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Microsoft Pri0

Welcome to Microsoft Pri0: That's Microspeak for top priority, and that's the news and observations you'll find here from Seattle Times technology reporter Matt Day.

June 30, 2011 at 6:28 AM

Steve Ballmer pre-announces 2011 earnings for Microsoft

Thumbnail image for Thumbnail image for USC_Commencement ballmer.JPGThis story ran in the print edition of The Seattle Times on June 30, 2011. -Sharon Pian Chan

For the first time, Steve Ballmer took a public swing at critics who say he should step down as Microsoft chief executive.

“You tell me if I lack energy, conviction or we’re not driving all the change we need to drive,” Ballmer shouted after a lunch attendee asked his reaction to an investor’s call for his resignation.

Ballmer spoke at a civic-group luncheon Wednesday at the Westin Hotel in Seattle.

Investor David Einhorn, a hedge-fund manager who used to be one of the largest shareholders in the Redmond company, called in May for Ballmer’s departure, according to several reports. He blamed Ballmer’s presence for Microsoft’s stagnant stock price over the past 10 years.

In his speech to the Seattle Rotary Club, Ballmer also talked about the difficulty of bringing an NBA franchise back to Seattle and the importance of state investment in transportation and education.

It also sounded like Ballmer pre-announced Microsoft’s earnings for the 2011 fiscal year, which the company is scheduled to report July 21.

“There’s a reason why we’ll do almost $70 billion in revenue this year and we’ll make over $20, whatever, $26, $27 billion in profits,” Ballmer said.

Microsoft said after the speech that Ballmer had been referring to $26 billion to $27 billion of operating profit, not net income. Analysts were expecting an operating profit of $27.2 billion and for Microsoft to bring in $69.8 billion sales for fiscal 2011.

Another attendee asked about Ballmer’s interest in buying an NBA team to play in Seattle. Ballmer led an investment group in 2008 to try to keep the Sonics in Seattle, but the team ended up moving to Oklahoma City and becoming the Thunder.

“The challenges there are real-estate challenges, honestly. KeyArena would not be able to have an NBA team in it that could be competitive,” Ballmer said.

“The simple economics are if you don’t have a nice enough building, you can’t sell enough of the right kind of tickets at the right kind of prices. If you can’t do that, you can’t pay the players the right amount of money and you can’t compete and you can’t fill the seats.”

He said it takes $300 million to $500 million to remodel or build a competitive arena, and that the money needs to come either from real-estate investment or from the city, county or state, which were not interested in contributing.

“I’m sure we’ll someday wind up with that problem solved and with a basketball team back here in Seattle.”

Ballmer tasked the real-estate industry to make it happen. “If you want to get on that problem, I’ll offer to buy the first season ticket.”

Ballmer called Seattle the most important technology hub after the Bay Area and said he hopes the state will invest in transportation and education to keep it competitive.

“After Silicon Valley, it’s hard to cite any place in the world that is as vibrant a tech community as the Puget Sound,” he said.

Ballmer said he looks forward to replacement of the Highway 520 bridge and said he wants to see the state focus on schools.

“We’re all going to have to do our part to support and do what it takes to improve the K-12 education in the state,” he said.

Microsoft recently gave $25 million to build a college-scholarship endowment for students in Washington. Microsoft chief counsel Brad Smith chaired a higher-education task force for Gov. Chris Gregoire that led to the endowment and to new legislation giving colleges the ability to set their own tuition.

On technology, Ballmer identified three areas of innovation to watch:

“No. 1, your computer will learn to recognize you, even more than it does today. It will see you. It will recognize your gestures, your voice, your fingers,” he said.

Microsoft built Kinect, a camera that senses motion and sound, for the Xbox video-game console, and will bring it to Windows for use with computers.

Secondly, “My computer will actually learn to understand me,” Ballmer said. He said that, if he told his computer today, “Get me ready for my trip to the Rotary,” nothing would happen, but that tools such as Bing search are changing that.

Then he mentioned cloud computing, where software and data are stored at remote servers run by companies like Microsoft and Amazon.com. People access the software through computers, mobile phones and televisions.

“The cloud is essentially a buzzword that refers to using the Internet to connect you even more seamlessly to the people and information that’s important to you,” Ballmer said. “Those phenomena, in the large, will be the source of so many new companies … that it will be a really exciting time over the next five, 10 years.”

Ballmer said Windows remains very important to Microsoft. “If you cut me open and saw what was inside? Windows,” he said. “It’s just Windows, Windows, Windows.”

Update 7:25 a.m.

Microsoft’s stock is up 21 cents, or 0.8 percent in early trading Thursday to $25.83 per share. The Nasdaq composite is up 24, or 0.9 percent, to 2,764 in early trading.

(Photo of Steve Ballmer speaking at USC commencement in May: Nick Ut / AP)

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