THE NATION’S NEWSPAPER
Special
Reprint
Collegiate
USA TODAY CEO Forum at the University of Washington
CEO job was
surprisingly
different
‘Every day, I’ve had a bigger
challenge than … the day before’
SEATTLE — It's a good thing
that Microsoft CEO Steve
Ballmer has so much energy.
He recently introduced two
key products designed to
strengthen Microsoft's control
of personal computers: the
Vista operating system and
the Microsoft Office 2007
suite of applications.
Strong starts for each helped
fuel a 65% profit surge in the
just-ended quarter.
© Copyright 2007 USA TODAY, a division of Gannett Co., Inc. All rights reser ved.
By Kevin P. Casey for USA TODAY/unlimited reuse
Efforts to expand into other
fast-growing markets pose big
challenges. The Zune music
player has made scant inroads
against Apple's iPods. The
division that includes its Xbox
360 video game console lost
$315 million in the quarter.
And MSN Search attracts 10%
of online searches, according
to Nielsen/NetRatings
MegaView Search.
Now Ballmer, 51, must chart a
course for Microsoft as
Chairman Bill Gates prepares
to give up his day-to-day role
www.usatodaycollege.com
Steve Ballmer:
“I never would have
believed I could feel
more accountable
than I already did
for Microsoft.”
next year. Ballmer says he's
confident his investments will
pay off over the long term as
rivals such as Google take the
early lead in emerging busi-
nesses on the Internet.
Ballmer was interviewed by
USA TODAY's David
Lieberman at the sixth USA
TODAY CEO Forum, in con-
junction with the University
of Washington Business
School. The interview took
place in front of an audience.
These are edited transcripts.
AS SEEN IN USA TODAY’S MONEY SECTION, APRIL 30, 2007

USA TODAY CEO Forum at the University of Washington

Balmer on
becoming CEO
Q: There's no CEO school. How did you
pick up what you needed to know?

A: I'm the only person you'll ever

interview who has been the No. 1 or No.
2 guy in (a company that has grown
from) 30 people to 77,000 people. Every
day, I've had a bigger challenge than I had
the day before. I've been at it 27 years. I
will say the job of being CEO was more
different than I ever could have guessed
when Bill asked me to take it.

Q: In what way?

A: Just flipping around from junior

partner to senior partner, you really feel
a different kind of an accountability, as
amazing as that might sound. I never
would have believed I could feel more
accountable than I already did for
Microsoft. And the CEO in a lot of ways
becomes the icon for many things in the
business. The CEO establishes culture.
There's just a set of subtle twists that I
really didn't have my mind fully wrapped
around until two months or three
months or four months after Bill actually
asked me to take this job.
Q: But it was trial and error.
A: No, there were some guys from
McKinsey & Co. that we were using for
some consulting projects; they were
trying to be helpful. They said, "We're
going to introduce you to three CEOs,
By Kevin P. Casey for USA TODAY/unlimited reuse
Talking point: To remain competitive, “We’ve got a lot of work to do,” says Microsoft CEO Steve Ballmer.
and you can learn from them." As it
happened, one of them was (former
Enron CEO) Jeff Skilling. I'm glad I didn't
learn everything I was supposed to learn
from him. (Laughter.)
I had lunch yesterday with Jim Donald,
who runs Starbucks. You sit there, and
you exchange stories, and you learn from
other guys' experiences. "How do you do
that? How much time do you get? What
are you tr ying to do at your board
meeting? What's your strategic planning
process look like? What are the cultural
issues? What are the PR issues? How
does crisis management work? What's
the best way that you've found to
communicate internally, externally?"
Ever ything you do adds to the
experience.
Q: Are you having fun? It sounds like
some of this could be stifling.
A: I have a great time doing what I do.
We get a chance to change the world
through the kinds of products we build.
I have no excuse; if I don't like my job, I
guess because you're the CEO, you
should change your job so you like it
more. And you go, "OK, well, I'll go add
somebody to help me with that; boom,
let's go do it." So I do enjoy what I do.

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AS SEEN IN USA TODAY’S MONEY SECTION, APRIL 30, 2007
USA TODAY CEO Forum at the University of Washington
Microsoft CEO Steve Ballmer: On dealing with the competition
Q A few years ago, the Justice
Department investigated Microsoft and
charged it with anti-competitive
practices. Now, you're asking the Justice
Department to look at Google's deal to
pay $3.1 billion for Internet ad company
DoubleClick. Do you see at least a little
bit of irony here?
A: In all things that are emerging, there
are questions to be asked.
If the regulators decide there's an issue
there, they'll take a look at it, and if they
decide there's not, so be it. I do think that
it would be worth the regulators taking
the time to understand this market,
much the way they took the time to
understand other parts of the technology
business, because the whole future of
media and advertising will move to the
Internet.
What we think of as television today,
what we think of as newspapers,
magazines, you name it — all of those
things are going to move to the Internet
and be funded by advertising. And so
we're talking about a pretty important
part of … people's basic lives.
Q: Can you give us some insight into
your thinking with DoubleClick? It
would have done a lot for MSN, but you
let Google outbid you.
A: No, no. You don't know that. You
know that they signed a definitive
agreement to buy DoubleClick. That is
the one factoid that is known. That's the
only factoid I'll confirm, what you know.
(Laughter.)
Q: Let's broaden this a bit then. What
type of future does MSN have? It's in
third place, and that's a tough place to be
in the search market.
A: Well, in a way it is and in a way it
isn't. Online activity is really quite
fractured. Microsoft has the most visitors.
Reprinted with permission. All rights reser ved.
Yahoo actually has people spending the
most total time with them. And Google
makes the most money.
The real question is what's going on in
the commerce and advertising side. That
is not very fragmented. Most websites
rely on DoubleClick or Google or Yahoo
for our stuff to run.
Q: There's nothing that you have to
change to become more competitive?
A: We've got a lot of work to do. Let's
just start with the fact that at the end of
the day, since this is a business school,
people probably will say that the
scorecard says, "Who makes the most
money?" We don't (make the most
money).
There's a whole lot of opportunity to
innovate on the end user side, and we're
only scratching the surface. Today, a very
small percentage of all advertising has
moved to be essentially online. As TV
experiences, video experiences, radio
experiences move online, there's going to
be a lot of innovation on the advertising
side.
Q: You must have some time frame
when you expect MSN to become
profitable.
A: Well, we've been profitable. We
decided to take the business to be less
than zero profit because (we're) making
the R&D investments and the sales and
marketing investments that we think are
necessary for the long term.
Above all, I would say one of the things
I believe in that has made Microsoft a
great company is we take a long-term
view. It took a long time for Windows to
reach critical mass. It took a long time for
music players — not the iPod, but for
music players — to reach critical mass.
The guys at Google were at it, what, eight
or nine years before they really reached
critical mass. And so one of the keys in
our business is not to be impatient in the
wrong way. I've seen that kill a lot of
other companies in our business.
About Steve Ballmer
CEO, Microsoft
Born: Detroit
E d u c a t i o n : Bachelor's degree in
mathematics and economics,
Harvard University. Dropped out of
Stanford University business school
after first year.
I n c o l l e g e : Managed the football
team, was business manager of The
Harvard Crimson newspaper and
worked on the university literary
magazine.
Fateful encounter: In sophomore year
at Harvard, he lived down the hall
from Bill Gates.
First job: Assistant product manager
for Duncan Hines' Moist & Easy cakes
and brownies. His cubicle mate was
Jeffrey Immelt, now CEO of General
Electric.
Joined Microsoft: 1980 (employee
No. 24)
Named president: 1998
Named CEO: 2000
Key decision: Ballmer approved a big
investment in the Xbox, placing
Microsoft in the hardware business
vs. entrenched gamemakers Sony and
Nintendo.
Family: Wife, three children.
Source: Microsoft
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AS SEEN IN USA TODAY’S MONEY SECTION, APRIL 30, 2007
USA TODAY CEO Forum at the University of Washington
Microsoft CEO Steve Ballmer: On operating systems
Q: Is Vista the last big operating system that will be
introduced that way, as: "Come, buy Vista"?
A: No.
Q: No?
A: No. People like to write that; I don't know why. Nothing
we've said should cause people to think that way. There will be
a Vista. There will be a Vista plus one. There will be a Vista plus
two, plus three.
Q: When is your next operating system coming out?
A: That I won't share with you. Not because we're not hard at
work on that; I want to let the team do their job, figure out
what the release looks like. I guarantee you it won't be four or
five years.
Q: You mean sooner?
A: Yes, absolutely.
Q: Have you learned any lessons from the rollout of Vista
that could apply to other products that you sell?
A: A lot of what we did with Vista was very similar to what
we've used for some of our other big launch products. It was
beneficial for customers to be able to think about new
Windows and new Office at the same time. That doesn't mean
we'll always do them together. But in a sense, it let customers
think about them as one decision.
Q: Google has been rolling out applications that are very
similar to Office. Are you concerned about competition from
Internet-based applications?
A: They've come out with what I might call — what's the
politically correct way of saying it? -- they've come out with
some of the lowest functionality, lowest capability applications
of all time. (Laughter.)
If you want to sit and write a paper for school, you're not
going to use Google Docs. You can't even put a footnote in.
Now, last time I checked, that's still kind of important to give
attribution. (Laughter.) There are some basic, basic things that
you just don't find.
Reprinted with permission. All rights reser ved.
In the short run, we don't have a lot of competition; in the
long run, sure. We always have some competition. We have
competition from OpenOffice. We have competition from
StarOffice. We're going to have competition from Google. We
have competition from IBM. And competition is a very good
thing for Google to give us, and for us to give Google.
Q: I use Word, I use Excel. And I don't use half the features
they've got. Have you reached a point where, sure, you can
keep adding more features, but who needs them?
A: With the new version of Office, you will use a higher
percentage of the product than you use today. We have
completely redesigned the user interface. The truth is, people
may not use things because they don't know how to find them.
And in the revamp, we've done to the user interface of Office,
everything is more discoverable.
There's a great anecdote. Bill Gates, before we shipped Office,
sent the team some mail, "Hey, you know, I really love the user
interface in the new Excel, but I didn't know you were going to
add so many new features." And he listed a couple things he
really liked. And they said, "Bill, those aren't new features."
(Laughter.) Bill said, "No, I'm an Excel expert. Those are new
features." And they said, "No, they've actually been there for
three releases." (Laughter.) So, it had features that even an
expert couldn't find, and yet they were very discoverable in the
new user interface. That's the first thing I'll say.
The second thing is, everybody uses a very much higher
percentage of Word, Excel and PowerPoint than they know.
Does anybody ever send you spreadsheets, documents or
presentations that are more complicated than you could
author?
Q: Sure.
A: I get them all the time. So, you are using the advanced
capabilities in the products whether you can be the author or
whether you are just a consumer, a viewer, a reader and an
annotator.
So, I think you'll find that I can't create many of the
spreadsheets I receive for analyzing our financial information,
but I need that power and capability to do my job.
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AS SEEN IN USA TODAY’S MONEY SECTION, APRIL 30, 2007
USA TODAY CEO Forum at the University of Washington
Microsoft CEO Steve Ballmer: On management
Q: You're a strong personality, and so is
Bill Gates.
How do you prevent groupthink from
setting in?
A: It's a big problem in any organization
of any size. And yet, it's also a big
opportunity. If you really want to sail your
ship this direction, you want enough
groupthink that people actually sail with
you, and not so much groupthink that
people don't do other things innovative
on the path, or that people won't second-
guess fundamental assumptions before
you set course. But once you really set
course, you really don't want a
cacophony that prevents progress.
I actually think we've had a very good
balance. If anything, I think Microsoft
tends to err on the side of having less
groupthink and more cacophony than
most other places.
Q: You don't find you've got a problem
with people saying, "Sorry, but I really
think you're wrong here"?
A: That happens all the time. From 10
this morning until I came over here, I got
more "Steve, that's wrongs" than I got
"Steve, that's rights" today. It was two to
one, "Steve, that's wrongs." (Laughter.)
You asked me, what's our business, and
I said horizontal software, but we go to
market in four ways. I would tell you that
most companies in our business never go
to market in more than one way. IBM is
an enterprise company. Google is an
advertising company. Apple is a hardware
company. They're one-trick ponies,
because there is a lot of groupthink in all
companies.
I think we've actually done better in
saying we're going to have (more)
Reprinted with permission. All rights reser ved.
multiple ways of thinking than any
organization in our industry, and I count
that as one of our great achievements as a
business.
Q: Do you have any formal processes to
be sure that you're getting the best ideas
from everybody, or is it something you
just count on?
A: No, there are many checkpoints. We
have four leaders of the business who see
it through different eyes. We have a
research group that sees things through
its own eyes, and the eyes of university
professors and academics, because there
are eyes and ears out in the academic
community. We have the eyes and ears of
our finance group, which is out talking to
start-up companies, venture capitalists,
private equity, alternative business
models, what's coming, what's on the
horizon. We get our customers'
perspective. And you can get that pretty
unfettered.
It doesn't mean we always do
everything right. Really understanding
the power of advertising as an Internet
business model we came to later than I
wish we had. That's the No. 1 thing I
regret. We underinvested in some
opportunities for a while.
So, it doesn't mean we get a perfect
outcome at all times, but we certainly
have a lot of formal checks and balances
in our system that push us along.
Q: One of the interesting things about
your career is that you and Bill Gates
have really been kind of married all these
years.
A: Longer than I have to my wife, that's
correct. (Laughter.)
Q: And marriages go through their ups
and downs. Have there ever been times
when you felt like throttling the guy?
A: Sure, and vice versa; both are true.
Q: How do you deal with it?
A: We were learning to find a pattern of
interaction that would let us be partners
and be married, but we changed the state
of affairs. When I came to Microsoft, I was
a friend. We had never worked together.
We had a crisis after a month, but
because it was important enough and
we're dear enough friends, we worked
through it.
At the end of the first year, we really
had to say: Is this permanent? And there
were some things we had to work
through.
And then for many, many years, Bill was
kind of the senior partner and I was the
junior partner. He asked me to become
CEO in '99, and I said, "Do you really want
me to be CEO? If you do, I'll do it. But
don't ask me to be CEO if you really still
want to be CEO." He says, "No, I still really
want you to be CEO." And neither one of
us really kind of knew what to do
differently. So, he probably tried a little bit
too hard to have nothing change, and I
probably tried a little bit too hard to have
ever ything change. That was just a
transition that we had to go through.
But each time, because we love what
we do, we love Microsoft, and because
we're such good friends -- I'd say we're
like brothers, as opposed to husband and
wife, that analogy works a little bit better.
(Laughter.) Brothers stick together; that
doesn't mean brothers are always having
a simple and easy relationship.
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AS SEEN IN USA TODAY’S MONEY SECTION, APRIL 30, 2007
USA TODAY CEO Forum at the University of Washington
Microsoft CEO Steve Ballmer: On music, gaming
Q: People get passionate when Apple
comes out with something new — the
iPhone; of course, the iPod. Is that
something that you'd want them to feel
about Microsoft?
A: It's sort of a funny question. Would I
trade 96% of the market for 4% of the
market? (L aughter.) I want to have
products that appeal to everybody.
Now we'll get a chance to go through
this again in phones and music players.
There's no chance that the iPhone is
going to get any significant market share.
No chance. It's a $500 subsidized item.
They may make a lot of money. But if you
actually take a look at the 1.3 billion
phones that get sold, I'd prefer to have
our software in 60% or 70% or 80% of
them, than I would to have 2% or 3%,
which is what Apple might get.
In the case of music, Apple got out
early. They were the first to really
recognize that you couldn't just think
about the device and all the pieces
separately. Bravo. Credit that to Steve
(Jobs) and Apple. They did a nice job.
But it's not like we're at the end of the
line of innovation that's going to come in
the way people listen to music, watch
videos, etc. I'll bet our ads will be less
edgy. But my 85-year-old uncle probably
will never own an iPod, and I hope we'll
get him to own a Zune.
Q: Would you agree with Steve Jobs
that music companies should get rid of
the digital rights management that
makes it hard to copy songs?
A: I will not either agree or disagree.
Every recording artist, in my opinion, is
entitled to make their own decision. And
I don't think Apple or Microsoft should
be imposing its will on folks, because
people will have different economic
interests, different things to think about.
Reprinted with permission. All rights reser ved.
the color is white with faceplates, not
black. It actually rounds out the audience
appeal of the product. Now you can
customize for the hard-core gamer; you
can customize in other ways.
If you look at the game selection: Viva
Pioata is targeted at a more female and a
younger demographic than anything else
we've done. Our arcade games,
traditional board games and card games
target casual gamers. The audience tends
to skew older than the average gamer
and tends to skew again more female
than the, quote, typical hard-core gamer.
There will be a Halo 3. There will be a
Gears of War 2. We're not going to stop
Microsoft handout that stuff. On the other hand, we're
trying to broaden the appeal as opposed
Music: Ballmer says Microsoft has no plans to
add a phone to Zune.
to revector it.
We're a company that makes tools, and
we're going to enable people to use those
tools and make their own judgments as
individual artists.
Q: When can we look forward to a
Zune phone?
A: It's not a concept you'll ever get
from us. We're in the Windows Mobile
business. We wouldn't define our phone
experience just by music. A phone is
really a general purpose device. You want
to make telephone calls, you want to get
and receive messages, text, e-mail,
whatever your preference is. The phone
really is kind of a general purpose device
that we need to have clean and easy to
Microsoft handout
use.
Games: XBox 360 targets a wider audience.
Q: With the Xbox, it looks like you're
targeting the hard-core gamers. Are
there enough to make this a good
business?
A: Version one we targeted to hard-
core gamers. With Xbox 360, we're
broadening the audience. You may notice
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