Ballmer: Windows Is 'The Air We Breathe'

In a Thursday keynote speech at Microsoft's annual Financial Analyst Meeting, Ballmer discussed Microsoft's shift to what it calls Software Plus Services, a strategy that combines elements of cloud computing with traditional on-premise software.

Despite the proliferation of small form factor PCs and devices, Ballmer said Windows remains at the center of Microsoft's plans. Although Ballmer mentioned Windows Vista only once during the speech, and that time only in passing, he may have been seeking to reassure investors that the difficulties Microsoft has experienced with Vista haven't changed its commitment to the Windows cash cow.

"At the end of the day, I sometimes say Windows is kind of the air that we breathe. We don't want to get a cold in Windows. It's very important business to us," Ballmer said. "We need new releases of Windows to keep the Windows PC vibrant and interesting. We're working on it."

Despite the industry's shifting focus from technologies focused on enterprises to those focused on consumers, Microsoft still sees "the most fantastic growth opportunities of all time" in the enterprise, according to Ballmer.

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In fact, Microsoft's investments in mail and collaboration, business intelligence, virtualization, enterprise search, and its recently unveiled Business Productivity Online services have paid huge dividends, Ballmer said.

"I think palpably we are this close, Microsoft is able to claim we are the No. 1 enterprise software company in the world," Ballmer said. "Which nobody would have been able to say 20 years ago."

Ballmer touched briefly on the changes that Software Plus Services entails, but spent more time addressing the rise of the thin client and how that doesn't fit with Microsoft's vision of the industry's future evolution. "People talk about thin clients. The world doesn't believe in thin clients. I'll say, I don't believe in thin clients," he said.

Microsoft's vision for the future involves moving computational power to the Internet and letting users access it through their Web browsers, and the software giant is adding more essential capabilities of Windows to the browser in order to drive its vision forward, Ballmer said.

"The rich client has to do natural user interface and visualization, the tools have to help you manage clients, multiple TVs, phones. The platform is changing as we think of software plus services in the context of what I might call Web 2.0 technology," Ballmer said.

Microsoft's online search aspirations, as evidenced by its dogged, months-long pursuit of search No. 2 Yahoo, are the result of its belief that Google's business model hasn't fully tapped into the market's potential, Ballmer said.

"There is at least a trillion dollars, just of media communications and advertising," said Ballmer. "Search is interesting, the only business where clearly people value advertising as part of the result."

Ballmer also confirmed that no new progress has been made in Microsoft's ongoing acquisition talks with Yahoo, but said Microsoft's search ambitions will continue even if a deal is never finalized. In fact, Ballmer said Microsoft actually has more flexibility now than it would have had if the deal had actually gone through.

"Yahoo was always a tactic, not a strategy. It had to be a tactic, not a strategy, and it was, and we approached it in ... a reasonably disciplined way. I know Yahoo liked to characterize differently," Ballmer said.