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Brier Dudley's blog

Brier Dudley offers a critical look at technology and business issues affecting the Northwest.

May 1, 2006 at 11:27 AM

Ballmer weighs in

So who was Steve Ballmer’s Friday memo targeting — employees or skittish investors?

The April 28 memo, first reported today by Bloomberg News, was Ballmer’s explanation of why Microsoft is spending heavily and his reassurance that the company isn’t frittering away its billions. It also provides more details about the War on Google and the advertising push that I mentioned in today’s column.

“Throughout our history, Microsoft has won by making big, bold bets. We’ve always taken a long-term approach, striving to solve the hardest problems in computing and working to realize huge new opportunities in vast new markets through investments in innovation across the broad spectrum of human endeavor,” he wrote. “I believe that now is not the time to scale back the scope of our ambition or the scale of our investment. While our opportunities are greater than ever, we also face new competitors, faster-moving markets and new customer demands.”

The current big bets include Xbox, Internet services and its adCenter advertising network.

Why the negative reaction among investors? “The bottom-line result of these investments created a shift in our near-term profitability that was a surprise. The change in our stock price reflects this.”

The Google mention: “Further development of adCenter is key — our goal is to create the Web’s largest advertising network, giving us an engine that will enable us to monetize our services and compete against Google.

The outlook: “These bets will pay off in FY07, when we’ll see revenue that is expected to reach $49.5 to $50.5 billion, for a growth rate of 12-14 percent. Longer term, our opportunities for growth are phenomenal, and I expect the next five years will see results that eclipse the performance of the last five.”

But why explain all this in a memo to employees that trickles into the press? Why didn’t he jump in and clear up questions during last Thursday’s earnings call when things started going south?

Comments | Topics: Microsoft

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