As PC users clamor for Microsoft to continue to support Windows XP, company CEO Steve Ballmer called the Vista OS "a work in progress" at an annual Seattle event on Thursday.

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"It's a very important piece of work. We did a lot of things right and have a lot of things we need to learn from. You never want to let five years go between releases," he said.

While Microsoft recently extended the date when the XP software will be available for low-cost PCs, it doesn't plan to listen to some other complaints, including that Vista is too big. "Vista is bigger than XP, and it's gonna stay bigger than XP," Ballmer said. "We have to make sure it doesn't get bigger still."

During the lively session, peppered with flag waving by a rowdy group of Canadians, hoots, and applause, Ballmer spoke about a few other key areas that the company will focused on in the near future. "It's virtualization time for Microsoft," he said. "We're gonna make sure we democratize virtualization." Probably less than 5 percent of servers in the world are virtualized today, he said. "It's too darn expensive and too hard to manage. We intend to take major strides around addressing both of those."

He also said to expect more work from Microsoft in the search market. "There's an opportunity to knock the socks off in terms of innovation," he said.

Once Microsoft introduces some blog services later this year, Ballmer intends to ask its MVPs (Most Valuable Professionals) to switch their default searches to Live Search for one week. After that week, he'll ask for their feedback about what they liked and what they didn't, as part of a broad effort to improve Microsoft's third-place standing in the search market.

Another key area for the future of Microsoft is services. Overall, the use of hosted services worldwide is small, but Ballmer expects that in two to three years there will be an inflection point after which millions of people will use hosted services, he said.

There are 4,000 Microsoft MVPs around the world, and nearly 1,800 of them gathered in Seattle this week for an annual summit. MVPs are technology experts who provide feedback to Microsoft about its products -- Ballmer said they are his favorite group to address.

The topics Ballmer tackled during his talk were sometimes similar, but much broader compared to the big issue that he, Bill Gates and Paul Allen, Microsoft's founders, discussed while beginning to develop software at Harvard University. "Our strategy and mission have expanded," Ballmer said. In the very beginning, year after year, Allen would approach Gates with the idea to start building computers. And each time Gates sagely said, 'No, Paul, we're not hardware guys,'" Ballmer said. "We're on that same strategy 30 years later ... but we do have an expansive vision."