When: Today, Tuesday, May 10th
Where: CNBC's "The Strategy Session"
Following is the unofficial transcript of a CNBC interview with Microsoft CEO Steve Ballmer and Skype CEO Tony Bates today on CNBC's "The Strategy Session" at 12:20pm ET. All references must be sourced to CNBC.
DAVID FABER: CNBC'S TECHNOLOGY REPORTER JON FORTT IS LIVE WITH MICROSOFT SHOW STEVE BALLMER AND SKYPE CEO.
JON FORTT: THANKS, GUYS. LET'S DIVE RIGHT IN THE TECHNOLOGY BENEFIT OF THIS DEAL IS ABSOLUTELY CLEAR. A 663 MILLION REGISTERED USERS LAST COUNT I SAW, 207 BILLION MINUTES OF VOICE AND VIDEO, ADDING 600,000 USERS DAILY, BUT LET'S TALK ABOUT WHAT THIS DOES TO HELP THE BUSINESS, STEVE. ADVERTISING BUSINESS AND A PREMIUM SERVICES BUSINESS. HOW DO YOU TARGET ADS IN SKYPE? WHAT KIND OF UPSIDE DOES THIS BRING MICROSOFT?
STEVE BALLMER: WELL, I THINK THERE'S PROBABLY TWO DIFFERENT WAYS TO THINK ABOUT THE FINANCIAL PROPOSITION. NUMBER ONE, SKYPE IS A GREAT BUSINESS THAT HAS THREE REVENUE STREAMS PRIMARILY TODAY. THE SKYPE OUT BUSINESS TO HELP COMPLETE CALLS, PREMIUM SUBSCRIPTIONS, REALLY THE ADVERTISING BUSINESS IS NASCENT, THERE'S NOTHING MUCH THERE AND TONY AND HIS TEAM WILL FIGURE OUT WHAT THERE IS THERE, AND THE WE'RE EXCITED ABOUT THAT. BUT THAT BUSINESS HAS BEEN GROWING 20% REVENUE, 40% EBITDA IN THE LAST YEAR, VERY EXCITING. WE GET A CHANCE TO COMBINE THAT WITH THE VALUE ADD THAT COMES FROM REALLY CONNECTING UP TO MICROSOFT DEVICES AND CONNECTING UP, PARTICULARLY IN THE ENTERPRISE WHERE WE CAN START TO PUT PEOPLE IN CONTROL OF THEIR COMMUNICATIONS ACROSS THEIR -- THEIR WORK LIFE AND THEIR PERSONAL LIVES, AND I THINK THERE'S A BIG REVENUE OPPORTUNITY IN THAT AS WELL.
FORTT: MICROSOFT HAS ALREADY MADE SOME BIG MOVES IN UNIFYING COMMUNICATIONS WITH LINK. OBVIOUSLY YOU'RE BIG IN COMMUNICATIONS WITH EXCHANGE, WITH OUTLOOK AND HAVE BEEN DOING THAT FOR A LONG TIME. HOW DOES THE COMMUNICATIONS BUSINESS OVERALL GET LED NOW BECAUSE YOU'VE GOT MULTIPLE DIVISIONS PLAYING IN THE SPACE. HOW DO YOU KEEP ALL THE TRAINS RUNNING IN THE RIGHT DIRECTION?
BALLMER: COMMUNICATIONS IS THE BROADEST SCENARIO IN SOME SENSES IN THE TECHNOLOGY BUSINESS, AND NOT SURPRISINGLY ALL ASPECTS OF MICROSOFT, BUSINESS AND CONSUMER, TV, PHONE, PC, NEED TO PARTICIPATE, AND SO THE ANSWER ISN'T JUST TO PUT EVERYTHING TOGETHER. IT'S TO HAVE A STRONG FRAMEWORK FOR COLLABORATION, AND CERTAINLY AS WE FORM THE MICROSOFT SKYPE DIVISION, WHICH TONY WILL RUN, THE PREMISE IS WE DO A GREAT JOB OF SUPPORTING NON-MICROSOFT DEVICES BUT OPTIMIZE AS MUCH AS WE CAN FOR WINDOWS, PHONES, PCs AND -- AND XBOX AND KINECT, AND WE CONNECT THE CUSTOMER BASES. OUR MESSENGER, HOT MAIL, OUTLOOK, LINK. WE NEED TO CONNECT THOSE CUSTOMER BASES INTO THE VERY SUCCESSFUL SKYPE CUSTOMER BASE, AND WE'RE GOING TO TRY TO LEVERAGE AND BUILD UPON THE SKYPE BRAND VERY AGGRESSIVELY, AND THOSE ARE THE KIND OF PRINCIPLES THAT WE BRING STRATEGICALLY AND ORGANIZATIONALLY TO THE -- TO COMING TOGETHER. EVERYTHING ELSE HAS TO WAIT UNTIL WE CLEAR REGULATORY FOR THE DETAILED ROAD MAP.
FORTT: ONE OF THE THINGS TO LIKE ABOUT THIS DEAL, 8.5 BILLION. THAT'S YOUR BIGGEST DEAL BY 2 BILLION PLUS, I BELIEVE. AQUANTIVE WAS SOMEWHERE CLOSER TO $6 BILLION BUT THIS IS OVERSEAS CASH. MOST OF YOUR CASH IS OVERSEAS. HARD TO BRING THAT HOME WITHOUT GETTING TAXED. SINCE SKYPE IS LUXEMBOURG-BASED, YOU GET TO USE OVERSEAS CASH, BUT LAST TIME WE TALKED, STEVE, I ASKED YOU ABOUT DOING BIGGER ACQUISITIONS. YOU WERE A LITTLE COY AND SAID, YOU KNOW, WE'LL SEE WHAT HAPPENS. THIS IS A BIGGER ACQUISITION. SHOULD WE LOOK FOR MORE OF THESE TO COME POTENTIALLY, OR DID YOU GET MAJOR INDIGESTION DOING THIS ONE AND YOU THINK YOU ARE NOT GOING TO DO ANYMORE?
BALLMER: I'D BE KIND OF QUIET ON THE SUBJECT. I MEAN IT ISN'T LIKE THERE IS SOMETHING IMMINENT AND YOU KNOW WE ARE-- I TRY TO THINK OF AND MAKE THE COMPANY AS AGILE AS WE CAN BE AND WHEN IT MAKES SENSE TO DO AN ACQUISITION WE WANT TO HAVE BOTH THE WHEREWITHAL FINANCIAL AND THE CAPABILITY TO DO ONE. AND SO I'M EXCITED TO DO THIS ONE. ON THE OTHER HAND IT IS CERTAINLY NOT OUR SORT OF FUNDAMENTAL STRATEGY THAT WE ARE JUST OUT LOOKING, TROLLING FOR ACQUISITIONS. WE ARE NOT AN INVESTMENT COMPANY. WE ARE AN INNOVATION COMPANY. BUT THIS IS A GREAT DEAL WITH A GREAT COMPANY WHERE WE-- THE FUNDAMENTALS OF OUR MISSION, TO BUILD TOOLS TO HELP PEOPLE COMMUNICATE. IT IS FUNDAMENTAL TO SKYPE'S MISSION AND THE TALENTED PEOPLE WHO ARE THERE AND YOU KNOW ONE PLUS ONE IS DEFINITELY GOING TO BE MORE THAN TWO.
FORTT: TONY, LET ME ASK YOU, FIRST OF ALL YOU GET THE GOOD TIMING AWARD, YOU LEFT CISCO A FEW MONTHS AGO. YOU COME TO SKYPE AND NOW YOU'VE GOT THIS $8.5 BILLION DEAL THAT YOU ARE A PART OF. IT WAS UNSOLICITED BUT IT SOUNDS LIKE FROM THE PRESS CONFERENCE YOU GUYS JUST GAVE THAT AS PART OF THIS MICROSOFT HAS COMMITTED TO CONTINUING CROSS-PLATFORM EFFORTS WITH SKYPE. YOU'VE GOT IPHONE APPS, YOU'VE ANDROID APPS, LOTS OF OTHER PLATFORMS. TELL ME THOUGH LATELY MICROSOFT HAS FAVORED ITS OWN PLATFORMS IN ROLLING THINGS OUT WE DON'T HAVE OFFICE ON IPHONE ON ANDROID, THINGS LIKE THAT. SHOULD WE EXPECT SKYPE TO BE JUST AS AGGRESSIVE ON OTHER PLATFORMS AS IT HAS BEEN OR IS THERE GOING TO BE MORE FOCUS ON MICROSOFT PLATFORMS.
TONY BATES: WELL CLEARLY PART OF SKYPE'S VALUE PROPOSITION IS HOW WE REACH HUNDREDS OF MILLIONS OF PEOPLE AROUND THE WORLD, OUR COMMUNITY, SO PART OF THE VALUE PROP THAT IS REALLY IMPORTANT I THINK TO MICROSOFT AND CLEARLY TO SKYPE IS THAT WE STAY COMMITTED TO THAT. SO THERE IS GOING TO BE NO CHANGE IN THAT STRATEGY WHATSOEVER. OF COURSE, WHERE WE CAN FIND WAYS TO-- GREAT OPTIMIZE EXPERIENCES AND LET'S FACE IT COMMUNICATIONS ISN'T JUST ABOUT VOICE ANYMORE IT IS ABOUT VIDEO AND HOW YOU INTERACT AND BEING CLOSE TO THE TECHNOLOGY IS DEFINITELY SOME OF THAT. IT IS GOING TO BE DIFFERENT FOR OUR CUSTOMERS. WE WILL TAKE ADVANTAGE OF THAT BUT WE ARE TOTALLY COMMITTED ACROSS CLIENTS, ACROSS MULTIPLATFORMS. WHETHER IT IS ON MOBILE PHONES, WHETHER IT IS ON DESKTOP OR EVEN FRANKLY ALL THE WAY INTO THE LIVING ROOM.
FORTT: GOT TIME FOR MAYBE JUST ONE MORE SO I'LL GO BACK TO YOU, STEVE. LATELY IN MICROSOFT WE'VE SEEN GROWTH IN SERVER AND TOOLS IN PARTICULAR, DOUBLE-DIGIT GROWTH CONSISTENTLY. A LITTLE BIT MORE STRUGGLE IN ONLINE ENTERTAINMENT AND DEVICES DOING WELL. IS SKYPE GOING TO CHANGE THE GROWTH PICTURE FOR MICROSOFT BECAUSE OF THE TECHNOLOGY THAT YOU'RE GETTING HERE AND THE USER BASE THAT YOU'RE GETTING HERE?
BALLMER: I'D HIGHLIGHT WE HAVE DOUBLE-DIGIT GROWTH ACTUALLY IN OUR OFFICE SEGMENT, OUR SERVER AND TOOLS SEGMENT, OUR ONLINE SEGMENT AND OUR ENTERTAINMENT AND DEVICES SEGMENTS, SO PRETTY STRONG, PRETTY MUCH ACROSS THE BOARD. AND, YES, I EXPECT SKYPE TO BE AN ACCELERANT OF OUR FINANCIAL RESULTS. IT'S NOT SENSIBLE TO DO AN ACQUISITION IF IT'S NOT. NOW, WHETHER IT SHOWS UP IN THE PARTICULAR SEGMENTS THAT WE REPORT, BLAH, BLAH, BLAH, BLAH, BLAH. YOU KNOW, THE TRUTH OF THE MATTER IS, COMMUNICATIONS IS ONE OF THE BIG SCENARIOS THAT'S DRIVING OUR FINANCIAL SUCCESS, AND SKYPE IS GOING TO ACCELERATE THAT.
FORTT: THEY ARE SAYING, IT'S A GROWTH DRIVER. BACK TO YOU IN THE STUDIO. THANKS GUYS, FOR TAKING THE TIME TO SIT DOWN WITH US.
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