With Gates Away, Ballmer Takes The Stage

During its annual meeting with financial analysts, Microsoft's CEO talks of building on Vista while growing the company's Internet advertising and entertainment businesses.

Aaron Ricadela, Contributor

July 27, 2006

3 Min Read

Microsoft is on track to distribute the first "release candidate" of Windows Vista by the end of September. RC1 will replace the current beta 2 for companies evaluating the forthcoming operating system.

Microsoft plans to leverage Vista and the upcoming Office 2007 suite to sell add-on products, said CEO Steve Ballmer, speaking at Microsoft's annual meeting with financial analysts in Redmond, Wash. Vista and Office 2007 "are the engines, not just of short-term revenue growth," Ballmer said.

Ballmer opened the meeting in place of chairman Bill Gates, who traditionally kicks off the conference. Gates, who disclosed last month that he would leave his daily role at the company in two years, was vacationing in Africa. Since Gates relinquished many of his technical duties last month, Ballmer said he's taken on a new, unaccustomed role as "the primary champion of innovation in the company.

Microsoft is trying to get faster growth out of its desktop software business, gain market share in Internet advertising, and make entertainment products such as Xbox and the upcoming Zune digital music player another "pillar" of the company's business, Ballmer said.

In addition, Microsoft is branching into new vertical markets, such as health care. On Wednesday, it acquired clinical software called Azyxxi and much of the team that created it from a Washington, D.C. hospital for undisclosed terms. The software collects and displays documents and medical images from a variety of computer systems to help doctors view information more quickly.

Ballmer said he's continually peppered with questions from investors about how the company will expand its traditional software business, expand on the Internet, and "get our stock price to do something interesting." Shares of Microsoft have been trading in a narrow range for the last five years. Last week, Microsoft began a $40 billion stock buyback program designed to boost its share price.

As Microsoft pushes into new areas, it's also trying to broadly release the much-delayed Vista by early next year. Speaking at the conference, Kevin Johnson, co-president of Microsoft's platforms and services division, said the company plans to publish a first release candidate of Vista during the current quarter, which ends Sept. 30.

Microsoft in recent months has said it plans to release versions of Vista for enterprise customers in November, and ship consumer versions in January. Johnson said there's currently "no information" that would indicate Microsoft will miss those deadlines. But "we will ship the product when it is ready," he added. "We'll just take it milestone by milestone."

Gates said earlier this month that he was "80 percent" sure that Vista, which has undergone years of delays, would be ready for broad release in January.

Johnson forecast that revenue from desktop versions of Windows would grow by 8% to 10% during the fiscal year that began July 1, to $14.3 billion to $14.5 billion. During Microsoft's 2006 fiscal year, desktop Windows sales were $13.2 billion.

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