Microsoft's Ballmer: We have a mission
Exclusive: Microsoft CEO talks to Yedioth Ahronoth about vision, fight against Google
The night before, as I was settling in at my hotel room in Redmond, Washington, a sleepy suburb of Seattle, she informed me that the interview may be called off despite the fact that it was scheduled a long time in advance.
The Friday a fortnight ago was one of the tensest days in Microsoft history, a company that has had its share of stressful moments. A few weeks earlier, Ballmer issued an ultimatum to Internet giant Yahoo, which he offered to purchase in January for roughly $44 billion. If Yahoo rejects the offer, Ballmer threatened, Microsoft will withdraw it altogether or attempt a hostile takeover.
Yahoo rejected the offer despite the threat, the ultimatum expired, and Ballmer said he would soon announce his next move. The week came to a close, and on Friday morning Ballmer graced the cover of all of the major economic journals in the world. Only then did executives at Microsoft remember that the most anxious man in the world, who was faced with one of the most important decisions in the history of his company, had committed himself to dedicating an hour of his time to talk to an Israeli journalist, at a junction where any journalist equipped with a keyboard would love to hear as much as one sentence from him.
Time is money
Ballmer promised that the interview would take place as planned, but a few minutes after he was already supposed to be sitting in the conference room adjacent to his office and start answering questions, he was still talking on the phone.
"He'll be right with you," the edgy spokeswoman said.
"Can't you just disconnect his call?" I said. She didn't find it amusing, and turned away to check in on her CEO. Ballmer appeared a few seconds later from the opposite side of the hallway.
"I promised I'd set aside enough time for you!" the large, heavy-set man yelled as he ran toward the conference room while waving both hands in the air.
"I promised I'd set aside enough time for you!"
He was out of breath but all smiles as he approached. The public relations people who feared Ballmer would come off as being tired, short-tempered and stressed out were relieved. He was in a great mood.
Ballmer granted us a 90-second photo session. His upbeat demeanor was in complete contrast to the tense atmosphere that enveloped the vast complex, which spans some 750,000 meters and absorbs the 30,000 employees that arrive there each day. Everyone I met, from the most junior programmers to the highest-ranking executives, wanted the latest news on the Yahoo deal.
"You are scheduled to visit Israel for three hours this coming Wednesday to inaugurate the company's new research center in Herzliya," I said to him as he posed for the camera.
"Three hours? Ballmer laughed. "I know. It will be the craziest tour I have ever been on. I'm flying to Slovakia, Russia, Ukraine, Hungary, the Czech Republic and Tel Aviv; and all this in such a short time."
Our photographer's 90 seconds were up, and Ballmer entered the room. He sat down, opened a soda can and said, "Yes sir, how can I help you?"
Ballmer is considered to be one of the most colorful characters in the high-tech world, where insipid engineers, genius developers and two-bit dreamers live side by side. In this world, Ballmer is deemed a marketing person from head to toe who does not hesitate to resort to aggressive tactics. The videos in which he is seen going berserk on stage at employee events have reached cult status for good reason. The interview justifies his reputation; if you press the right buttons, he immediately springs to action - and it is during these moments that he is at his best.
Walking in Gates' shoes
Ballmer took over the management of Microsoft from Bill Gates, who founded the company along with Paul Allen in 1975. Gates has recently grown tired of his role as chairman and is expected to quit Microsoft entirely in a few weeks time to focus on his philanthropic endeavors, leaving the reigns to the $273 billion company in Ballmer's hands.
The past few years were some of the most trying Microsoft had ever seen. The software company is facing a stubborn and vigorous rival in Google. Ballmer was even quoted as saying that he would "kick (Google CEO) Eric Schmidt's ass", but for the meantime it is Ballmer's ass that is being kicked, regardless of the fact that Microsoft is a well-oiled money-making machine.
Microsoft's new line of operating systems, Windows Vista, has not been embraced by users, despite the vast resources that went into its development. Ballmer estimated that the deal with Yahoo would give Microsoft a huge boost and therefore exerted all of his clout to have it approved; his enthusiasm reached the point where there were those who said he was obsessed with finalizing the deal.
In this mission, he failed decisively. An hour after the interview it became known that he agreed to pay another $5 billion or so. He was sure this will finalize the deal, but Yahoo wanted another $10 billion. The next day he withdrew the offer. Now, some say that one of the most well-known and influential CEOs in the world should draw some conclusions.
The Yahoo! dilemma
Yahoo was established in January 1994 by two students and has grown into an Internet empire that employs more than 13,000 workers. It is well-connected with advertisers and possesses some priceless assets: Every month, 500 million people surf to its site and it holds popular photo sharing site Flicker as well as Yahoo News, considered the one Americans love most. Ballmer knew Microsoft could develop similar capabilities to Yahoo's but it would take it time and money. In the tough fight against Google, he preferred to cut the timetables short and go for a giant acquisition.
Now, commentators say that Ballmer would be forced to explain why Microsoft actually does not need Yahoo, after he pushed for acquiring it for more than three months. Last week I sent Ballmer's spokeswoman an e-mail. I wanted to know whether he had had drawn any personal and professional conclusions from the failed deal and whether he hears the calls for his resignation. Ballmer chose a general and vague response:
Microsoft's Windows Vista – not a success story (Photo: Ehud Kenan)
"We made a compelling offer - one that made sense to Microsoft, to Yahoo, to our shareholders, and to industry competition. In the end the stars didn’t align. We are 100 percent focused on building the industry-leading business in search, online advertising, media, and social networking."
Yet the possibility that the deal would fall through lingered in Ballmer's office when I met him. I asked him how he intends to cope with a negative answer.
How will you feel if the company will tell you: 'Steve, I don’t want to be your friend?'
I don't think Yahoo! is saying we don't want to be your friend. The Yahoo! management, we've always had a very friendly relationship, frankly. I won't say that this has been the easiest period in our relationship, because we've been pushing this, which is unsettling but I like Jerry.
Could it be that you want Yahoo! So badly because you realize that it represents the future of the Microsoft, because your operating systems are becoming less relevant?
You're missing something.
What am I missing?
Forget Microsoft. Just pretend Microsoft didn't exist.
It's hard, but I'll try.
Is there any less focus and attention on the innovations going on in mobile handsets? The mobile operating system is becoming more important, not less important. Microsoft has a broader view of itself than any other company has of itself, we say we want to be in all of the interesting, relevant, high volume areas. That doesn't just include the PC; it also includes the enterprise, it also includes online and media and advertising.
And this is where Yahoo! enters
Yes although it's not the strategy for us. It's a part of the strategy. It doesn't replace anything; it augments what we're already doing.
So, you will be able to handle yourself without Yahoo!
Of course, we will. We have a strategy; this helps our strategy. But it's not like we don't have search. We have search. We have good people doing search improvements. We like our search. We have the biggest community of Messenger users in the world, blah, blah, blah.
Yahoo deal fell through (Photo: AP)
This kind of "Blah, blah, blah" repeated several times during our conversation. This is how he finishes off his sentences when he finishes making the point. This is his way of hinting: "I can talk about this forever, but it's a waste of time. Can we move on?"
Still it seems you have a problem. A few years ago, Microsoft represented America neck to neck with McDonald's and Coca-Cola but in recent years there is a constant decline about the power of the brand of Microsoft. What happened during those years? Can you explain what?
Certainly our brand is…
Struggling?
It's very strong.
Balmer quickly corrects my attempt to insert a word into the sentence.
Nobody should be confused. I bet if you gave 10 people the chance to trade their brand for our brand, Microsoft or Windows, you'd get most people to change.
Still there is a problem.
There are a couple of high visibility consumer areas that have grown rapidly in the last couple of years where we're not number one, and people notice that! I think there's a general expectation that we have, and that the world has that we're going to be number one in everything we do.
Now, I tell our people, you don't always start out number one, you've got to earn your way to number one!
Size does matter
Maybe the company forgot how to be number two. It was so used to being number one for so many years.
We have plenty of number two businesses. We have some strong things we've done from a brand perspective. Xbox has really taken off in some strong ways.
People like the Xbox but it's the exception and not the rule. People are really enthusiastic about the iPod or the iPhone but they don’t feel the same way about Microsot's products.
Here's a product that has very high presence. You're the product for everybody. Which is what Windows is; it's the product for everybody.
Okay. So?
The product for everybody doesn't have just a narrow set of users who get, in an unusual way, kind of intimate and passionate about the product. That would tend to go to the guy who's got the 3, 4 percent market share, not to the guy who goes to the 95, 96 percent share.
The notion that we're going to have literally the 250 million new Windows users per year, will all have exactly the same emotion as the brand new 10 million Apple users per year, that may not be the right aspiration level. I want to have customers love our products but I still want to appeal to 95 percent of the people.
So it's only a matter of size?
Apple I think likes to appeal to a narrow audience and I won't say Apple is wrong. They make a lot of money doing what they're doing. It's a different approach.
Google is another approach. I don't think Google has anywhere near the level of passion and people are not as passionate about Google as they are about Apple, not even close, in my opinion. But Google also appeals to a much higher percentage of the people than Apple does, which I think just kind of helps make the point.
Let's talk about Google. In 2004, I had a conversation with the CEO of MSN Israel, and he said 'there is nothing to worry about. Microsoft people are working on search and the gap will get tinier and tinier.
And it has.
Has it?
Mm-hmm.
It doesn’t feel like it.
Which gap now, the technical gap or the market share gap? The market share gap has not gotten smaller.
If the search engine is getting better than your position in the market should have been better. There is a link.
It's an imperfect link. If technology wins, lots of markets would be different. It's a combination of technology, brand, distribution, market power, revenue; lots of things come into play.
I think the world should be happy that there is competition just like people like it when we get competition in the areas in which we lead, I think it's good that there's good competition for everybody.
I'm still not convinced that the gap is getting smaller
Yeah, I mean, mathematically we do blind tests, no ads, no brand, because if you take the same results and put Google's brand on it, no matter whose results they are, they do better with the Google brand on it than without.
It's must be really frustrating.
We need broad strategy. It's fourfold. Number one… do you play poker?
Sometimes.
Okay. We have to ante up. It's jacks or better to open, so that means we've got to have so many documents in our index, we've got to have great relevance, we've got to have great blah, blah, blah, blah, blah. It doesn't let you win but if you don't do it, it ensures you lose.
You have to show up to the game.
Yes. That is not a cheap proposition. It gets more expensive just to be in the game. Number two, we're doing that I would call -- you remember Mohammed Ali, the fighter? Rope-a-dope, tactical differentiation, get in, float like a butterfly, boom, boom, boom, sting like a bee.
Now, will Google catch up? Of course, they're going to catch up. But you have to keep showing, hey, look at this innovation; hey, we can do this; boom, boom, boom, and then you get some customers.
And what's next?
Number three, you've got to get scale. You actually have to get scale, because scale begets scale. Then number four, you've got to rewrite the rules.
Google rewrote the rules when they entered the game.
They sort of rewrote the rules on Yahoo! really, because Yahoo! was the player at the time, and what does that mean? Rewriting the rules means we need to sort of shift the model, the user model. I mean, let's face it, search is not a very innovative area, right? It looks about the same today that it did five or six years ago. Shame on us, shame on Google, shame on Yahoo!, shame on everybody. You would think there would be a little more innovation. I mean, it's odd, this is an area people think is very innovative and it never changes.
Are you sorry that you didn't buy Google when you had the chance?
I don't know that we ever had a chance. We never had a discussion
Maybe you should have.
Maybe we should have, but it never really came up, and if you ask my opinion, I doubt they were ever for sale. I mean, we've tried to buy Facebook, I think that's well-known, and we made an investment, but Microsoft wasn't for sale when we were small, Google, Facebook are not for sale either.
The vision, the mission
However, we shouldn't get excited about this Ballmer declaration. In recent days it has become known that Microsoft is putting out feelers on the possibility of purchasing Facebook. After all, following the rejection of the Yahoo deal, it has quite a bit of cash lying around.
Let's go back to Microsoft. A decade ago, Microsoft had a clear cut vision: put a desktop computer on every desk. Do you have a succinct vision for the next decade?
We have a mission. Enable people and businesses throughout the world to realize their full potential.
It's a very broad mission
But it is what information technology is about. So, if you ask, hey, what's your strategy, our strategy is to be a leading innovator in software with capabilities to bring those innovations to market in four ways: On the desktop, in new devices, non-PC devices, for the enterprise and online.
In short, you want to rule the world
We want to be involved in the world. They're really quite different.
30 years ago, 35, Bill Gates, Paul Allen said, software is a great business, let's be broadly in the software business. You ask me in 2008, software is a great business, I want to be broadly in the software business.
We're not saying let's just stand here in the corner and only do Windows and Office for our whole life. We're being expansive.
What market share will we have, when will it happen? Don't know. Not all businesses will necessarily develop exactly like Windows. If we're the one who's winner take all, I wish they were all that way and we had all those positions.
I never read anything about you that you were referring to your Jewish heritage, never. You know, we Jewish people like to keep close with our fellow Jews. So, where are you Steve? You don't call, we never hear from you.
I am the CEO of a global company of many nationalities and many religions. I have a nationality. Everybody has either some religion or they've consciously decided not to have one, and everybody has got origin. But my message to our customers and to our employees and to our business partners is we embrace you because of what we do together. We don't embrace you because you're from country A or B or religion C or D.
So, it's a conscious decision not to talk about it. I don't not speak about it, but, I mean, I went to Belarus to see the little town where my grandfather grew up in Belarus, in October.
Do you have free time? Is this the kind of a job that allows you free time?
I manage my time. I have exactly four things I do in my life. I work here. I'm a husband and father; not one job, it might be two. I care about my health. So, I make time in the morning to exercise and I have something of an interest in golf, and that's a sport that consumes time.
What about basketball? You invested some money in the Seattle Supersonics?
But I spend no time on that. I've been to maybe three basketball games this year. My son's games, yeah, I went to many basketball games played by my three boys this year. I coached, in fact, my nine-year old boy's team.
So I don't have lots of sort of time consuming hobbies, other than I work to play golf quickly, so I can afford the time to do it.
What makes a person like you get up in the morning and go to work? Clearly it's not money. Is it ego?
I'd say three things. Number one, I love the impact we have.
"We" or "You"?
We, we Microsoft. Seeing how we transform society in a positive way. Number two, I love the people I get a chance to interact with, both outside Microsoft as well as inside Microsoft. And number three, I am a person who sort of breathes on this notion of attacking hard problems and solving them. There are tough kind of business and people and management and leadership and vision challenges, and I enjoy a good challenge.
My sister will do sudoku; I won't. I'll come to Microsoft.
I want to play a little game with you. I will name five names and I want you to tell me what the first thing that pops into your head.
Go for it.
Bill Gates
"Friend," Ballmer replies quietly and an expression of sadness that cannot be mistaken or faked appears on his face.
Eric Schmidt
"Google, "He says and laughs.
Jerry Young
Nice Guy.
Barack Obama
Charismatic.
And final name, Steve Ballmer
Ballmer was stuck for words for a moment, but then replied: "Father!", while laughing loudly.
After the interview ended and we bid each other farewell, Ballmer rushed to the next meeting. I was walking down the long corridor, when he appeared around the corner holding a bagel. "Whoops! you got me", he said, amused. "Truth is the bagels in Seattle really suck."
