Microsoft Benefiting From Gaming, Cloud Computing: CEO Ballmer

Microsoft and the tech industry are in the middle of a “great product wave,” Microsoft CEO Steve Ballmer told CNBC Thursday.

Ballmer was speaking to CNBC from the 2011 Consumer Electronics Show in Las Vegas, the industry’s annual gathering in which manufacturers showcase new products.

As part of the product wave, Ballmer noted that Microsoft shipped 1.5 million Windows Phone 7over the holidays. To date, added Ballmer, Microsoft has sold 8 million Kinects and that the Xboxis the most popular product among young consumers.

“Let's make no mistake that for young people today, the exciting things they are doing is in the entertainment side of their life,” he said.

CES 2011 - Your Digital Life - A CNBC Special Report
CES 2011 - Your Digital Life - A CNBC Special Report

“Every kid grows up with Microsoft Office to do their homework, but the exciting part of their life is what they're doing online with their friends: It's gaming, it's TV, and Xbox is square in the middle of that.”

Ballmer declined to discuss new products that Microsoft, which makes over $25 billion annually in pre-tax profit, will be introducing, but said there’s plenty of space to generate revenue in the enterprise area, including in cloud computing, which can be used to lower a business’s labor costs in financial and billing departments. He also said that, thanks to cloud, Microsoft will enjoy more of a company's IT budget than ever before.

Ballmer acknowledged that investors want to know the next steps for Microsoft, but said leading a company is about more than the price of the stock. The share price virtually hasn’t moved in the last decade, since Ballmer has been running the company.

"Moving the stock [is] always a complex topic," said Ballmer. "Moving the profits, I understand a lot better. So I've always got to remind myself, the thing we control is our ability to innovate, to get winning products and to drive revenue and profitability. We sold eight million Kinects. People came out of nowhere at $150 a pop."

“It’s [investor psychology is] a function of what’s going on with the consumer, more than what goes on in our enterprise business, which you point out has been phenomenal,” said the CEO. “I think people want to see if we are going to rise to the occasion with phones and other form factors that’s important for people to see.”

Ballmer refused to discuss the company’s plans for some $40 billion in cash on its balance sheet, although he did say the level of capital expense has gone up with Microsoft’s move to cloud.

“We treat the cash on the balance sheet like what it is,” he added. “It’s a resource owned by our shareholders, which we can give them back for other purposes. We can invest in our own business, we can invest in acquisitions. We have returned over $100 billion in cash over the last several years to our shareholders: That’s pretty good.”

Watch Maria Bartiromo's full interview with Ballmer today on Closing Bell at 4pm ET.