Microsoft Chief Executive Steve Ballmer started Microsoft’s 2009 analyst meeting with a few hardballs.
He said Microsoft has stumbled on its mobile phone effort, but it’s going to continue with a “software only” strategy that’s the right way “to get 50, 60 percent market share.”
Ballmer said early confusion about netbooks and mobile Internet devices has passed and now people realize that they’re PCs – PCs that mostly run Windows, not Linux as Microsoft investors feared.
“A netbook is a PC,” he explained. “Nobody wanted any netbooks that didn’t have Windows on them. So we went from nothing to about 95, 96 percent attach (preloaded on netbooks), and I’ll tell you the other 4 percent probably have Windows on them also.”
Then he jumped into the Yahoo deal, which he said needs further explanation.
“Nobody gets it,” he said of the deal.
Ballmer explained how the deal will immediately benefit Microsoft (and Yahoo) by scaling up Bing.
“The partnership in and of itself creates economic value. not just on the future promise of improved product, improved share and improved revenue,” he said in a hoarse voice, jabbing a finger in the air to emphasize his points. “It creates an immediate opportunity for synergy.”
With Bing scaling up, Microsoft’s cost of running search should be lower as a percentage of sales, he said.
Ballmer also noted that Microsoft’s costs will only be a few hundred million over the next couple of years, but Yahoo will get “well over 50 percent of the economic value” of the deal.
“I was kind of surprised by the market reaction,” he said.
Microsoft stock is about flat this morning, at $24, and Yahoo’s down 5 percent to $14.30.