SPENCER MICHELS: This is an interview with Steve Ballmer, Microsoft CEO. You know I was listening to you talk and you were talking probably over the heads of most of the people that I know. I'm just wondering who these new smart phones are going to be for.
STEVE BALLMER, CEO, Microsoft Corporation: The new phones, smart phones, hopefully with our Windows Mobile Software [...] will really be for everybody. They'll be for people at work and people at home. People in both their personal style, work style, lifestyle, they'll be for everybody and they'll be simple, simple, simple to use. But they're for everybody. When we're talking to the grand poobahs of technology that's one story. But the devices, the kinds of phones you see here they really have to appeal to literally billions of people.
SPENCER MICHELS: But many of my friends, I mean this is my cell phone. I hardly know how to use this thing. And, and so do many people, 40, 50, 60, 70 years old, they have a hard time using all these functions, and you're adding so many new functions to it. Is that going to work for the population?
STEVE BALLMER: I think so. I'm not going to try to claim that everybody's going to use every feature of a Windows Mobile Device, but what I will say is, in a sense it will be easier to get people to use more capability when you actually have a nicer user interface, a bigger screen, you can make more powerful things more simple to do with better user interface than you'd ever get on -- let me just call it an old feature phone.
SPENCER MICHELS: When you say more power, what is the power for? What are you going to do with this phone? What will the phone be able to do?
STEVE BALLMER: I'm out shopping, I can't find a pair of, you know, Nike shoes, size 12 in stock. I will go to my phone and I will check who's got it in stock and where's the closest place I can find them. I will do that on my phone. Somebody wants to tell me, hey look, the Rockies just won the World Series, here, take a look at a clip from the eighth inning when they scored the go-ahead run, boom, I'll be able to just get that, take a quick look at my phone and gab with a friend about it, no matter where I am. So a lot of things.
SPENCER MICHELS: But philosophically though, is that why you went into business? Is that why you went to college -- to help people get the Rockies' score?
STEVE BALLMER: I went to try to enable people to do things that they want to do, to make them more productive, that make their lives more fun, more connected. So yeah, I feel very positive about enriching people's entertainment and relaxation time as well as their productivity.
SPENCER MICHELS: Where's this field at right now? The big news in the last year was the introduction of Apple's iPhone. What has that done for you and what is the state of the competition?
STEVE BALLMER: I think all of the discussion in the last year has done nothing other than to serve to stimulate interest in the great capabilities that are coming to these very small form factor devices. And so then for a company like ours to build software, not just for one phone, but there's literally 140 different phone models in the market running Windows Mobile, that stimulated interest whether it comes from us or from the competition - it's really helping us drive sales.
SPENCER MICHELS: What percentage of the market is your goal at this point with smart phones?
STEVE BALLMER: The top phenomena that's happening today is phones that are more capable, so-called smart phones, are becoming a much higher percentage of the total phones on the market. That's a good thing for us and everybody else who builds either smart phones or software for smart phones. The second thing of course is we're trying to also enhance our market share. But if you ask me over time, 100 percent of the billion to two billion phones that get sold a year are going to be smart and I'd love to have many, many of them running Windows Mobile Software.
SPENCER MICHELS: Would you be happy with 10 percent of them?
STEVE BALLMER: I'd like many, many to be running Windows Mobile Software. Ten percent sounds like a small share to me.
SPENCER MICHELS: What about the advertising? How important is search to how much money you make from advertising on phones?
STEVE BALLMER: Well I think one of the more important applications that'll be funded through advertising is search, so search and advertising is very important. If I want to find a pair of shoes in stock, if I want to find a place to go eat that serves Italian food, if I want to find the closest cheesecake place to the movie, those are all kinds of search and advertising opportunities. And we're making a big investment in our general capabilities around search and advertising and for phones specifically.
SPENCER MICHELS: Does Microsoft make it so that somebody who is using their phone more or less has to use the Microsoft search function or will it be very easy if you wanted to go to Google, let's say?
STEVE BALLMER: Well we're certainly going to make it easy to use our services with our software. But we need general purpose capability in these devices, and whether people want to get something from, you know, Yahoo Mail or something from any one of the other service providers, we're going to make that simple.
SPENCER MICHELS: But isn't it to your advantage to get them to use your search function so that you can put advertising on that function?
STEVE BALLMER: Sure, sure. We need to have the best search, best mobile search, best advertising, very accessible. If we want people to buy these phones we're going to have general purpose Internet browsing capabilities so they can get to any website.
SPENCER MICHELS: Is there a difference there then with Apple's philosophy on that which seems to be changing?
STEVE BALLMER: No, I would say Apple tends to think about things much more sort of cordoned off and cocooned, that's what they did with the PC, that's what they're doing with their phones. Doesn't mean that they won't be successful, but it probably means they won't be a very high percentage of the phone market.
SPENCER MICHELS: You know Microsoft is so successful with Windows, you dominate the field, why do you even have to go into the phone business at this point? Why can't you sort of sit back and say we're doing fine?
STEVE BALLMER: I guess we could, but you know in a sense I would say we're, we are innovative, excited, excitable people with a lot of good ideas. And the next frontier I think that the end user, the consumer's interested in, is how do they bring together the best of what they know from their phone world, the PC world, from their work world, from the world of the Internet and online, and we're excited and stimulated to innovate in those areas.
SPENCER MICHELS: Is the smart phone the next big thing?
STEVE BALLMER: I think it'll be one of the couple or three very big next frontiers. We've got a lot of opportunities still with Windows and Office and what we're doing in the enterprise. The two new frontiers for us really are around Internet services, phones, and software that changes the TV viewing experience.
SPENCER MICHELS: What do you hear that Google is doing in this field?
STEVE BALLMER: Everything and so I don't -- I know nothing.
SPENCER MICHELS: Come on.
STEVE BALLMER: No, there are a lot of rumors and we all just have to wait and see what really happens.
SPENCER MICHELS: Does that concern you, Google getting into this?
STEVE BALLMER: There's already a lot of competition in this field. Our job's got to be to drive important innovation and to work very well with partners. And if we do that you know the sky's the limit for opportunity for us.
SPENCER MICHELS: Intel has this saying, "Only the paranoids survive." Do you subscribe to that too?
STEVE BALLMER: I think that's a reasonable description of the way things work in business. It's not really just about only the paranoids survive; only the people who are really driving forward do well in business. It's hard to sort of play defense and succeed. You have to continually be marching forward, doing new things, driving new innovation. That's the key to success, more than anything else.
SPENCER MICHELS: The idea of getting people to use your phones and software --you've got labs that are studying that. What are you trying to figure out and what are you doing with the information?
STEVE BALLMER: We've got to continually refine the user interface, the way people get access to capability. You asked me earlier, will people ever really use the full richness, the full power of these devices? To which my answer was, only if there's enough innovation to make it easy to get to -- and that's the kind of stuff we're studying in our labs.
SPENCER MICHELS: You've got focus groups in those labs too. I mean what are, what are they doing?
STEVE BALLMER: We have people watching people try to accomplish various tasks. Figuring out what's easy, what's hard, what appeals to people, mocking up prototypes of approaches and restudying and retesting because at the end of the day you're only as good as the kind of the accessibility you give the average consumer.
SPENCER MICHELS: Thanks very much.
STEVE BALLMER: Thank you.