Ballmer, Gates on Microsoft's Future

RoadFever writes: "At the Microsoft shareholders meeting, CEO Ballmer acknowledged they may have a popularity bug. "We understand, based upon the fact that our industry didn't rally to support us, that we need to change the way we interact and relate to our industry," Ballmer said. There's a summary article in the Seattle Times and more stuff on the Microsoft investor relations page. Will words translate to action? Well, the company might want to start by toning down the habit of taking credit for every innovation: "Really, the reason you see open source there at all is because we came in and said there should be a platform that's identical with millions and millions of machines," Gates said." The question-and-answer session near the end of the meeting has the most juicy quotes.

Comments

Driving people to open source

[90XDoubleSide]

"Really, the reason you see open source there at all is because we came in and said there should be a platform that's identical with millions and millions of machines,"

So wat he's saying is that the mass adoption of their inflexible software has driven people to create open products that will meet their needs, or am I misinterpreting him ? ;)

Re:Driving people to open source

[Ami Ganguli]

I was trying to figure this one out myself. My best guess is that thinks Open Source requires commodity hardware, and figures that Microsoft helped to create the commodity PC platform.

I'll grant that MS helped to create the PC (although it wasn't entirely their doing by any means - Intel and IBM certainly had a role to play), I'm at a loss as to why this would be relavent to Open Source. Free/Open Source software tends to be much more cross-platform than proprietary stuff, so it's a pretty bizarre statement.

Could it be that Bill still doesn't get this whole Free Software thing? Can he really be that clueless about the non-Wintel universe?

Re:Driving people to open source

[Exedore]

So wat he's saying is that the mass adoption of their inflexible software has driven people to create open products that will meet their needs, or am I misinterpreting him ? ;)

Yeah, that's kinda like Osama bin Laden patting himself on the back for doing his part to beef up airport security.

Re:Driving people to open source

[Null_Packet]

I think what Bill is saying is that he feels the Open Source movement is riding on the coat-tails of Microsoft's success. I think he is implying that Microsoft broke ground and created a standards-based system of software (Office, Windows, etc) and the Open Source movement is using some of his original ideas and yet claiming to be at odds with MS.

As far as Bill being clueless- remember any large Corporation's PR stuff is like a big card game. Bill and Co. are very, very smart no matter how evil they may or may not be. Don't think for a second that Bill hasn't thought through the whole OSS movement.

DUH!!!

[ackthpt]

We understand, based upon the fact that our industry didn't rally to support us, that we need to change the way we interact and relate to our industry," Ballmer said.

Like they haven't already killed off a lot of competitors, knifed in the back a lot of partners, and set their sights on other industries, which BTW could be customers of partners and competitors? The problem with being an 357.142851428 Kg. gorilla is, you can sit anywhere you like, but after you've done so, who's willing to be their friend and stick their neck out for you? Even some things PR can't fix.

Popularity bug?

[DrCode]

He's right on that. A local radio station has been running the following spoof of an XP commercial every morning:

(Madonna music in background)
Q: With XP, can I burn CD's?
A: Yes, you can.
Q: Can I send email?
A: Yes, you can.
Q: Can I create an internet virus?
A: Yes, you can.
Q: Can I download female-on-female animal porn?
A: Yes, you can.
Q: Can I install XP myself without help?
A: Not f***in' likely!

Pay a g**d damn dividend.

[FatRatBastard]

Forget all the anti-trust stuff and "we don't play well with other" crap for a minute. In terms of "investment relations" what MS needs to do is pay out a god damn dividend. They're sitting on a pile of cash, and the days of constant double digit growth are behind them. They are going to have to face up to the fact that they are a grown, mature company and their stock price is going to act accordingly.

That's what's driving their licensing debacle, BSA audits, etc. They've hit the wall in terms of market penitration on the desktop, they never achieved the "slam dunk/home run" domination of the server market they thought they would (not to mention where they do dominate there-- small print, file, web servers they've got linux/BSD nipping at their heels) and the X-box is going to put a hit on revenues for the next few years even if its a runaway success. Other than Web Sevices, which at best are a few years away, they have no room for massive growth.

So, if the stockprice ain't going up all that much they better start paying out on all that cash they're sitting on, or some investers are going to be none too happy.

(then again, I'm a code jockey, what the f**k do I know about finance)

Re:Pay a g**d damn dividend.

[humphreybogus]

I'm not much of a code jockey, but I know a bit about finance, having worked as an investment banker and venture capitalist.

1. Paying a dividend is not required by the IRS, the SEC or any federal law, as far as I know.

2. Paying a dividend exposes your money to double taxation: the standard corporate rate (paid at the time the profit was earned), and then your personal tax rate (including city, state, and federal). This is money out of your pocket as much as Bill's.

3. Whether Bill Gates ownes 25% of MSFT is irrelevant to the decision to pay a dividend. If I own one share, I'd rather receive the full value of my 1/# shares ownership of Microsoft's cash assets, rather than shave off an additional percentage to go to the government. Paying more taxes is not in the interest of Microsoft's shareholders, no matter how large their holdings. If anything, more stock held by management is a good thing--it aligns the incentives of the managers with the incentives of the stockholders. In a company where the management owns very little of the shares, you are far more likely to see decisions made that sell out shareholders (the owners) to the benefit of the current management (with foolhardy acquisitions, for example). This is a classic problem in economics, and it's why you rarely see small, owner-managed companies being as stupid with their money as large companies often are.

4. If Microsoft can't find profitable uses for the cash, it should buy back its stock. That, as one poster wisely pointed out, will increase the value of each share, as the same pie is divided by a smaller number of shares. Besides, the value of the cash on hand increases the book value of a single share of Microsoft--in other words, each share of ownership now entitles you to your proportional share of each additional dollar in MSFT's bank account, a gain in value that cost you nothing.

5. For most stockholders, the capital gains tax rate is lower (often far lower) than the personal income tax rate. As a result, you'd rather get paid back for your investment in Microsoft in stock price appreciation than tax-affected cash.

6. People buy equities (shares of stock) because they represent a future stream of cash flows generated from a business. In this way, buying the stock of a business is no different than buying a bond: both represent a stream of future payments, and the price you pay now depends on the magnitude, frequency, and likelihood of those payments. Thus, buying the stock of a company that doesn't pay dividends is like buying a zero-coupon bond (a bond that doesn't pay periodic interest, but that reaches full face value at maturity). The net result is that market adjusts the price you paid for the stock or bond to account for the nature of the payouts. Instead of valuing the stream of cash payments you receive in the form of dividends, you value the discounted cash flows that Microsoft retains.

But Microsoft shouldn't just sock away money in a money market account. If it can't find opportunities that offer a greater rate of return than a money market account or bonds (both vehicles which are available to individual stockholders as well), then it should buy back stock. (Technically, the rate-of-return hurdle for new lines of business or new acquisitions should be Microsoft's cost of capital, the rate at which it can "borrow" money from the capital markets.)

I hope that helps.

Popularity bug?

[91degrees]

Surely he means popularity "feature"!

Yup, give credit to IBM

[sterno]

The PC platform that Gates is touting was created by IBM, not Microsoft. Sure, Microsoft software was running on all of them but what made it appealing was the low costs of the hardware which came about by IBM's rather loose licensing policies. It took a very long time for the PC to become vaguely usable, but it remained cheap and ubiquitous which is why it eventually came to dominate.

But Microsoft's position in that domination was, at best, an accident. They were in the right place at the right time and did a good job of screwing IBM. Credit to them for that, but not much else.

Just one thought

[jd]

I don't know if it's "normal business practice", but I have never seen such artistic dancing around the questions.

If you were to distill the -essence- of what was said (especially on women on the Board and in the company), you'd end up with exactly nothing. Sure, they may be concerned about this, or feel strongly about that. I'll allow for that possibility. But feelings don't equate to action. They're just feelings, the same as "happy" and "sad".

Even the sweeping apparently-grandiose statements made wrt "Open Source" and "Free Software" really reduce to nil. Sure, they may have been a factor in the popularity of "Open Source". But there are probably as many coders inspired by a rainbow, or a fascinating geological formation.

In short, I have to give credit for an amazing non-statement, which said exactly nothing and offered nothing. However, the credit has a value of $0.00.

Why there is no g**d damn dividend.

[WillSeattle]

In answer to the question of why MSFT doesn't pay a "g**d damn dividend", it's pretty simple.

Look, MSFT is a shell company, one that permits Bill and Paul and a few other major shareholders to buy other companies. By maximizing the capital growth and having no dividends, they reduce their effective tax rate to 8 to 10 percent. Then they sell off a few shares and pay the 5 year capital gains tax on them, or sell the high purchase shares and keep the low purchase shares, thus getting a capital loss.

That's why there's no dividend.

Until MSFT becomes more like GE, where no single shareholder owns more than 20 percent of the stock, this will never change.

This is their way of avoiding taxes. People like me buy a mix of stocks - some dividend and some non-dividend - we use the non-dividend stock to go long on capital gains and thus reduce our tax hit (realized income) and use the dividends from the other stock (or bonds, PERQs, SPARQs, money market) to provide enough cash flow for expenses.

Thus we pay less tax than the working poor do. My realized income is very small. And so is Bill's and Paul's.

Unless you change the tax system, we'll keep doing things like that. There is no incentive to realize earned income, under the current system.

-

Bill's Right

[gdyas]

Gates also took some credit for the genesis of open-source software. He said Microsoft made it possible by standardizing
computers: "Really, the reason you see open source there at all is because we came in and said there should be a platform that's
identical with millions and millions of machines," he said.

Well Bill, you're right. You are the reason for open-source software. Just not for the reasons you think you are.

Dick.

Re:Juicy Excerpt

[pubjames]

This is so funny. These guys really don't get it at all, do they? Dangerous for them.

In the pre-software vision is that there would be no jobs in the software industry, there would be no testers, no engineers, no taxes paid, or anything of that notion.

Well Bill, all of those things can still exist under an open source model, but it's a different model to yours. Can't you see that?

If there's a key learning for us, we can't have free software,

So, Steve, you're saying you're older and wiser than IBM? Than HP? Than Compaq, Sun, Dell, Intel and all the other companies that are contributing to the Open Source community and releaseing code under the GPL? I think not. They get it, you don't.

It's still in the early phases, but we are massively mobilizing to try to stimulate communities, support communities, and really, if you will, borrow one from their playbook.

Can anyone point me to any evidence of this? Really? I've honestly tried to find it. Are there disussion boards where developers can openly discuss Microsoft technologies, and MS engineers will chip in with comments? I've looked for that, couldn't find it.

The clock is ticking Steve, Bill. Let me spell it out for you: YOU DON'T GET IT! If you don't get it soon, you're going to slowly die. Tick-tock, tick-tock, tick-tock.

Billy is Afraid of the GPL!!

[DG]

Take a gander at this excerpt: (emphasis added)

MR. GATES: Let me start out, really the reason that you see open source there at all is because we came in and said there should be a platform that's identical with millions and millions of machines, and the bios of that should be open to everybody to use, and all the extensibility should be there. And so it was very predictable that once we had gotten the PC going, and going and gotten hundreds of millions of machines out there, that it had always been sort of free software and the universities would flourish and there would be more of that. We certainly accept free software as part of the software ecosystem. In fact, there's a very virtuous cycle where people do free things, some people find that adequate, sometimes companies will take that work and turn it into commercial products, those companies will hire people, pay taxes. And so you see the free software and the commercial software existing together.

There is a particular approach that breaks the cycle called the GPL that is not worth getting into today, but I don't think there is much awareness about how so-called free software foundations designed that to break that cycle

In terms of getting people excited about software and building communities around them, yes, that is a key to success. Nobody has done that more effectively than we have with Windows. Are there ways that we can do that better? Are there aspects of this where we're actually learning from all our different competitors out there? I think it's fair to say yes.

In the free-software vision is that there would be no jobs in the software industry, there would be no testers, no engineers, no taxes paid, or anything of that notion. So I certainly don't agree with the full sort of free software foundation view that there should be no jobs in this area, and that the kind of commercial advances and risk taking that we've been able to do you can't get that, you can't get things like speech recognition on a tablet computer coming out of that kind of a paradigm. You can get things that follow along, you can get some smaller software, and so we embraced the idea of the free software paradigm and the commercial software paradigm moving forward in really a self-reinforcing way.

Sounds like ol' Billy has seen his doom coming, and it's the GPL!

Take a good hard look at that rambling morass of a quote, and you see the strategy (and the enormous depth of self-delusion) that will be driving Microsoft forward. Free-as-in-Beer, Good! Free-as-in-Speech, Bad!

In Bill's world, Free Software is fine as a toy, an interim solution, and educational tool, but it takes a company to turn it into something useful! Nothing good ever comes out of the commons!

Except, of course, the "Microsoft Commons". Funny, when was the last time community work became part of Microsoft, except by force?

And gee, where have we seen this attitude before?

How about in the actions of every tin-pot political dictator who tried to buy off the goodwill of his oppressed subjects with free goodies! The barbarians are howling at the Gates, and Bill is offering Microsoft's shareholders bread and circuses!

Funny thing Bill, those dictators don't have much of a track record....

Stallman (for all his faults and foibles) is the Martin Luther of the information age, and bill is the Pope. Quick - who can name the Pope who was in service when Luther nailed his manifesto to the door of the cathedral?

Me neither.

New Windows "Community"

[Kiaser Zohsay]

and I encourage you to go up to Microsoft.com and check out our community areas. It's an area where we have sort of massively mobilized. It's still in the early phases, but we are massively mobilizing to try to stimulate communities, support communities, and really, if you will, borrow one from their playbook.

I can see it now... Microsoft meets Slashdot... Microdot, news for sheep, stuff that we think matters

Internet virus?

[SecurityGuy]

There are no internet viruses. That's Microsoftese for MSTDs (MicroSoft Transmitted Diseases). These "internet viruses" are, for me, nothing more than academic interest as I watch them bounce harmlessly off software which isn't both bug ridden and misfeatured to the point that any script kiddie can run their code on your box.

Repeat after me. MSTDs. Lets get it to catch on. Just imagine how pissed Bill will be. :)

The Open Source comments

[shanek]

From the meeting transcript:

Let me start out, really the reason that you see open source there at all is because we came in and said there should be a platform that's identical with millions and millions of machines,

This is laughably wrong. RMS made the GPL and the Free Software movement in the early 80s, when Gates was still piddling around with DOS and saying that 640K should be enough for anybody. The actual movement started even earlier; the concept of open source predated commercial software.

In fact, there's a very virtuous cycle where people do free things, some people find that adequate, sometimes companies will take that work and turn it into commercial products, those companies will hire people, pay taxes. And so you see the free software and the commercial software existing together. There is a particular approach that breaks the cycle called the GPL

Gates apparently doesn't know what a "cycle" is. A cycle, by definition, has to link back up again with its origins, in this case, free software. Microsoft breaks the cycle by incorporating open source code into, for example, its TCP/IP stack. The GPL restores the cycle by requiring developers to give their changes back to the community.

In the pre-software vision is that there would be no jobs in the software industry, there would be no testers, no engineers, no taxes paid, or anything of that notion.

Tell that to Red Hat.

Here's a telling quote from Ballmer:

If there's a key learning for us, we can't have free software, it's kind of inconsistent with the goals of most people in the room.

In other words, Microsoft is against freedom in software. Remember, we're talking free speech, not free beer. So all this stuff about "Freedom to Innovate" is nothing more than a thinly veiled apologetic for Microsoft's business practices.

Maybe what really happened was this...

[opkool]

I interpret what really happened in this other way:

BALLMER: After 20 years of backstabing, copying other's innovations, playing Mafia-games with IT companies, abusing our consumers and stealing children's bubblegum, we have gotten a slap on the wrist by the DoJ. Surely this means something.

GATES: If I might add a few words...

BALLMER:, Sure, Bill, go on.

GATES: Our impressive innovation Laboratories -MS-iLabs , (c) (R) - show that actualy being nice to customers can help selling our product...

AUDIENCE: (gasps, mutted comments of surprise, a few horror screams)

BALLMER: Be quiet back there! It is true! You can get the results in ExcelXP format at dubya-dubya-dubya-microsoft-dot-com-slash-ilabs-sl ash-results

GATES: In fact, in a demo-test carried over at Poukeespie-upon-Avon (Yorkshire, UK) with a cautive population, we discovered that WindowsXP-SE was being bought by people that had no history of verbal-and-phisycal abuse by part of our marketing representatives.

SOMEONE IN THE AUDIENCE: Don't you think that having both legs not-broken could help? I mean, last year, in the ASF file that you showed us about training methods for Microsoft Certified Marketing Representatives , they were being trained in "MS-Leg-Breaking-As-A-Buying-Stimulous 101". Maybe we should change this module to "MS-**ARM-TWISTING**-As-A-Buying-Stimulous 101" instead of playing nice...

AUDIENCE: Yeah! yeah! that sounds more sensible!

GATES: Please! Calm down! I personally worked with the MS-iLabs environment definition and I can assure you that the results are true!

AUDIENCE: but... but.... We Want Blood! We Want Blood! We Want Blood!

CATS: All Your Base Are Belong To Us!

CATS: Make Your Time!

BILL: HAHAHAHA

BALMER: Take Off Every ZiggyXP!!!!