Steve Ballmer Speech Transcript – Digital Nervous System Seminar

Remarks by Steve Ballmer, Executive Vice President, Sales and Support, Worldwide Business Strategy Group

Digital Nervous System Seminar
Stockholm, Sweden, November 7, 1997

Steve Ballmer: Thanks, Mr. Ambassador, and thanks to all of you for taking your time today.As I was listening to the quote from the Economist, it was sort of a dreary quote, a sad quote, you could say, about the state, I think, of technology use in many companies around the globe.It is a pleasure to have a chance to be here in Sweden.It’s a pleasure to be in a country where there is actually very advanced use in Sweden, and where it will be meaningful to this audience for me to say in advance: If you have any questions, if you have any comments, if you have any thoughts, I’m [email protected] feel free to send me your thoughts.I do read my mail myself.

Our purpose in bringing everybody here today is to have a chance to set a bit of a framework for what it really means to try to derive value out of information technology to help you guide, run and drive your businesses.It is very easy — for me, too, it is very easy in any discussion of the PC, of technology — to jump off fairly quickly into a bunch of more specific, technical, business and competitive issues, and lose sight of the real focus, which has to be on how do you in your business gain value.

To do that I think requires an understanding, of what the landscape is, not only for your company, but the landscape for your customers:what will the world look like, what opportunities does that open up, how do you need to think about these things?

So I’m going to start with sort of two fundamental things that are happening today in the computer and communications market, which does impact you, I am sure, and you need to sort of have this in your mind.You should think through not only internally, but in terms of how you relate to your customers, where you can derive strategic value out of IT.Those two things are very simple.

One:The PC revolution continues in force.This year worldwide there will be 80 million personal computers sold.In the United States there will be over 28 million personal computers sold.And just to give you a perspective, that’s twice as many PCs as cars and light trucks.The PC really has become a broad device.The US and Sweden are countries which lead in this aspect.Forty percent of US households, for example, have a PC.Something like 15 percent of US households have access to the Internet.In American business, about 75 percent of desktops or white collar workers would have a PC.Even here in Sweden, that’s somewhat lower, maybe 60, 65 percent.And that number’s as low as 50 percent through most of continental Europe.

But the good news is the innovation, the performance improvements, the price reductions, have driven this market from literally zero when I started with Microsoft, to 80 million units today, continues.

Gordon Moore, who founded Intel, talks about something called Moore’s Law.And Moore’s Law basically says that computers get twice as powerful at the same price every year and a half.Just think out, five years from now, you’ll be able to buy a computer that’s 32 times more capable for the same $2,000, $1,000, depending upon what your budget is.Or you could simply buy a cheaper computer.That means more penetration, more households, more desktops, and more power.Some of you may say, we don’t need more power, we’ve got plenty of power.But if we’re really going to make these computers accessible to more and more people, we need the power, we need the power to allow the computer not to just behave the way it does today, but the computer has to start to listen, talk, learn.You will be able to speak to your computer.It will recognize your words.It will understand those words.It will be able to take action on your behalf.It will recognize your behavior patterns and tailor itself to you.And as we get the power, the software can mobilize to make the PC a device that we can think about putting into more places, for more applications, making it more accessible and more important to the way people work, both in the home and in business.

The other core thing that’s happening in the world today is an absolute change in the communications area.A lot of people focus in on telecom deregulation.I think that’s a fantastic thing.It doesn’t happen to be my personal area of expertise, but it dovetails well with the explosion in the Internet.In the United States, in the Nordic countries, and now as telecom gets deregulated I think throughout the rest of the world, the Internet will mean to communication what the microprocessor meant to computing.The microprocessor commoditized computing, made it accessible at a price that could make it broadly available.The Internet will do the same thing to communications, make high bandwidth, connectivity and communications cheap, broadly available, in homes, to branch offices.

And so the way you think about people interacting really will be able to change quite significantly in this world of the Internet.

So commoditization of computing, commoditization of communications means a world in which you have many, many, many, many intelligent devices, which don’t make the same burdens on people today in terms of what they require the user to know, that can communicate with people any place, anywhere, any time.That is a fundamental mindset shift in terms of the way you should think about IT in your organization, and the way you should think about engineering, the relationship between your business and your customers.

Now, Microsoft as a company is really in a fairly unique position.We think to help, you’ve gained some of this value.I’ll talk to that a little bit, but I want to just give a quick summary.

Microsoft’s a company of about $11.4 billion in our last financial year.We get our revenue quite broadly.We get about a little over a third from the largest enterprises.We get about 40 percent or so from smaller and medium sized companies.We get about a quarter from people in their homes.Why is that interesting?I think that puts us in a position to really help understand not only what’s going on in the big business market, but also to help you understand what’s going on in the home, in the consumer area.Because at the end of the day we all sell to customers, and our customers are either other large businesses, medium companies, small companies.It’s important to have that perspective.

We’re a company that’s in four businesses: We sell our Windows software and Office software for people on the desktop; we sell server software that can help you automate your business operations, and I’ll explain that, particularly in the context of the digital nervous system; and we’re a company that is making investments in products that help people really lead what we like to call a web lifestyle.

I think, and Sweden is one of the few countries — I’ve been all over continental Europe this week, frankly, and I talk about a web lifestyle, most places and people go “Huh?What do they mean?What could a web lifestyle be?”

Coming in from the airport last night I saw a sign, that I forget, “” so I think people here in Sweden certainly have a much greater sense of the importance of turning to the Internet for fundamental information about what’s happening in the world, what’s available, et cetera.

As a company, we’re really investing in three key things to try to bring value.One is R & D.We’ll spend about $2.6 billion this year in R & D, which makes us now the number five US company.Only IBM, AT & T, Ford and General Motors spend more now than we do in research and development.And fundamentally that research and development budget is all about taking those four businesses and continuing to add more value for lower prices, about continuing to make those products not only more functional, but making the everyday things that you do with them simpler and easier and more possible.It’s not about 100 new business areas; it’s really about focusing in, in a few key areas.

Okay.The digital nervous system.Our focus for today, and frankly, what I think will wind up being one of the two or three key new sources of value from IT to your business.So you should say to yourself first, what is a digital nervous system?The phrase doesn’t really many anything, but it is a phrase that came to Bill Gates’ mind as he was preparing for a seminar that we did for CEOs from around the world in Seattle in May.Now, we’ll hear later from Lars and he was certainly in the audience.But Bill was wracking his brain, how do we express the value that IT can deliver to, you know, the kinds of companies here in the room.And he came upon this phrase, digital nervous system.

If you think of the human body, what does our nervous system let us do?It lets us hear, see, take input.It lets us think and analyze and plan.It lets us make decisions and communicate and take action.Every company essentially has a nervous system: Companies take inputs, they think, they plan, they communicate, they take action.The question is how does the nervous system in your company operate?Is the IT infrastructure really adding value?

Computers really grew up adding value in two ways: First, with the big mainframes and minicomputers, and they were good at processing orders and, you know, shipping goods and materials, super important stuff.But that’s a little bit like moving muscle.It’s not like the analysis and thinking and planning.PCs came along and computers got very good at helping individual people plan, think and analyze.Now we need to bridge the gap, we have to bridge the gap between moving the muscles and individuals thinking, to companies thinking and companies taking appropriate action.

So when we talk about the digital nervous system concept, that’s really the direction in which we’re driving.

Here’s a question to pose to yourself: If one of your competitors changes a price, how long does it take for that information get communicated back to a headquarters operation?How does that information move through the organization, and do your people have the tools they think they need to analyze and say, “Okay, what if we changed price, what if we only changed it on this product, what if we did it on a couple products, what if we did it on this service, what if we only did it in this geography?” Can they dig it, can they find the historical information that they need to answer those problems, and communicate back with the salesmen and test propositions with the sales force?Can they communicate to product development about whatever they might need in terms of product improvement or price reductions in manufacturing in order to go ahead?

In other words, if there is a nervous system in your companies, how important is the PC?Is the communication electronic?Is the data available in a way that you can access it from the same PC that you use for your own personal planning and communication?When a decision gets made, how do you communicate the decision — how important is the electronics — if you need to train people on how to implement the decision, how important is the computer infrastructure in that training process?

Those are the concepts that we are talking about with the digital nervous system.

We find as we travel around the globe that some companies really do start to have the beginnings of what I would think of as a digital nervous system, particularly, companies that have a high percentage of engineers who have been open and more flexible in terms of their use of computers. But we have very few companies we see around the world where engineering, marketing, sales, manufacturing, finance and perhaps even more importantly executive management, really participate in the digital nervous system.

We’ve been working with McKinsey, and you’ll hear from Bill Meehan later today, on a study to try to understand where IT value comes from.And certainly there’s a lot of interesting observations that came out of that work.But it only served to reinforce our view that today we have a problem that IT is not delivering in many organizations the full value that it can.People are therefore focusing in only on its cost.But I will tell you from our own experience as a company — and we do some things well and we do some things poorly as a company — the most important investments Microsoft makes in our own company in IT are in the digital nervous system.We don’t have a complicated manufacturing process, we don’t have a complicated transaction model, we don’t have a complicated customer service model.So the investments we make are really in knowledge, planning, communications and the tools that enable that.And I want to help you understand these things perhaps a little better.

One of the important things to recognize is that technologically, we all have most of what we need to implement a digital nervous system.Most of the businesses in this room, the companies already have modern personal computers on most desktops; you have a reasonable network in place, maybe not unified, maybe not broadly enough available, but you have the start of what you need.Most companies in this room, you have Internet connectivity, which is essential.A digital nervous system should extend outside the company for communication and knowledge, not what you just have inside your own organization.

A good digital nervous system must have good electronic mail.And I can’t even begin to tell you how fundamental I think that is to the value people can get out of IT.Microsoft has a set of products that can help with this.We’ve worked with a number of customers and have some experience with people who are rolling out these kinds of systems.

I had the opportunity when I was in Japan earlier this year to visit with a CEO of a Japanese liquor company, Suntory.Mr. Tori — Tori-San, Suntory, I didn’t realize there was a joke there — but Mr. Tori, who is the CEO of San Tori, came into the meeting and he had but one real question.He wasn’t interested in technology and IT.He says, “I hear in the United States you guys are putting all these PCs on all these desks, and I’m out there competing every day with the likes of Coca Cola, et cetera.I want to understand, what is all this information that people want to really look at and see and understand.”

And they already know how to run their manufacturing and do this and do that, but he really wanted to drill in on the kind of value people get.And we initiated a project with that company, which is one of the largest consumer products companies in Japan, to help think through how to give better visibility to their salesmen who are calling on bars, who are calling on liquor stores, who are calling on grocery stores.How do they give them better visibility on what’s selling, how it’s selling, and how do they get better communications back into the head office?There are so many scenarios that are rich, but he, as the CEO took a personal interest to make sure that the company stayed competitive.He knew the focus had to be on what the PC delivers to the individual, because that was a thing that he knew his company had yet to invest in, in a very rich way.

I want to go through some of what I consider classic scenarios of a digital nervous system.First is communication.I, for example, receive about 100 pieces of electronic mail a day.About a third of those come from customers and business partners.Some people I know, some I don’t; some have suggestions, ideas, some have random comments, but nonetheless valuable.I get all of my information, news clippings come to me electronically, so when I plug in, in the hotel at night, I get all of the news clippings from the Wall Street Journal, the New York Times, the Los Angeles Times about Microsoft and our competitors electronically.All of our financial information lives on our corporate digital nervous system, and I have that e-mailed to me so I can take it with me on the airplane, in a very nice way.So that comes automatically.And then there’s just many discussions, decisions.Sometimes people are just letting me know something.But the electronic communication is important.

Electronic communication, though, is more than just mail.For example, I needed to work on this presentation in conjunction with Magnus Andersen and our team here in Sweden.How do we do that?Do I put the presentation together, I send it to Magnus, he looks at it, he sends it back with comments, or is it more efficient for me to get on the telephone and for Magnus and I to be able to literally change the presentation where he and I are looking at the same screen and making the same changes?Well, clearly the latter is better than the former.

How do we do discussions?Let’s say a product development team at Microsoft is trying to get input from the field.You don’t really want all kinds of mail floating hither and yon; you want a place that people can put their suggestions, just e-mail in their suggestions and have those be very easy for the product development teams to go through.

So there’s a variety of communications scenarios that are very important, and from a Microsoft perspective, a variety of technology.

One of the areas that I think is most interesting is voice mail integration, the degree to which we can make telephone messages and simply voice messages generally more integrated with the PC communications infrastructure.

I don’t know about everybody in this audience, but I still type like this.I’ve been typing now for 17 years at work, and I type slowly.Sometimes I wish I could just speak to the computer, and not even have it recognize, but just have my voice message be transmitted through the same electronic infrastructure.I want to have all of my voice messages integrated, and my fax messages too.And these are sort of some of the frontiers in which people can add value.

I’ve been working with the folks at Coca Cola.At Coca Cola the average senior manager gets about 75 voice mails a day.I have no idea how people process 75 voice mails a day with the technology.But it does tell you that even in cultures which are less electronic mail oriented than ours and some of our customers, there’s certainly a nervous system need for communication, that’s a distinct source of IT value.

Our Exchange product I’ll just mention quickly, because we’ve gotten a lot of good feedback.It is a key element, not the only key element, but it’s a key element to the way people can create these digital nervous systems.

We’ve been in a market with this product just a year and a half.We already have seven million people using this system.It’s growing at a rate of about eight million a year.And you see companies, it’s fun for us, it’s exciting to see how companies love this thing when it goes in.Boeing just put 100,000 users on Microsoft Exchange.And I tell you, the system is immediately mission critical.Phil Condit, who’s the CEO of Boeing, he knows, he wants to review any of the big bids that they do for airlines as they propose, you know, packages of new airplanes.The e-mail system has become the communication system of choice between engineering, the support organization, and the sales organization, as they work on those new bids.

At General Electric, Bill Gates had a chance to talk with Jack Welch, who runs that company.He decided that one of the few tools he wanted to standardize across his business, his financial service business, his television business, his jet engine business, his light bulb business, he wanted to standardize the communication system.How else would he get the information and be able to communicate top down and bottom up?

Even in a decentralized company, as I’m sure many of you are, having the CEO be able to have common communications with all people is terribly important.

The US Navy, I mention the US Navy.The US Navy actually is one of the leading users of IT in the world.They own 500,000 PCs, the single largest organization in the world in terms of their use of PCs.And why?They’ve made a decision that, as they call them, warriors — I don’t like the term, but I appreciate, I guess that’s what they need to call them — but warriors are intelligent workers; they really do expect those people to think, plan, et cetera.So the admiral who runs the Pacific Fleet for the United States Navy personally came to Seattle to sit down to really focus in on their thinking and decision process about electronic mail and messaging, because it’s such an important part of the way he hopes to communicate and coordinate the operations of the Pacific Fleet of the United States Navy.

And those are just some kinds of cases.

Secondary, I’ll highlight data analysis and tracking.No matter what business I go to, including our own, people never have the information they seem to want to get a decision made or to really make a right decision.I was traveling on an airplane with a fellow who runs half the United States for one of the largest insurance companies, auto insurance companies in the United States, and he said, “Oh, you work at Microsoft, I see.”I said, “Yes.”He said, “Well, you know, we’ve got a lot of computer people in our company.”I said, “Bravo, you’re right on.I’m excited.That’s great.”He said, “Why are you so excited?”I said, “Well, you must make good use of IT.”And he said, “I don’t know if we make good use or bad use; I just know that when I need the price of automobile insurance in the State of Colorado, I still can’t just in a simple way from my laptop with Excel — ” a Microsoft product he uses — “I can’t really look at how many claims we’ve paid for car accidents in Denver, Colorado versus Durango.I can’t tell how many of those happened around holidays.I don’t have any of the information I need to make the kind of decisions that we make every day in this business.”

I think companies around the world have underinvested in the digital nervous system to support that kind of thinking and analysis.Claims processing works beautifully in their company.But in terms of actually then packaging that information up in a way that a business manager can make a decision, that’s an area where I think all of us can work together.

Tracking.You go to so many companies where they’ll say, can you really track how well a project’s doing in R & D department?Can you really track how well we’re doing in the progress against a sales quota?Even in fairly sophisticated companies, things are still behind.I have seen some progress.I sat down with the folks at Cisco, a very large company in our industry that builds router and network equipment.They have a very sophisticated system that really lets them track, so top management can see how many customers do we have in the pipeline?.And that’s very real time, very computer based so they can really manage and track and apply the right amount of executive focus to help close important sales situations at the right time.

Take the businesses you’re in; how good a visibility do you have on the information to make decisions?How well can you track your projects in R & D?How can you track your sales force?Do you have the visibility that you want and need?And, again, a set of technologies are required.

Knowledge delivery.In many companies, simply keeping customers and employees educated is one of the most important challenges.I work in a computer company.One of our most important and toughest challenges is getting technical information out of our heads and into our customers’ heads.But the same thing is true, for example, at Caterpillar or John Deere, who make heavy equipment.The same thing is actually true in many banks and retail organizations.The training of the workforce as they roll out new procedures, new financial products is very difficult, particularly in the retail world, we have retailers like WalMart, for example, in the US who tell us that the turnover in their retail store personnel is perhaps 20 percent a year.One of the issues for them is how do they use the computer to help cut down the training costs and improve the training process for new employees.How much can they publish information?How well can they mix together audio and video?

At Microsoft we run a set of regular seminars and events.We now videotape every one of those seminars and events.We capture all of that information and we put it up on a server so that our sales people and our customers can call it up later.They can find it easily on our corporate intranet and watch those presentations.

How do we work, though, with the retailers, with the banks?How do we work with companies like Deere and Caterpillar to help them change the way they deliver information to their customers?

Boeing, a company I know better than many, Boeing’s looking at this problem in terms of delivering information about service on jet airplanes.They want to take it a step further.They actually want to not only deliver the generic manuals about, say, the 777 airplane on-line, they also want to be able to keep specific configuration information for their customer, let their customers update the service record as the plane gets serviced, so Boeing and their airline customers have a common view of what’s happened with an aircraft and how to service it.It’s part, again, of the knowledge that’s important in the digital nervous system.

I won’t spend any time on traditional line of business applications, because I don’t think that’s where the meat is, but they need to be well integrated into these scenarios.Perhaps an area of more important integration is the area of electronic commerce.And sometimes when people hear that word, they assume this means how do I take orders over the Internet.Taking orders over the Internet is not the number one priority.It is an important thing we can do in some industries, but there’s a lot richer, there’s a lot more even you can do over the Internet.Can you market to your customers?Can you sell?Can you support?Can you profile?Can you ask your customers for input?We want to bring out a new product concept, we can put it on our Web Site and literally we can rest assured that within ten days we’ll have 7 million customers who have read about it and can give us their input, send us direct comments and feedback about our new ideas.

So we’re talking about selling, serving.If you’re in financial services, you can even deliver your product in some senses electronically.If you’re in the media world, you can deliver product electronically because it comes to the screen.

So there’s a wide range of opportunities to change customer interaction.

Maybe what I’ll do is give you a very specific case — well, I’ll come back and give you a very specific case, I’ll talk about Microsoft in a variety of ways, because there’s a lot of things we’re trying to do.

I can’t complete this speech without at least a discussion about the other side of IT value.I talked a little bit about the digital nervous system and how excited we are about it.Of course the only way to get the money to invest in new things is also for you to be able to take costs out of your existing IT infrastructure.Companies like Microsoft and others need to build products and services that offer lower costs, better manageability, better interoperability with the systems that you already have.These are important areas of investments for our company, because nobody wants to continue to extend and do more in IT in a way that causes the cost to spiral out of control.So we need to make at the same time investments in reducing the costs of running the traditional infrastructure, so you can really invest in your digital nervous systems.

The Internet, as I said, is fundamental.The Internet is fundamental not only because Internet technologies are used to implement the digital nervous system; Intranet and Internet Explorer, for instance.But the Internet is also fundamental because it’s what lets you reach out and touch your customers.That is very basic.

When I talked earlier about the web lifestyle, I really do mean that within three, four, five years, the first place most consumers will turn for information about almost anything will be the Internet.Today, if somebody mentions a new company to me, what do I do?I type in www.newcompany.countryname.That’s what I do.That’s how I look for information.I hope they do have a web page.I hope I can find them.I hope I can, if I need to, get somebody to call me and follow up.

It’s a silly example, but I’m going to give it anyway.I was looking to go camping three weeks or so ago with my family.I went to the Internet and looked up campgrounds in the northern part of the state of Washington.I found one.They actually had pictures of all of the campsites and the nice little cabin.They even let you reserve a campsite.I was a good customer.And I wasn’t disappointed.I knew exactly what kind of experience that I was going to have.

We have a partner in Phoenix, Arizona called T-Matic.They sell systems to golf courses in that resort town, and then they provide an Internet site where you can go, look up golf courses, and reserve golf tee times at any golf course in the greater Phoenix area.These are small company cases.But think through the equivalent in your world.And today you could say, “Okay, well there aren’t enough people on the Internet, or it’s not important enough.”But think about all those students graduating from universities who become the best next generation of customers.They’re going to grow up expecting to find you on the Internet, expecting to do business with you on the Internet, whether it’s for financial services or banking or whatever the case may be.

Microsoft as a company is investing in a few areas of information, primarily for the US market today.We have a joint venture with NBC to provide news and sports information.We provide financial information, and we work in partnership with people like Merrill Lynch and Wells Fargo so that that can be part of their overall financial services offering.We have a travel product called Expedia which will actually not only provide financial information, but lets you book travel on-line.We have a partnership with American Express where they offer that same technology to corporations, so that corporations can implement on-line booking of travel with corporate travel policies in that environment.Local information, information to help people get up to speed to buy a car or buy a home.We, through our MSN product, provide Internet navigation and Internet services.

And the business models for these things vary.Some are traditional advertising models, some are subscription models and some are based on transactions.Each and every person in this room is already in some business.The real key thing is thinking through, how does my business change and/or what new businesses open up to me as a result of the Internet?

How does this have to do with the digital nervous system?The degree to which you have an electronic relationship with your customer will actually give you more sophisticated understanding of your customer than if you don’t have a digital relationship.Our Web Site, is now either the third or fourth most popular on the Internet.We have about a million and a half visitors a day.We’ve had over 10 million people now give us detailed information about themselves so that we could better serve them and market to them.We have almost six million of those 10 million have subscribed to receive regular news letters from Microsoft.We can analyze where support questions are by watching that site.We track everything you do on so we can see what’s confusing, what’s hard, what’s easy, what kinds of questions do you have.We’ve had, in addition to the 10 million people who’ve profiled themselves, we’ve had a total of about 60 — almost 60 million different visitors — as amazing as that seems, 60 million different visitors, at some time or another to have a knowledge and understanding of our customer.

And certainly the most important information for most firms on the digital nervous system is information about customers.At the end of the day, the key is driving revenue, selling more product in all of our businesses.The better you understand your customers, the smarter off you’ll be, the better off you’ll be running your business.That’s the fundamental source of IT benefits.We can all do better managing IT costs.We’ll certainly try to provide tools to help that.But let’s go out and really get the full benefit that IT can deliver through the digital nervous system and electronic customer interaction.

It’s been my pleasure to have a chance to talk with you here today.I want to thank you very much.


I went a little bit longer than I hoped, but Magnus says I can still take a couple or three questions.And I believe there’s somebody with a microphone coming down, if we could have the lights up a little bit and a little less bright in my eyes, I’ll actually see who has the microphone.Two microphones.

Question I have a question here.Being an old air force colonel, this is all fantastic, of course, and we are using it in Sweden a lot, and it’s a perfect tool for communications, in crisis communications.But will it work when we need it to, or are there any dangers involved?

Steve Ballmer: Well, certainly if you fundamentally depend on a digital nervous system to run the business, it’s got to run all the time, seven days a week, 24 hours a day.And much the way the manufacturing systems need to work, the logistics systems need to work, so do these digital nervous systems need to work.I would say that we are, with the customers at least we’ve had a chance to work with, we’ve got a good but not perfect record.I told you about Boeing.I can tell you about some phone calls I have received personally from the CIO of Boeing telling me what was going to happen to him and me both if we had a repeat of the blah, blah, blah incident.So I would say it’s imperfect, but I would say also that the level of quality, let’s say the mean times to failure, we measure those things carefully and they’re increasing as a percentage very rapidly.

There’s a new metric which actually one of our customers is teaching us, which I think we will start applying, which is percentage of lost work station hours.In a digital nervous system in some senses that’s what you measure.And we’ve got to drive that to be kind of, you know, 99.9 percent type tolerance.And we certainly understand that.

Today I would say they’re very good.At Microsoft we depend upon our electronic mail system.I can tell you both times in the last year that we had outages and, you know, in both cases we were back up within an hour or so.

Moderator: You have another question here?

Question You mentioned that you got your clippings from Washington Post to your hotel room.Will there be any Washington Post in the future, do you think, and why?

Steve Ballmer: Will there continue to be — I’ll phrase it maybe even more generally — what’s the evolution and future for media industry, perhaps in this world, will there continue to be newspapers.Sure, there will.There will continue to be newspapers, but the newspaper industry — I mean, physical newspapers will continue, but the newspaper industry needs to be an important early investor, in my view, it would be a recommendation I’d make to them, in these technologies. Companies like ours are very willing to give every bit of technology we have to the newspaper, to the TV station, to engineer these kinds of solutions.The problem is many traditional businesses are, what shall I say, strained for capital and/or overly conservative about this type of investment.And so we see some industries moving more slowly, some more quickly.

If you go to the Internet today and you look at newspapers, some newspapers are very well done on the Internet, very well done.Many newspapers have just said, “We need a home page.We’ll put up a little bit of news.”They’re bad, they’re ugly, they’re terrible.That leaves them open to a competitive attack.

Now, we decided we wanted to be in the global news business in the US.We also decided that there was no way for the economics of the news business to make sense unless you had multiple forms of distribution.So our partnership, ourselves with NBC has broadcast distribution through NBC, cable television distribution through MSNBC, as well as Internet distribution, because the economics of news says you gather it once, you have to distribute it many places.That gives the local newspaper the natural advantage, if they make the investment.

Moderator:W e have an additional question down here.

Mike Haftel: Hi. I’m Mike Haftel from the US Embassy, and I run the computer system there.

Steve Ballmer: Great.

Mike Haftel: We use a lot of Microsoft products.And we’re interested, of course, in connectivity to Internet, but we’re very security conscious.What can you tell me in the way of development for stopping malicious kinds of intrusions back to our computer systems?Thank you.

Steve Ballmer: Well, I could go through four or five or six or seven sort of different technology steps, improvements, et cetera.I think though probably the best thing for me to do, to say today is the current state of the art is actually far better than most people think it is.We, for example, what’s our most valuable asset, Microsoft as a company?It’s the source code of our products, which are all on our network.We do connect up a number of our sales offices now to Microsoft, not over a private secure connection, but actually over the Internet.If you’re at Microsoft in Holland, or Microsoft in Dusseldorf, or Microsoft in Portland, Oregon, you actually connect up to our company through the Internet, because we believe there’s sufficient security.But we also know, it’s not secure enough for all scenarios, so we and others are making investments.I will say that our highest — the best security techniques in the world are not always eligible for export around the world, and I’ll smile and look at the Ambassador on that.That’s an issue, certainly, at least for us, that the US government is the controller of, shall I say.

Moderator: Okay, thank you very much, Steve.

Steve Ballmer: Okay, thanks everybody for attending.We appreciate it.


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