At the WSJ’s D conference, Bill Gates and Steve Ballmer sit down for a lengthy chat that’s part interview, part argument and part product demo. The news: No news, says Ballmer: He acknowledges what Microsoft (MSFT) has already disclosed — that’s talking to Yahoo (YHOO) about possible tie-ups. But he insists that he’s not in the market for the entire company:
“We are not rebidding for the company. We reserve the right to do so. But that’s not on the docket.”
Then again, Ballmer repeatedly says that the MSFT/YHOO talks broke down because of price and price alone. So based on that logic, if Jerry and company (or his advisors/handlers/investors) come back with an acceptable offer, is he a buyer again?
The rest of the chat’s highlights include a pretty interesting walk through memory lane, where Bill and Steve discuss their time at Harvard, and early days at the company. They spent quite a bit of time talking about Bill’s reluctance to take any risks with his company’s money, which seems to have implications for the Yahoo deal. It was also interesting to see just how much Apple, popular adulation of the company, have gotten under MSFTs skin.
Less interesting: The Windows 7 demo, which revolved around bringing multitouch technology to the OS. Look for this in late 2009. Or if you can’t wait that long, go play with an iPhone.
Transcript follows: Apologies for the long run-up. We promise to skip the intros for future D chats over the next couple days.
We’re about to watch Bill Gates and Steve Ballmer show off Windows 7 at the D6 conference; we’re also hoping that Kara Swisher and Walt Mossberg are able to eke out some non-product news out of the duo — as in, what’s going on with Yahoo?
While we’re waiting, we can tell you about Bill Gates’ summer vacation plans: He and the family are taking a 10-week vacation in Europe this summer (the Euro-dollar exchange hasn’t disuaded him), splitting up their time in two different locations. Where are they staying? He wouldn’t tell the press scrum that formed around him at the D6 cocktail hour, and we can’t begrudge him that. We must say that we found him remarkably even-tempered about fielding questions from the likes of us, given that no one could hear a thing in that room.
Warming up now: Dow Jones CEO Les Hinton is introing the conference, to the strains of REO Speedwagon. Praises Walt and Kara. Acknowledges that Dow Jones now has a new boss, who will be speaking at D tomorrow. Now Kara and Walt, who walk on to “Gimmee Some Lovin”. They praise the attendees for showing up.
Now time to show off some gadgety goodies on stage. There’s some kind of Close Encounters light show in the back. Kara describes it as a “gay bar circa 1978”. Now she’s stumping for gay marriage. Winding up slowly to the event at hand with a video preview. Actually, we’ve seen this before, it’s the “Bill’s last day” video shown off at CES this year. This is supposedly the “director’s cut” – we’ll embed the old one below. We think the extensive Matthew McConaughey part is new. New pact with our readers: We’ll save you the pla- by-play until Bill and Steve show up onstage.
Here they are, ushered on by “Roland The Headless Thompson Gunner”. Getting in the way-back machine to talk about Bill and Steve’s Harvard days. Bill didn’t spend much time in class, because he didn’t like it, and Steve was too busy to go to many classes.
Basically we’re watching the tech equivalent of “The Actors Studio”, except instead of one bald interviewer, there’s one bald interviewer, and Kara. If there’s news here, it’s going to come later on.
Steve recounts Bill’s recruiting call to him when he was getting his Stanford MBA — Bill says that it’s too bad Steve doesn’t have a twin brother to go to work at Microsoft, then hangs up. Steve eventually gets the hint, and leaves after a year of B school. Upon getting there, Steve figures out company’s problem: “I did no business analysis. Every customer said their stuff was late. And every employee said they were always working” so he figures out they need to hire more people. But Bill didn’t want to expand beyond his bare bones staff. Steve quoting Bill: “I didn’t ask you to leave business school to bankrupt us!”
Bill proud of his fiscal conservancy, an approach he says the company has kept for three decades: “We’re one of the few companies this day that keeps enough cash on hand that even if our customers didn’t pay, it wouldn’t be a problem.” Steve grudgingly acknowledges that this approach is smart: They take no financial risk, to this day.
Walt passes on conventional wisdom: Bill is tech guy, Ballmer is sales guy. True? Not really, says Bill: There’s strategy, and both of them have been intimately involved in that. Also, Steve did tech, even though “I’m not an engineer! I’ve have never written a line of production software” – he ran the Windows 1.0 team. Steve on Bill: “As good a salesman as the company will ever have.”
Walt: The two were close partners, and then Bill becomes world-famous and Steve isn’t. Didn’t that bother him? Steve: “No, not a bit” Steve’s fame benefited the company. And Bill clearly the senior partner, “so it never had been a big deal to me at all.” What about realtionship now? Bill: “We had 8 years where Steve was handling bottom line, all the decisions,” and that was great. “I am the junior partner. I have been for the past 8 years.”
Steve: That transition took about a year to figure out. Bill’s transition out of the company will be easier, though. Bill will spend about one day a week there. “We’ll figure out the projects that Steve wants me to work on”. But still, Bill is chairman, largest shareholder. Doesn’t Steve want to consult with him? “Never. I’ll consult with my friend Bill Gates…I look at it that way, instead of the formal, oh, Bill’s chairman of the board.” Just about to get to present tense questions now….
OK. Please tell us about Yahoo. What’s going on?
Steve: “We made a bid for Yahoo. That bid was out for about 3 months. it became clear that there was a difference between the bid and ask…we have quite a thing about financial discipline. We are talking to them about some other things…We are not rebidding for the company, we reserve the right to do so, but that’s not on the docket.”
Wheeling out a whiteboard so that Steve can explain his thinking re: Yahoo. You’ll want to see the video for this. “It’s a scale business. To accelerate scale, it made sense for us to look at the Yahoo acquisition. I still think it’s a scale business” but we’ll have to get there in different ways.” Mentions Facebook relationship…
“Ongoing discussions” with Yahoo about a relationship. “If nobody else gets scale except for the current leader… ” you’ll have one guy telling you what to sell your ads for. Kara: “Like a monopoly.” Big laughs. But yeah, Steve says, that’s right.
Bill, what do you think, in detail. “Yeah, I thought it was good.”
Bill, what do you need to do in addition to scale? Search important. Shouldn’t just think about search in the way you think about it today, when you just get a bunch of links. Debate about whether MSFT search share has dropped. Steve: “We need innovation both at the search level, and at the ad platform level”…Walt: Is “cashback” innovation? Is it just a gimmick? Steve: “It’s a business innovation.”
Steve describes Microsoft’s online advertising/search plan: Bascially, spending money and resources and being relentless. He hits his hand repeatedly to make his point. He is getting a bit worked up here. “People think that in our business great things happen overnight. They don’t happen overnight.” They require patience and being tenacious.
Now on to OS. Steve: “With 20/20 hindsight, would we have done things differently? Sure.” But says Vista a success, not a failure. “Application compatibility, did we do it exactly right?” Well, not exactly. But it was a tradeoff for security. Bill: “We need to do better” but we say that about all of our products. “There are a lot of things that very successful about Vista.”
Steve: Windows 7 demo, likely to ship, “within three years of general availability of Windows Vista”, late 2009. Showing off some multitouch capabilities, a la “surface” products Microsoft has been showing off (or the iPhone). Basically, if you’ve played with the “big arse table” that Microsoft has shown off, you’ve got a sense of what’s coming. Will require new hardware investment for most consumers: Need both multitouch screen and a digitzer.
Kara: What’s the point? They show off some practical applications: “Concierge app” adds bells, whistles to maps. It’s an example of an app that could be written, not a Windows 7 feature. Walt: Can I do things on screen that I could do with a mouse? Sure. Kara notes iPhone-like similarities.
So Bill, what does multitouch “mean” for future of computing? Is this the way people will use computers going forward? Bill: Today almost all interactions with PC are keyboard, mouse. But going forward, speech, vision, ink – all of those will become huge.
Walt: I assume Apple has one more turn at OS before you get this out the door. What if they do this? They already have multitouch consumer product on market (iPhone). “Is there a risk that the work you’re doing here will look like they got there first?” Steve: Windows 7 PCs will look fantastic!
Kara talks about Steve Jobs’ ability to turn around excellent products quickly, by snapping his fingers. Ballmer gets testy, notes that Apple only coming out with a handful of products, while MSFT works with hundreds of applications. “Our partners will sell 290 million PCs; Apple will sell 10 million PCs”. But Walt won’t let him skate, arguing that old Windows machines started up faster than new Vista machines.
Steve: “If what you’re trying to do is really have a the variety that people on the planet want, our model works very well. And we’re trying to improve it.”
How do you feel about the Mac/PC ads. Bill: “People are pretty rationale about buying machines, beyond ads, in terms of picking what works well for them”. This is getting reasonably heated, because Walt continues to needle him about Vista, and Apple. Bill: “You’re kind of repeating yourself.”
Reader Q: “Do you feel that unsuccessful pursuit of Yahoo has tarnished image” Steve: “No”.
Walt Q: According to one research report: RIM is number one in smartphones, picking up share. Apple in second. You’re in third. Does that worry you? No, says Steve: Because actually we’re selling more smartphones than anybody but Nokia. Steve and Walt having a debate about categories, and descriptions.
What about Google phone? “Google comes late, and with no experience, so we’ll see.” What about advertising? “Nobody knows what the model is, so we’ll see.”
Audience Qs: Opportunity for advertising in MSFT core products? Neither Steve or Bill very interested in it, Steve is fairly dismissive. Bill less dismissive, but describes MSFT’s caution about pushing advertising into core productivity tools.
MSFT seems kind of me-too lately. So what’s your new “big hairy audacious goal”? Bill describes “questions” – basically, what will the future look like in various incarnations? And we’re really being ambitious about that.
More details on MSFT/YHOO. How frustrated where they after talks broke down? Bill: “I’ve been totally supportive of everything that Steve has done.” Steve: “I’m not frustrated at all… the fact that we couldn’t agree on some of the issues – we couldn’t agree on price, basically” doesn’t mean that we’re upset with them.
Slide’s Max Levchin (wearing Slide t-shirt) wants to know what they think of apps, basically. And apps in the cloud, undermining MSFT core biz: Steve – there’s going to be compromise between what browser can do, which is limited, and the flexibility of what the cloud offers. (Implicit here: MSFT core biz isn’t going away). Bill: Not a big Facebook app user.
Esther Dyson question: Why not make for-profit healthcare your next big hairy goal? Steve: We are working on healthcare, via software. “It’s a big deal for us”. But our involvement begins and ends with software.
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Video: Multi-Touch in Windows 7