' ready for might. Steve?

STEVE BALLMER: I'm not a very fickle guy. There was no Zune phone. There is no Zune phone. No matter what the media wants to write.

JIM GOLDMAN: That's pretty categorical again. You know, you're nothing if not consistent.

STEVE BALLMER: I-- I try to be.

JIM GOLDMAN: What about XBox mobile?


JIM GOLDMAN: Yeah. Where-- where's this device?

STEVE BALLMER: No-- certainly no-- no announced discussion of anything (LAUGHTER) called XBox Mobile. I mean that-- I don't rule out the possibility of bringing our gaming environment. We've said we're gonna bring our gaming environment to Windows phones. So you will see technology, certainly from the XBox, come into-- the Windows phone environment.

JIM GOLDMAN: Let's talk about Microsoft as a company for a little bit because here's a company that, you know-- you've had a challenging 2009. You've had some excitement. You've had some issues. We're watching this global economy continue to sputter. On a macro basis you travel the world. Give me a sense from your perspective right now where things are at economically. On-- on the global scale are we finally seeing the seeds of recovery from your standpoint or are we still stuck in this morass of, well, gloom?

STEVE BALLMER: I'm not an economist and I-- hesitate to make predictions. I do know that we-- we all built up a (UNINTEL) wave of debt. Now it's essentially being refinanced and some of it's being refinanced through the government. And I know that that has led to a decrease in-- in employment, which is not a very good thing.

Certainly we have-- it feels, at least now, like we have stabilized, which I-- I think is fantastic and credit wherever it's due on that. I think, you know, we-- we oughta say, "It's great. We've stabilized." I'm-- I'm enough of a historian to say that in past times stability didn't always stay. Recovery didn't always come. Hard to predict. So I won't predict.

We have-- redone our cost base to try to be appropriate for the range of economic outcomes that we anticipate. And-- like everybody else we'll see where the economy goes. In the meantime we're gonna focus in on buildin' some great products.

JIM GOLDMAN: So does Windows 7 usher in that massive upgrade cycle that so many people are so hopeful of?

STEVE BALLMER: Well, I think one of the things that-- that people don't really understand very well about our financials is that most of our Windows revenue-- comes with the sale of new computers. So if the question is, "Do I expect, necessarily, to see a surge in new computer buying?" I think that's as much dependent on the economy, frankly, as it is our Windows 7 product.

I think we've built a good product and we'll see what it does to-- to stimulate, but we still are in-- you know, not the-- not the best anyway of economic times. But we've got the-- a great product. And if anything has a chance to-- to stimulate the market a little bit I think it's Windows 7.

JIM GOLDMAN: Well, yeah, but I mean you're meeting with customers now. I mean you must have a sense of what the build out is. I mean what does HP tell you? What does Dell tell you? What does-- what-- what are you even hearing from Intel as far as--

STEVE BALLMER: All of us in the computer industry are talkin' to one another, but the real question is number one, what happens with the consumer over the holiday season, which we can talk about as long as we life. We-- we-- we work really well together. And yet at the end of the day-- you know, what's the economic climate and what the-- what's the consumer gonna do over Christmas. And what's gonna happen with IT budgets for calendar year '10? Those are-- those are the two big questions.

JIM GOLDMAN: And-- and do you have any insight?


JIM GOLDMAN: Just between you and me.

STEVE BALLMER: Just between you and me? I actually don't. I mean I talk to plenty of folks and there's plenty of opinions. I'd say on the business side people are still cautious. They are cautious because it's the prudent thing to do I think for most business people. On the consumer side I read and-- listen-- to the same kind of numbers you do. And we're just gonna have to wait and see what happens this holiday season.

JIM GOLDMAN: Tell me about the latest with the European Union right now. I mean we're-- we're getting hints and fits and starts of news out of this. Is-- is this gettin' squared away? Is this finally done? And then I have a follow up as far as-- where the EU goes next. But let's start with you-- and Microsoft. This has been-- a burr under your saddle for god knows how long.

I-- I imagine there's light at the end of the tunnel here. That this is finally gonna be behind you. Give me a sense of where you're at today and also from your perspective whether this is justified. Whether you're gonna fight. Intel continues to fight. Give me your sense of all of this?

STEVE BALLMER: Well, we-- we are in market tests now. We've made a set of proposals to the European Commission. They-- were enthusia-- they're enthusiastic about the proposals, but under European law the process says now they got out for-- a formal market test. That's I think about a 30 day period.

After which they, you know, can talk to us again or-- or conclude-- I think in general they conclude, because we've done a lot of talking to get to this point. But they're gonna see what the constituents say and-- and it would be my anticipation, because we've already made a lot of changes. We made-- a proposal in July which we had plenty of opportunity to get market feedback and-- and amend before the commission went to market test. I'd be my-- hope that-- within 30 days or so we will be in a position to largely ratify the proposals that we've made. And-- put the-- the matters with the European Commission behind us.

JIM GOLDMAN: How sick and tired of the EC and their process are you? I mean this has been goin' on for so long. I-- I don't know-- I mean you and I have talked over the years about all the anti-trust things and all the issues facing Microsoft. I read an interview that-- that you and I did years ago about Big Johnny in the classroom. And I said, you know, if-- if the teacher keeps comin' back-- and says, "Johnny must be doin' something wrong," I meant at s-- some point you gotta bel that Johnny's doin' somethin' wrong.

And I think your response was along the lines of, "It's not that Johnny did something wrong. It's just that Johnny's much bigger than anybody else. If he falls funny he's gonna hurt somebody so Johnny's gotta be really careful." You've go the EC out there. Basically an activist organization on a competitive level for, some will say, European-based companies tryin' to compete with Microsoft.

Now you've got an Obama administration that's putting teeth in the FTC, the FCC, the SEC. It seems like government is getting very involved in how businesses are run. And, more importantly, how businesses like your compete. Is there a new world order at work here? And are you having to dramatically shift the way you're doing business and adjust? Or is-- it's gonna be business as usual at Microsoft? We'll pay the fines if that's what happens but basically we're movin' ahead with the way we've always done things?

STEVE BALLMER: No, no, no. Nobody-- I mean at least not around here we don't say, "We'll pay the fines and move on." I mean we're-- we work hard to be in compliance with the-- legal framework around the globe. When you have a large market share sometimes the legal framework has to get written after you get the position.

I mean we've been-- we've been-- sort of under investigation, working on writing the legal framework that governs us with the U.S. Department of Justice. That's the consent decree which has been enforced now for a number of years here in the U.S. with the European Commission. So no, it's-- we have been living under this regime-- of regulation-- for a number of years now. And we work hard at it. It's important to us to comply.

So in a sense-- I don't know what it feels like for the rest of the world. I don't feel like there's been a big world change because we've been living-- in this world now for-- for a number of years. And, you know, it-- it comes with success I guess. And-- I wouldn't turn down the success if our market position with-- with some of our products and if this is the consequence then-- then so be it.

JIM GOLDMAN: I-- I just wanted to-- to follow up with that briefly. You know, you've got IBM that's-- in the government's eyesights now. Apple. Intel. I mean it just seems like the list is getting longer and longer and longer and they're going after everybody-



STEVE BALLMER: And their books dealer. Sure.

JIM GOLDMAN: So I mean-- is that a concern? Or is it-- do you just look at that and say, "Well, it's-- still happenin'. More of the same."

STEVE BALLMER: It's been our world, so-- it's been our world and-- government has to do its job just as we need to do our job. I can speculate what I'd like. I can do a lot of things. But I know people are workin' hard tryin' to do their jobs appropriately. We've-- we've run the gamut on that. I think we're almost-- seeing the-- light at the end of the tunnel here in Europe. And-- I think that's just the-- the way of the world.

JIM GOLDMAN: Last question for you. Looking at your position as CEO of this company, you've been doing it a long time. We're a financial network so you have to ask the stock price-- question. And I-- and I've has-- have asked you this before. Stock has been sort of in a very narrow range during your tenure. A better part of a decade now. This is a pretty exciting time for Microsoft. New operating system. Big advances in mobile. Big changes with the cloud. Lots of innovation--


JIM GOLDMAN: Bing. Let's not forget Bing. How could I with you sittin' there tellin' me Bing. Bing, Bing, Bing. DO you get frustrated that Wall Street isn't gettin' their arms around the Microsoft story? And how do ya reassure investors who parked their money in Microsoft stock, which doesn't seem to perform the way your colleagues in the market also perform. Apple, Google, Research in Motion, even Oracle. Do you get frustrated, one? And two, how do you reassure them that this is the place for their money and that the job you, Steve Ballmer, are doing as CEO is the right one? Are you worried about your job?

STEVE BALLMER: I'm not worried about my job. I do worry about shareholder value. Number one, I'm a shareholder. I'm one of-- I'm our second largest shareholder.

JIM GOLDMAN: I was gonna say a pretty big-

STEVE BALLMER: There may be an institution above me, but otherwise I'm right behind Bill Gates, so I think like a shareholder. A long-term shareholder, mind you. But a shareholder. That's number one. Number two, as a shareholder I know the best thing we can do is to grow operating income and generate cash.

We do more of the latter, because we don't have a lot of CapEx the way the oil companies do, than anybody around. And, you know, we've made over $20 billion pre-tax operating income last year. A substantial growth over the period of time. I don't know what it would have been when I took over in 2000. And I'm proud about that. And I point to that to shareholders.

I think somebody-- you know, I can't keep track every day of what's goin' on in China, but (UNINTEL) what's it's goin' on the Chinese stock market, I think only Exxon mobile has a higher market capitalization than we do. And so in some sense is-- you know, growing that, probably a little tougher. I feel some days like we're the ceiling on the market. And if the ceiling goes up everybody goes up with us.

But we're gonna keep driving operating income, cash generation. We're gonna continue to pay dividends and buy back when that looks like an appropriate thing to-- to go do. And we're going to at the same time invest the $9.5 billion we invest in R&D to give this company a growth future. We have grown-- at $9.5 billion. Nobody in the world spends more and R&D than we do. Nobody better get more out of their R&D investment than we do.

And if we do that right we'll be sittin' here in a number of years and operating income will have risen. And-- we'll be-- we'll be talking about the performa-- another strong performance by the company financially. And in the long run that's gonna reflect itself appropriately in the price of the stock.

JIM GOLDMAN: Right. Steve Ballmer is the CEO of Microsoft on the eve of Windows 7 official release, thanks very much for being with us.



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