Microsoft's Ballmer asks investors for patience

Microsoft's CEO emphasized the importance of attracting talent and urged shareholders to be patient with the amount of time it might take the company to pursue its various business models, speaking during Microsoft's annual financial analyst meeting on Thursday.

"Vista doesn't get done by three people in a garage in three days," said Steve Ballmer. The company is making big bets, and some of them will take time to develop. "A great misconception in the tech industry is that most successes happen overnight," he said.

The two main areas that Microsoft aims to expand into are advertising and devices. While Microsoft once was largely defined as a desktop company, it has proved that it can expand into new sectors, Ballmer said. Around 18 years ago, Microsoft decided to get into the enterprise market and now is a major enterprise software company, he said.

"We are hell bent and determined to allocate the talent, resources, money, and innovation to become a powerhouse in the advertising business," he said. Microsoft is currently in third place in online advertising, behind Google and Yahoo, but he pointed to some Microsoft successes, such as deals to provide ads for Facebook and Digg as evidence of potential to improve that position.

On the devices side, products such as Windows Mobile, set-top boxes, Zune, and the Xbox, will be key to Microsoft's growth in the devices market, he said. "We need to have this business outlet for our software creativity to continue to grow and innovate and be relevant," he said. Microsoft will continue to use a variety of models in which it will provide a mix of software, hardware, and services, while sometimes relying on partners for some of those components.

Ballmer emphasized how important it is for Microsoft to continue to attract leading talent in order to drive these initiatives forward. In its fiscal year 2007, Microsoft hired almost 13,000 people, including 4,000 in product development areas, he said. Those hires continue to work in offices around the world, and they come from many different countries. As an example of the type of people working at just the Redmond, Wash., headquarters, 1,000 employees there speak Russian, he said.

Those workers will help bring about new innovations during the next 10 years, a period that Microsoft chairman Bill Gates said he expects will be more exciting than the past 30 years of the company's history. That's because the processing power of computers and the speed of broadband networks is enabling new types of applications. Computers aren't self-contained devices like they once were. Instead, storage and applications can be handled remotely, and users can access them from a variety of different types of devices, he said. That opens up the potential for new devices and applications, he said.

Advances in user interface models are key to those future innovations, he said. "Typing and using a mouse is only one way to interact," he said. Cameras, pen-based systems, and now touch-based user interfaces will lead to new possibilities in the future, he said.

He demonstrated Microsoft's Surface computer offering. Of all the demonstrations that he has done over the decades, this is one that he's been most surprised about how people respond, he said. People very quickly envision complex things that could very easily be done with the technology, he said.

Microsoft executives are spending Thursday talking to a group of financial analysts. The annual meeting comes a week after the company reported that for the first time its yearly revenue surpassed $50 billion. That milestone comes after the company recently took a $1 billion charge related to fixing faulty Xbox game consoles. It also comes at a time when the company faces the challenges of adapting to a marketplace that is shifting toward hosted services and away from PC-based software.

This story was corrected on July 30, 2007