Bill Gates focused largely on future innovations to come out of Microsoft as he presided over his last annual shareholders meeting as full-time chairman, leaving his colleagues to address questions about the threat from Google's Android, piracy in China and the affects of the European Commission's antitrust ruling.
Gates is in the process of shifting his time away from running the software giant and toward contributing more time to his charitable foundation. Next year, he'll serve only part time as chairman of Microsoft. Gates and other executives addressed a crowd of about 500 people at the meeting, held in Seattle this week.
In addition to innovations Gates cited like unified communications and software plus services, future growth at Microsoft will be driven in part by advances in emerging economies, particularly in Brazil, Russia, India and China, said Steve Ballmer, Microsoft's CEO. Three years ago Microsoft's revenue from those regions was around US$900 million, he said. By the end of 2008, he expects those regions to generate US$3 billion for the company.
Stamping out piracy in China, which is one of the biggest sources of pirated software in the world, will be key to that growth. Microsoft executives said they're feeling confident about progress there. "We still have as an industry a big challenge in China, but I also believe that we're a good deal more optimistic about the future in dealing with that problem than we were two or three years ago," said Brad Smith, Microsoft's general counsel.
Recent conversations with leaders in China leave Ballmer satisfied that the country is continuing to work to stamp out software piracy. He recently spoke with a government minister in China who is in charge of all the biggest software companies in China. Those companies are under an edict from the government to make sure all the software they produce is legal in the next 12 to 24 months, Ballmer said. "I believe they're very serious about it. I believe they're not quite sure how to even do it, which is an interesting fact and it's something the company has to work on in conjunction with the Chinese companies and the Chinese government," he said.
In Europe, Microsoft is pleased to have worked out a way to comply with the European Commission's antitrust ruling, which includes licensing some of its intellectual property. "It gives us some assurance and confidence that we're in compliance with European law," Smith said. Microsoft recognizes that the ruling will also affect some other Microsoft products, in addition to the Windows server product that the company has initially complied with, he said.
In addition, Smith noted that the agreement "in effect is setting rules of the road for the entire technology industry." That means some of Microsoft's competitors should also have to implement similar intellectual property licensing processes. "We'll have to watch as our competitors need to do a good job too," he said.
Microsoft is similarly watching its competitor Google from several perspectives, including the mobile market, particularly since Google's recent announcement about a new mobile operating system platform that will become available on phones next year. "When you get one of your competitors who announces they will have something that doesn't have the clearest way to make money for them or for their partners and it's coming in nine months, you have to say, 'a: they're a serious competitor because they're a serious company and b: let's keep doing the things that we're doing very successfully'," Ballmer said. He expects 20 million Windows Mobile phones to sell this year and he pointed to the many years that Microsoft has already been working on its mobile platform.