Ballmer's list: Microsoft's CEO shares his top nine Microsoft growth picks

Ballmer's list: Microsoft's CEO shares his top nine Microsoft growth picks

Summary: Microsoft CEO Steve Ballmer has come up with a list of the nine "opportunities" where he believes Microsoft can sustain a half billion or more in new margin growth over the next three years.

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TOPICS: Microsoft
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Microsoft CEO Steve Ballmer has come up with a list of the nine "opportunities" where he believes Microsoft can sustain a half billion or more in new margin growth over the next three years.

On February 15, Ballmer shared that list with Wall Street analysts and shareholders who participated in a forecast-update meeting. Ballmer ranked from largest to smallest (in terms of revenues, not percentages) the product arenas on which he's counting for the biggest growth for fiscal 2008 through 2010. He told Wall street that none of these segments requires any new, massive investment for success.

Ballmer's guaranteed nine growth spots:

1. Windows client revenues from OEMs (PC makers and system builders)

2. "Desktop value" revenues derived from corporations (big enough to have an IT department). This sounded like Office revenues

3. Server revenues -- Windows Server, database, security products. Ballmer said he sees this as an arena where Microsoft has a good opportunity to grow its business vis-a-vis Linux

4. "Mature desktops" -- i.e., add-on revenues in corporations where there's already some penetration of Windows and Office. Client-access licenses are a key growth driver here.

5. Emerging market savings -- especially due to Genuine Advantage Initiative anti-piracy crackdown campaigns/mechanisms

6. Advertising -- especially via adCenter, Microsoft's online ad system -- and the properties fueled by it

7. Xbox, particularly in dollars derived from Xbox Live, attached hardware and attached software

8. Sales of Office to small businesses and consumers

9. Windows Mobile operating system sales to cell-phone and PDA makers

Ballmer also shared with Wall Street analysts on Thursday another list. This was of six additioanl opportunities where Microsoft may derive longer-term growth, but where he admittedly had "less visibility."

Ballmer's next six high-growth picks:

1. Savings from cutting piracy outside major corporations. Genuine Advantage anti-piracy crackdowns among small-business and consumers

2. Office Live

3. Business services, particularly the Exchange/Office Communications Server hosting that the company is testing with three or four large customers. (I believe this is a reference to the Microsoft "Energizer" pilot.)

4. Zune MP3 player and all the attached hardware/software/services which will accompany it

5. TV, particularly IPTV

6. Healthcare. Ballmer hinted that Microsoft will go public soon with an offering on the consumer side of healthcare. (I believe this will be the Windows Live for Healthcare service I heard about a while back.)

I was surprised that Windows Live -- supposedly one of Microsoft's most important strategic efforts -- didn't make either of Ballmer's lists. Ballmer did mention services, but talked about it more from a platform perspective, than as a bunch of individual point products.

"We need a strong services platform" akin to Windows client and Windows server, Ballmer told analysts. "We are building a cloud platform."

The cloud platform is Microsoft's evolving "Cloud OS" that will consist of a set of services that are an adjunct to Windows.

Would you add -- or cut -- anything from Ballmer's quick-hit-pick lists? Places you don't or do see Microsoft being able to count on strong revenue growth for the next three years?

Topic: Microsoft

About

Mary Jo has covered the tech industry for 30 years for a variety of publications and Web sites, and is a frequent guest on radio, TV and podcasts, speaking about all things Microsoft-related. She is the author of Microsoft 2.0: How Microsoft plans to stay relevant in the post-Gates era (John Wiley & Sons, 2008).

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15 comments
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  • It looks like he could have had a shorter list

    I think a total of 15 items (9 + 6) is overdoing it. From looking at the list I think it boils down to three items

    1. Windows
    2. Office
    3. XBox

    No surprises there then!
    bportlock
    • Why leave out servers?

      The server business has already produced more sales than Office in some quarters (when a new version of Ofice was introduced), and even though the profit margin is lower than that for Windows and Office (now), the line has been growing consistently.
      Anton Philidor
      • I didn't leave out servers...

        ... they come under "Windows", just like palm tops and phones (Windows mobile, Windows CE, Windows server, etc).

        The thing is that I think some of the divisions outlined in the article are weak, but on reflection I would admit a fourth business area - MSN & internet
        bportlock
  • Surprised with # 5 - "Emerging market savings...

    ...specially due to Genuine Advantage Initiative anti-piracy crackdown campaigns/mechanisms."

    This is huge a expectation and more of an afterthought, IMHO, because of increasing awareness that Vista is a dog. It's reactive marketing rather than proactive. It's the hind-most teat they are sucking dry and a place where they expect to increase Vista and XP sales by strong arming the customer. Granted, it's their prerogative but it reeks of cynicism and...fear.

    These guys are worried little ferrets storing their nuts for many cold winters to come.
    rayted32
  • The real strategy

    I find Mr. Ballmer's remarks rather meaningless as stated. I plan to lose some pounds by March 1st. And if on March 1st I tell you I weigh 160, did I loose some pounds or gain some pounds? Where is the benchmark? I would really like to know because I think Microsoft (and their stockholders) are in for some nasty surprises on some of those "growth spots". I think Microsoft will be lucky to stay flat on the desktop and server market. Two years ago when I kicked Windows the hell off of my computer and installed GNU/Linux, none of my friends even new of Linux. Now anyone I mention it to has at least heard of it. No one from Microsoft, least of all Mr. Ballmer, can even entertain the thought of GNU/Linux overtaking Microsoft on the desktop, so no coherent strategies will ever develop from them. I think what we are witnessing is Microsoft's primary strategy: Tell Wall Street that we are going to grow in these markets. I see it worked. Microsoft's stock was up $0.06 today.
    kozmcrae
  • Linux servers.

    This observation shows Microsoft's attitude toward Linux on servers, the open source operating system's success:

    3. Server revenues ? Windows Server, database, security products. Ballmer said he sees this as an arena where Microsoft has a good opportunity to grow its business vis-a-vis Linux.


    Microsoft doesn't see Linux as a competitor, but rather as a sales opportunity. The company is even willing to sell Novell's version, partly to block Red Hat, but more to build a connection to the customer that will allow later replacement of Linux.

    In another article today, Novell's CEO recognized that Linux's success has been mostly in replacing Unix, and that more effort against Microsoft was needed.

    Microsoft apparently doesn't expect such an effort to be successful.



    Here's a (facetious) suggestion:

    Novell should work on tools needed to facilitate migration from Linux to Windows.

    Microsoft wouldn't mind; another software company made a fortune with tools to migrate from netware to Microsoft products, and why should server migration be different.
    hat's probably why those tools are not on Mr. Ballmer's list.

    Now that would be a Novell product with a long and profitable future before it.
    Anton Philidor
    • Or

      "Microsoft doesn't see Linux as a competitor, but rather as a sales opportunity."

      Or Steve is simply referring to leveraging their desktop monopoly to increase
      margins on their server product.

      I expect windows server prices for the next version will see the same price hike
      the desktop windows did.

      Even so profits will come from Office and windows as always. I know, maybe they'll
      release a new version of Vista called Ultimate Ultimate at an even higher price
      point;-)
      Richard Flude
      • The various versions of Windows...

        ... may be about market segmentation.

        Microsoft devises acceptable prices for intended buyers. There's no reason Office should cost as much as it does, except that the market in which it sells is willing to pay Microsoft's price. As (often) modified by negotiation.

        Home users can't easily afford so much. With Works with Word and then the "Student" version (we're all learning every day, no?!) as stopgaps, Microsoft came up with an acceptably priced version for them.


        Microsoft is now, I believe, using versions of Windows the same way.

        The price increase you discuss was applicable to customers which will find it acceptable. They can be identified by the features intended for them.

        Where the costs can't increase, Microsoft sells new versions by encouraging replacement of older hardware, in addition to some new owners.


        The price of software needn't be $0 to be acceptable. The old principle is Charge what the market will bear, and Microsoft has found that different markets will bear different charges.
        Anton Philidor
  • One more that should have made it

    The new Windows Home Server.

    Yes, I know it's new and has some distance to go but I also think MS is on the right track here. If you haven't seen how the Media Extenders work for yourself please DO NOT bother replying.

    Tie this together with IPTV, home automation, home security, home health monitoring, and a hundred other things I see this as the future for the home user.

    Yes it will take a year or three to take firm root but it is going to happen.
    No_Ax_to_Grind
  • A HALF BILLION OVER THREE YEARS

    This would be an increase over current revenues.If you have to keep your computer running by erasing the hard drive then reinstalling the operating system every week and you see another surfer's computer you cringe.Let's talk!
    anonymous
  • Primary Top Number A-One Growth Candidate

    All the crap he spreads.

    Microsoft should furnish hip boots to everyone who attends a meeting where Mr. Ball-More is present.
    Ole Man
  • Ballmer's Technology Perspective on Wall St. Not Surprising

    I am not surprised that Steve Ballmer did not mention Windows Live at the investors meeting last week. My research says he's the "platform for today" guy, while Ray Ozzie is the "services for the future" visionary. These are not necessarily adversarial positions (and are probably not). Ballmer's job for now is to keep Wall St. happy while Ozzie remakes Microsoft (note that Ballmer did list Office Live).

    My concern from an investiment perspective (which will affect users as well) is that Microsoft hasn't yet decided between the two: enterprise-oriented technology provider or consumer-oriented service provider. So far it's like the Ballmer approach is more a fall-back position than a holding action. It's tough to get the cultural change needed for the Ozzie position.

    My favorite and now overused analogy: Microsoft has not decided whether it wants to be the electric utility or the company that makes the dynamos.
    DennisByron
  • Drug test?

    Doesn't Microsoft require employees to get drug tests? I mean, Zune? Office Live?

    I think Steve is smokin' crack!

    He's a bit redundant, too. He lists more than one "opportunity" based on Office and WGA.

    On the positive (and more realistic) side, he should have said something about Windows Home Server, because that looks like a promising product. I suppose it could be seen as being in the "client" category, both retail and OEM.
    ogmanx@...
  • Link to Win a Free Zune

    If anybody is interested in winning a free Zune I am helping to spread the word about a sweepstakes going on at MSN right now.

    People who make MSN their homepage have the opportunity to win a free Zune. The promotion can be found at http://homepage.msn.com/zune

    They are giving away 50 Zunes, and the contest closes on Feb 28, with random drawing of all 50 winners on or about March 14.


    [url=http://homepage.msn.com/zune]MSN Homepage Zune Sweepstakes[/url]
    WillFi
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