Microsoft CEO Ballmer regrets slow start in mobile devices and services

Microsoft Corp Chief Executive Steve Ballmer has made an impassioned plea to investors to support his vision of the world's largest software company as a unified devices and services powerhouse in his swan song before Wall Street.

Ballmer, who in August said he planned to step down within 12 months, told investors and analysts in an annual meeting on Thursday that Microsoft had a bright future, despite missteps under his 13-year tenure.

"We have the tools. There's economic upside here. In the long run, we are almost uniquely poised to seize the opportunity," he said, in a typically high-volume presentation. "Today I'm speaking as an investor. You all own Microsoft stock, cheer for it, for God's sake."

Ballmer, who took over from co-founder Bill Gates as CEO in 2000, did acknowledge that under his leadership the company was too focused on Windows to realize that Apple Inc's iPhone was revolutionizing computing.

"If there's one thing I regret, there was a period in the early 2000s when we were so focused on what we had to do around Windows that we weren't able to redeploy talent to the new device form factor called the phone," said Ballmer.

After losing ground to Apple and Google Inc in mobile and internet arenas for the last 10 years, Ballmer in July launched an ambitious reorganization focused on "devices and services." He announced his retirement only six weeks later amid pressure from some discontented shareholders.

Ballmer said the top layers of that reorganization had taken effect, but the new functionally organized groups were at different stages in working out exactly how they will be structured. The company had no comments on the progress of the board's search for a new CEO.

"It really was a fundamental shift from running a set of separate business units where we tried to make connection points to running a company that is essentially one integrated entity," said Ballmer, attempting to explain his vision.

During four hours of presentations, which were interrupted for about half an hour due to a power cut, Microsoft executives expanded on Ballmer's idea, explaining how the company would continue its push into making its own hardware - following the deal to buy phone maker Nokia - and would stress services rather than products, while keeping individual consumers in mind rather than chiefly concentrating on businesses.

Qi Lu, the executive in charge of applications and services, hinted that Microsoft's popular Office suite of applications would at some point be available on the iPad, a market that one analyst put at $2.5 billion a year. He said Microsoft was currently working on "touch first" versions - as opposed to traditional keyboard and mouse versions - of core Office applications such as Outlook, Word and Excel which would at some point feature on devices running Windows, and would be available on other platforms when they were ready and "financially sensible."

Chief Financial Officer Amy Hood explained that Microsoft would start reporting quarterly financial data in five new blocks based around themes rather than products such as Windows or Office. Hood said the new reporting structure - which essentially separates consumer and commercial business, and then divides revenue streams between hardware and software licensing - would begin at its next earnings in October, and was aimed at giving more insight into the company's economic approach.

Ballmer closed the presentations, in Bellevue, Washington, on an optimistic note as he prepared to transition from CEO to an interested bystander who owns 4 percent of the company.

"The company needs to produce every day. We've got a little headwind but we've got plenty of upside," he said. "The ultimate measure of a place has got to be what happens with profits. As a shareholder I will hold us accountable for continuing to focus in on good short-term results and at the same time making investments that give us an opportunity to generate someday another $10, $15, $20, $25 billion of incremental profit."

© Thomson Reuters 2013