Steve Ballmer, Microsoft CEO
Steve Ballmer, Microsoft CEO



Following is the unofficial transcript of a CNBC interview with Microsoft CEO Steve Ballmer today on CNBC’s “Closing Bell with Maria Bartiromo” at 4:30PM ET.

All references must be sourced to CNBC.

MARIA BARTIROMO, host: Steve, great to have you on the program. Thank you for having us here.

Mr. STEVE BALLMER: Pleasure, Maria. Thank you.

BARTIROMO: So eight million Kinect consoles. Even better than you targeted. What do you think's behind that? Why so successful on this one product?

Mr. BALLMER: Well, the Kinect sensors are really quite amazing. The ability to just kind of sit back and control your TV with your--with your voice, with your body motion, with your hand, it's pretty exciting.

BARTIROMO: That's amazing. Now, there is a perception, as you know, that you've been run over on some of these big consumer trends. Now, to be fair, you actually demoed a tablet here last year at CES. You were among the early ones to actually notice the strength in smartphones. But over the last year, amazing what's happened. You look at the success with Android, the success of iPhone. What happened?

Mr. BALLMER: Well, a lot of work to do. And, I mean, I can go over history, but I kind of like where we are today. There's a big opportunity and a big challenge in front of us. The Windows Phone 7 that we just brought to market 60 to 80 days ago, people are loving them. People who get their hands on them, who actually see them, nine out of 10 are recommending, which is unheard of, phenomenal. So I'm pretty excited about where we can go there, and the range in new PCs and what people are going to do with them, because a lot of times what you really want is the ability to have something on the go, but you really want the full power of the PC if you're a student, you're--or somebody else.

BARTIROMO: What has stopped you from making really bold and sort of aggressive new bets on technology? For example, why not acquire? You've got more than 40 billion on the balance sheet. You want to have a substantial market share in smartphones. Why not just acquire RIM?

Mr. BALLMER: Well, look, let's distinguish between bold technology bets and acquisitions. We've made bold technology bets. We've bet on the Cloud and our Enterprise business, it's going fantastic. We made the bet on Xbox, we made the bet on Kinect. Those things have gone super, super well. So I think we're--we made the bet on... We've come from nowhere. We're growing like a weed in that business. So I feel pretty good about the bets. Now, when does acquisition make sense? That's a complicated subject, probably best not addressed in this interview.

BARTIROMO: Well, you know, when you talk about the installed base, let's say, you're talking about an installed base of 50 million, right, for let's say, you know, gaming. You're talking about four billion phones, mobile phones in the world today. I mean, that's really what investors want to know. So why not acquire? Why not use some of that cash on the balance sheet to acquire Nokia?

Mr. BALLMER: I'll write it down as a list of suggestions from you.

BARTIROMO: All right, let's talk about the generational shift that's really going on in the world today away from PCs and more toward wireless and portable devices. How are you going to get the Microsoft brand to really resonate with the younger consumer out there the way Apple and Google does?

Mr. BALLMER: Well, the most popular young consumer brand in the electronics business is ours, the Xbox. I mean, you could say, OK, we and Apple can go at it. But let's make no mistake about it, for young people today it's the exciting things they're doing, or the things they're doing in the--what we call the entertainment side of their lives. Every kid grows up with Microsoft Office to do their homework, but the exciting part of their life is what they're doing online, is what they're doing with their friends. It's gaming, it's DVD. And Xbox is square in the middle of that. So I like our seat at the table, if you will.

BARTIROMO: But do you need a transformative move to really make sure it's in people's face, that yes, you are in that space in terms of these different consumer trends, in terms of this move away from the PC model and toward wireless?

Mr. BALLMER: Well, let me first disagree with you. There's no move away from the PC. There is an embrace of other new form factors, which I think is fantastic, but people aren't stopping one thing and doing another. They're doing these things more or less additively, which I think is important. Do we have a lot of opportunity and a lot of desire to really drive hard, particularly in the phone? Absolutely. And Windows Phone 7, which we introduced two months ago, that's the shot.

BARTIROMO: Let's talk about Windows 7 and really how important it is to the bottom line. Obviously, your Enterprise business is off the charts. And the analyst community, the investor community knows that you are the leader there. But how are you going to move needle, really? You've got investors watching. Your stock hasn't moved in a decade. How are you going to move that stock, get Microsoft's mojo back?

Mr. BALLMER: Well, you know, at the end of the day, moving the stock, always a complex topic. Moving the process, I understand that a lot better. So I got to always remind myself, the thing we control is our ability to innovate, to get winning products and to--and to drive revenue and profitability. We sold eight million Kinects. People came out of nowhere, $150 a pop. You do the math. It's a phenomenal opportunity invented for the consumer out of nowhere.

BARTIROMO: You gave us the update on the Kinect sales. People want an update on Windows Phone 7. How many did you sell over the holiday season?

Mr. BALLMER: Well, we sold 1.5 million into the carriers. We're seeing how those things move through. But as I said, people get their hands on them, nine out of 10 in an AT&T store will recommend them to their friends.

BARTIROMO: What are you thinking about in terms of the cash on the balance sheet? How do you spend that money in the coming year or two or three?

Mr. BALLMER: I think the key thing is that we treat the cash on the balance sheet like it's the--like what it is, a resource owned by our shareholders, which we can give back to them for other purposes. If we do that, we can invest in our own business, we can invest in acquisitions. And we really have done a mix. Remember, we've returned over 100 billion in cash over the last several years to our shareholders. That's pretty good. We've done important acquisitions when we needed to do them. And the level of capital expense in our business has gone up with the move to the Cloud.

BARTIROMO: In an incredibly strong environment here for financials for Microsoft, why do you think the stock hasn't moved?

Mr. BALLMER: Yeah, I think always investor psychology's a function of a lot of things. It's a function of what's going on with the consumer more than what goes on in our Enterprise business, which as you point out, has been phenomenal. I think people want to see, are we going to rise to the occasion with phones and other form factors? That's important for people to see. And I think people wonder, they say, wait--you know, at our sites as we make, you know, well over 25 billion a year of pretax profit, people say, `Boy, that's a big number to grow very fast. Tell us and really convince us, and then go execute on a plan to grow that rapidly.'

BARTIROMO: Where does the growth come from next in the Enterprise side of the business? You know, we're up to the seventh incarnation of Windows Office. Obviously, the business going very well. Where do you see the growth coming from in the coming years?

Mr. BALLMER: Well, the Office--the Office--the Enterprise, there's a lot of opportunity. We can do more for the individual information worker, we've got a lot of ideas there. We, Microsoft, have barely scratched the surface in terms of being the backbone for the mission critical applications. We're in there, but the backbone of running the billing system, the financial system. You know, a lot of our competitors make a lot of dough there. We've got an incredible opportunity. And we can move to the Cloud. That transformation actually lets us help our customers replace, essentially, labor, and expands us into a much broader set of the total IT budget than we've ever participated in before.

BARTIROMO: Talk to me about the Cloud. How important is it for Microsoft? Tell me how significant this trend is.

Mr. BALLMER: Cloud's very important. I mean, it's a fundamental trend in our--in our industry. There's nuances in it. We talk about public Clouds and private Clouds, and we have to do both. And--but I think for a company that really says, hey, Enterprise, we'll help you inside your own data center and we can help you outside your data center, and we'll help you take advantage of this new lower cost deployment, more agile deployment model for Enterprise infrastructure, there's nobody better positioned than we are.

BARTIROMO: You had a great call in terms of buying a stake in Facebook. Is it really worth $50 billion, in your view?

Mr. BALLMER: It's worth--it's worth exactly what investors'll pay for it. They're a great partner and I love them.

BARTIROMO: At last check, your company's worth 240 billion. So a better question, is it really worth a fifth of Microsoft?

Mr. BALLMER: It's worth what investors will pay. It's a great company. They're doing great work. We partner with them closely, really innovating around how you bring social and search together. So the partnership, particularly with Bing and Facebook, is really--we're really doing innovative things to help you when you go look for something to find out what your friends think about it, and I love working with those guys.

BARTIROMO: You've got an international clientele. Give us your sense of where we are in terms of the economy based on what you saw from Kinect, based on what you're seeing for Windows Phone, as well as what you're seeing on the Enterprise side. Are people spending money? Are companies spending money?

Mr. BALLMER: We're in a product cycle. Our company and our industry's in a pretty strong product cycle. And so in a sense, sure, the economy is important. But the product cycle's as strong or stronger as anything that you see in the economy. You see that even here at this Consumer Electronics Show. I was told yesterday that most of the other conventions in Vegas have started coming back a little. Consumer Electronics is back to where it was in the heyday because this industry and Microsoft specifically, we're in the middle of a great product wave. So in general, the economy seems OK. But, you know, we have a lot of chance to control our own destiny with our product innovation.

BARTIROMO: Steve, you would like to add anything else that I may have missed?

Mr. BALLMER: No. I just think, you know, now's a great time. We're driving hard. We've got momentum in Xbox. We're moving beyond gaming into the heart of the TV entertainment space, which is phenomenal. Our phones, we're out of the chute, they're well received. PCs are more interesting and do more things than ever before. And of course, we're going to keep Windows front and center in people's imaginations. And you won't believe what you're going to see next.

BARTIROMO: Steve, great. Thank you so much for joining us.

Mr. BALLMER: Thanks, Maria.

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