Microsoft's Ballmer talks search, virtualization

Microsoft CEO Steve Ballmer on Thursday evening emphasized the company's ambitions in search and virtualization while offering his perspective on the current nervous U.S. economic situation.

Speaking at a Churchill Club event in Santa Clara, Calif., Ballmer also dished out his perspectives on rival Apple Computer and acknowledged -- but did not detail -- a cloud computing effort dubbed Project Red Dog.

In the search space, Microsoft remains a small player but is a much larger player in software-based advertising market, Ballmer said.

"In search, we [have] got about a 9 percent share in the U.S." he said. It will take a while for the company to be a larger player, he said. Microsoft offers search via its Live Search site and is competing with search giant Google.

"While we have made a lot of progress, we still have a lot of work we need to do to try to fundamentally reinvent the search experience, the search business model," Ballmer said. The company has improved the core relevance of its search results and differentiated in areas such as image and news search. Microsoft, said Ballmer, may be unique in its ability to compete with Google in search and search-based advertising.

With properties such as MSN and Hotmail, the company is No. 3 in advertising-based software. "We sell over $3 billion a year of advertising," Ballmer said.

Asked if Microsoft's five-year plan in search once included acquiring Yahoo, Ballmer acknowledged that this proposed acquisition, which did not come to fruition earlier this year, was likely part of the plan when he last spoke at the Churchill Club two years ago.

Ballmer also cited the newness of the virtualization market and how Microsoft sees an opportunity to democratize this space. "Numerically, virtualization is in a very early stage," with fewer than 5 percent of servers virtualized, said Ballmer.

Microsoft, he said, has had a tremendous reception to its work on the Hyper-V virtualization technology and the company's systems management platform. "I see real opportunity to bring virtualization to a much higher percentage," of the world's servers, Ballmer said.

Desktop virtualization also is possible in a number of ways to improve the desktop, he said. There could be application-level virtualization streamed to the client or virtualization at the presentation layer, for example, said Ballmer. Also, hypervisors present a technique to boost the desktop experience, he said.

Commenting on the health of the IT economy, Ballmer said the United States is harder hit than other parts of the world and the business side more impacted than the consumer market.

"Our industry is not immune to what goes on in the global economy," Ballmer said. But "people still see a certain buoyancy in the market," he said.

Nobody is quite sure how bad the fallout will be from either the credit crisis or bailouts, said Ballmer. He added that at least for now, people he talks to are feeling better than if all they did was watch CNBC.