Missing Gates, Ballmer Plans for Leaner Times

On something of a promotional and publicity tour, Microsoft CEO Steve Ballmer has been giving a lot of interviews recently.

In an interview published online yesterday by the Telegraph, Ballmer said he missed Bill Gates. He’s also nostalgic for better economic times.

Ballmer said current market conditions are”by far” the worst period Microsoft has experienced during his 30 years at the company. He said spending on information technology by businesses has dropped between 15 and 20 percent, with consumer spending also taking a dive.

Ballmer isn’t sanguine about the prospects for a fabled V-shaped recovery, though he admits he’s not an economist. (In my book, that doesn’t disqualify him from rendering an opinion on the downturn. The economists have not exactly proved themselves infallible in their powers of prognostication.)

Said Ballmer of the economy:

“It doesn’t look like things are going to change any time soon, and we’re planning our cost structure on that basis . . . . My theory is that things have come down and I see them staying down and then slowly growing.”

It’s one of the few times Ballmer could be said to agree with Oracle’s Larry Ellison, who also foresees an L-shaped pseudo recovery.

Ballmer says the severity and persistence of the downturn have occasioned “cultural reformation” at Microsoft. What that means, he explained, is that the company is reducing costs about 10 percent, slashing 5,000 jobs this year and next — the first significant layoffs in Microsoft’s history — and is being more selective regarding the investments it makes in markets and products.

He said the search and database businesses will be important to Microsoft’s future success, but he appeared to treat Windows Mobile almost as an afterthought, which might be wise given the critical drubbing Windows Mobile 6.5 has received.

Citing Apple’s iPhone as a successful example of how a pleasing user experience can be created by balancing device intelligence and local storage with cloud-based services, Ballmer estimated that cloud computing will account for about 70 percent of future processing.

Conveniently for Microsoft, that sort of computing model would leave plenty of room in the marketplace for local operating systems, such as Windows, and for hybrid approaches to application delivery, including Microsoft’s Office.

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