Ballmer seeks to justify online services push

Steve Ballmer, speaking at the annual analysts meeting, defends Microsoft's plans to invest more in online services.

Microsoft CEO Steve Ballmer sought to justify to financial analysts the losses from the company's online services group and to defend plans for increasing investment in the group.

Ballmer stepped in to speak for Kevin Johnson on Thursday at the company's annual financial analysts meeting. Johnson has been president of the Platforms and Services division, and his plans to leave the company to serve as CEO of Juniper Networks became public on Wednesday.

"I wanted to make sure that people making announcements in our online business were actually going to be here in three weeks," Ballmer joked. "We wish Kevin the best at his new assignment at Juniper."

Johnson has been head of Microsoft's online business, which recently reported a US$488 million loss in operating income for the fourth quarter, more than double the US$210 million operating loss the division saw last year.

That loss is insignificant when examined in light of the division's potential, Ballmer argued. "This year our [online services business] loss was about 5 percent of our operating income, and yet the amount of economic value we might create ... is 40, 50, even 60 percent or more of our total economic value," he said.

The amount of investment that Microsoft plans to plow into online services is relatively small from an overall company standpoint and will offer a real opportunity to grow the company's market value, he said. "I think it's a very good risk return," he said.

It's unclear even to Ballmer how long the company might have to continue this level of investment in online services. "How long is that going to go on? I'm not sure. But we're going to need to continue to invest until we get greater scale in this business," he said.

Ballmer spoke briefly about the company's discussions, currently on hold, with Yahoo, but seemed to take pains to exclude Yahoo from a short list of companies capable of innovating search. "Google and Microsoft are really the only two companies that can do this," he said, after describing the need for changes in the search market. "This category is ripe for innovation," he said.

Beyond search and advertising, Ballmer also argued that the shift to online services will help Microsoft's enterprise business. As Microsoft begins selling hosted offerings to businesses, it has the opportunity to offer support and service level agreements, for a price. "We see the overall pool of opportunity increasing," he said.

Microsoft has been chasing Google's significant lead in the search business and trying to catch up to other enterprise vendors that are shifting to offering services rather than software.

Join the newsletter!

Error: Please check your email address.
Rocket to Success - Your 10 Tips for Smarter ERP System Selection
Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Nancy Gohring

IDG News Service
Show Comments

Brand Post

Most Popular Reviews

Latest Articles


PCW Evaluation Team

Andrew Teoh

Brother MFC-L9570CDW Multifunction Printer

Touch screen visibility and operation was great and easy to navigate. Each menu and sub-menu was in an understandable order and category

Louise Coady

Brother MFC-L9570CDW Multifunction Printer

The printer was convenient, produced clear and vibrant images and was very easy to use

Edwina Hargreaves

WD My Cloud Home

I would recommend this device for families and small businesses who want one safe place to store all their important digital content and a way to easily share it with friends, family, business partners, or customers.

Walid Mikhael

Brother QL-820NWB Professional Label Printer

It’s easy to set up, it’s compact and quiet when printing and to top if off, the print quality is excellent. This is hands down the best printer I’ve used for printing labels.

Ben Ramsden

Sharp PN-40TC1 Huddle Board

Brainstorming, innovation, problem solving, and negotiation have all become much more productive and valuable if people can easily collaborate in real time with minimal friction.

Sarah Ieroianni

Brother QL-820NWB Professional Label Printer

The print quality also does not disappoint, it’s clear, bold, doesn’t smudge and the text is perfectly sized.

Featured Content

Product Launch Showcase

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?