The Ballmer and Chambers show--no fireworks

Microsoft CEO Steve Ballmer and Cisco CEO John Chambers are holding court with interviewer Charlie Rose in New York City, discussing how they view the market transition, Google, coopetition and industry cooperation. The two industry titans both view the market as in an early stage transition, with lots of potential to reap rewards.

"I believe you catch industry transitions right or get left behind," Chambers said.

"We are on the verge of a big market transition," Ballmer said. "We talk about collaboration, ecommerce and Web 2.0. It's all great until you meet the customer." He described meeting with the largest container shipping company and how it relies on a paper-based system to get cargo on ships as evidence of the market opportunity.

Chambers gave his 'Cisco loves voice and video' view of the future and the market transition underway: "It's about to become much easier to use technology and communicate in video and voice rather than just keying into a keyboard." For Chambers, the transition to digital collaboration is the next big thing, and Microsoft is also investing heavily on the software side. Microsoft Sharepoint collaboration server, for instance, was an $800 million business in the last fiscal year.

Regarding competition between the two companies, Chambers said, "Steve and I have a common view of where the industry is heading. We are both salesmen at heart. Customers ask and we find a way to do it."

"We're excited about what we can do with Microsoft," he added. "The days of friend or foe are over."

Ballmer made similar remarks about working with Cisco and competing at the same time. "We don't want to let engineering egos get in the way of interoperability," referencing Cisco's NAC and Microsoft's NAP as competing protocols for security policy enforcement on desktops.

Rose asked the two about Google as a competitor.

"I'm not up here with Google talking about that theme. It's fairly and purely a competitor. Google has done well in search and advertising, and has ambitions in lot of areas and so does Microsoft. Are they going to choose to be telecom company--watch the auction." He said Microsoft doesn't have an interest in becoming a telecom company.

Chambers said regarding Google, "I love anyone who loads network. Google is neither friend or foe."

Rose asked Ballmer about growth of the Windows operating system and office over the next five years. He responded that dollar growth for Vista and Office will continue, but there will be faster growth in advertising, servers, mobile phones, Xbox and other areas.

Rose also probed Ballmer about acquiring Yahoo. Ballmer said that it would be expensive, but acknowledged that Microsoft could afford it and gave the diplomatic answer. "Yahoo is an independent company and has direction it is going. We have an independent view and we are making progress.. We have a good relationship with them, sophisticated cooperation and competition, and we will continue to find ways to partner that make sense."

Rose pushed him for a definitive answer. "If we were, I wouldn't tell and if we weren't I wouldn't tell you. I won't say a darn thing...it's the respectful no comment could ever give," Ballmer said.

A question was asked about the impact of the volatile current economic environment. "My personal opinion--I can't control or predict the world financial markets. I focus on making innovation happen better than the guys we compete with, which is more in my control."

Chambers said that in the next three to five years, a gradual increase in productivity will occur because of the market transition he spoke about earlier, Chambers said.

Following the Rose interview, Charlie Giancarlo of Cisco and Bob Muglia of Microsoft demoed some of the areas of common labor, such the Microsoft Office Communicator working with Cisco back-end infrastructure and Windows Media Server with Cisco Linksys network devices.