Is Windows near end of its run?

Steve Ballmer, the chief executive of Microsoft, has his hands full. The
next version of the Windows operating system, Vista, is finally about to
arrive--years late and clouded by doubts that it might violate antitrust
rules in Europe.

Ballmer, 50, has been deeply involved in the discussions with the European
competition authorities.

Windows Vista and Office 2007, according to industry analysts, may be the
last time Microsoft can really cash in on these lucrative personal computer
products, as software is increasingly distributed, developed and used on
the Internet.

Friday, Microsoft announced that Vista would be shipped in late January and
expressed confidence that it would pass regulatory scrutiny.

In fast-growing consumer markets, Microsoft is playing catch-up. It trails
well behind Google in Internet search. Next month, Microsoft will introduce
its Zune music player, in an uphill effort to take on the Apple iPod.

At Microsoft, Ballmer must adjust to being alone at the top, as his friend
and longtime partner, Bill Gates, eases out of his company duties to work
full time on philanthropy.

In a meeting this week with editors and reporters of The New York Times,
Ballmer answered questions about Microsoft, his job and the future of
software. Following are excerpts:

Q: What was the lesson learned in Windows Vista? After all, it wasn't
supposed to ship more than five years after Windows XP.
Ballmer: No. No, it wasn't. We tried to re-engineer every piece of Windows
in one big bang. That was the original post-Windows XP design philosophy.
And it wasn't misshapen. It wasn't executed, but it wasn't misshapen. We
said, let's try to give them a new file system and a new presentation
system and a new user interface all at the same time. It's not like we had
them and were just trying to integrate them. We were trying to develop and
integrate at the same time. And that was beyond the state of the art.

Video: Ballmer says Microsoft is persistent
"The bone doesn't fall out of our mouth easily"

Video: Ballmer: Software will be 'click to run'
Services will be delivered via the Web but run on a PC In the future, will
the software model change? Will the Internet, for example, be the way most
software is distributed?

Ballmer: That will happen. It'll happen from us. It'll happen from
everybody.

Doesn't that mean that software product cycles are going to be much
shorter, months instead of years?

Ballmer: Things will change at different paces. There are aspects of our
Office Live service, for example, that change every three months, four
months, six months. And there are aspects that are still not going to
change but every couple of years. The truth of the matter is that some big
innovations--and it's a little like having a baby--can't happen in under a
certain amount of time. And, you know, Google doesn't change their core
search algorithms every month. It's just not done.

Is Vista the last operating system of this era? That is, the last operating
system in the traditional sense of being this monolithic software product?
Don't these Internet changes open the door to Windows a la carte? After
all, you have different versions of Windows now for personal computers,
cell phones and handhelds.
Ballmer: Windows is a little different because Windows manages the
hardware. It's got to come with the hardware and manage the hardware. For
the thing called the PC--the thing we think of as having a big screen and a
keyboard--there really is one infrastructure for supporting hardware, for
supporting application development. It's not 100 percent monolithic. But
it's almost 100 percent monolithic.

Can we talk about Europe?
Ballmer: Beautiful place. I lived in Brussels for three years as a kid. I
do love Brussels.

I was thinking of what seems to be the continuing conflict--the disputes,
penalties and fines--over how Microsoft designs Windows and what features
you put in the operating system. Is there a way around that problem?

Ballmer: First of all, I wouldn't call it conflict. We really have--no, I
mean this genuinely--have been having a constructive dialogue. Now, no
regulator, not in this country nor in Europe, is going to give you a gold
star that says, I will attest that everything in Vista is OK. The
Department of Justice is not going to do that, and the European Union is
not going to do that. At the end of the day, we can get a lot of guidance.
And then we have to make the call and we have to take the risk. We really
just have to decide whether we think the thing is compliant. It's not
really their issue. It's kind of our issue in an odd way.

In other news:
Apples for the students seen lifting Mac sales
Newsmaker: Taking 'Second Life' to the next level
Sharp expanding beyond silicon in solar
News.com Extra: Apple files patents for iPhones
Video: Bring HDTV to your laptop

With Bill Gates making the transition out of day-to-day involvement at
Microsoft, what is the biggest challenge you have to overcome?

Ballmer: Well, there are sort of two. First, it's not like Bill's written
every line of code or designed every product or done anything like that for
many, many years. But Bill's been an incredible contributor. If Office 2007
is a great product, give Bill 3 or 5 or 10 percent of the credit. We have
to make sure that--whether it's 5 or 7 or 10 percent--we get those values
someplace else. And second, with Bill people have understood that we're
committed to long-term innovation. Bill's been emblematic of that. We've
shared that vision all along the way. But I think I have to pick that up.
Because people want to know that the buck-stops-here person is committed to
continuing to invest and do things.

Several of the areas Microsoft is betting on for future growth--Xbox, Zune
and ad-supported Web software and services--are consumer markets. How do
you think the consumer perceives Microsoft?

Ballmer: All our surveys will tell you consumers think the world of
Microsoft. At the same time, you have to go win the consumer in each area.
I'll give you an example. When it came time to name Xbox, there was
certainly a class of people who wanted to have Microsoft and/or Windows
more prominent. They all lost. And it was a wise choice. Not because
Microsoft is bad. But it wouldn't have meant what it needed to mean to that
audience. And Zune could have been Microsoft music system or Microsoft
entertainment system or Xpod, I guess. But again, we thought the experience
was different and it was worth giving its own identity. So I think we have
a good seat with the consumer, but we have to prove ourselves every time as
our competitors have to do, too, by the way. Google has a good brand. It
didn't help them a lick in video.

What do you see as the most significant changes in how people use software?

Ballmer: I think one pervasive change is the increasing importance of
community. That will come in different forms, with different age groups of
people and it will change as the technology evolves. But the notion of
multiple people interacting on things--that will forever continue. That's
different today, and we're going to see those differences build. You see it
in a variety of ways now, in social networking sites, in the way people
collaborate at work, and in ad hoc collaboration over the Internet. You see
it in things like Xbox Live, the way we let people come together and have
community entertainment experiences. And you'll see that in TV and video.
It's not like the future of entertainment has been determined. But it's a
big deal.


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