Microsoft executive pay

Microsoft filed its annual proxy statement yesterday, detailing information including the compensation of its top executives in its last fiscal year. As explained in this morning's story, the combined bonus and salary for Bill Gates reached $1 million for the first time. Steve Ballmer's compensation continues to be the same as Gates'. Also surpassing that mark were the other named executives, Kevin Johnson, Jeff Raikes and Jim Allchin, each of whom was named a divisional president as part of Microsoft's restructuring last week.

Click image for chart showing Microsoft executive salary and cash bonus for past four years.

That doesn't include sizable stock awards given to those three executives, also disclosed in the proxy and detailed below. (Gates and Ballmer, who already own large portions of the company, don't receive stock.) Salary information for the fourth divisional president, Robbie Bach, wasn't disclosed. As noted in this related filing, the company has since boosted the underlying salary for each of the five executives.

Despite the overall compensation increases, Microsoft's proxy cites research asserting that its top executives are still paid less than others at comparable companies. Here's the passage that addresses that issue:

The comparison group includes approximately 15 leading information technology companies and large market capitalization U.S. companies with whom Microsoft competes for executive talent. The median CEO salary and bonus for the comparison group were $1.065 million in base salary and $2.385 million in bonus.

As you can tell from the accompanying chart, the increases for the executives came primarily through their bonuses, with smaller increases in their underlying salaries. That doesn't include the stock awards for the three named divisional presidents. Based on yesterday's closing stock price, Johnson's fiscal 2005 stock award was worth $17.87 million, while Allchin's and Raikes' were worth $22.25 million each.

Windows in a Palm

A few years ago, it would have seemed unlikely, at best, to see a Palm handheld device running on the mobile operating system from its rival, Microsoft, but here we have it. At a news conference Monday morning in San Francisco, Microsoft's Bill Gates and Palm Inc. CEO Ed Colligan announced a Treo smart phone based on Microsoft's Windows Mobile software. The deal had been widely rumored and reported in advance. (See this story from Saturday's newspaper.) Here's the news release with links to the webcast of today's news conference.

As unimaginable as it once was, this particular development became possible after Palm was split into two companies, one focusing on hardware and the other on software. As noted here back in May 2004, Microsoft's top mobile devices exec, Pieter Knook, acknowledged then that the break-up of Palm made it "perfectly feasible" for the hardware company, then known as palmOne, to use Windows Mobile. "They would be an interesting partner for us," he said.

Audio Extra: Gates, Ballmer on Microsoft's future

See below for some audio clips of Bill Gates and Steve Ballmer, speaking on a range of topics during an interview yesterday after marking the company's 30th anniversary at Safeco Field. These are extended versions of some of the answers in the Q&A that ran in Saturday morning's newspaper:

DAN DELONG/SEATTLE P-I Microsoft CEO Steve Ballmer, left, and Chairman Bill Gates during the Friday afternoon interview at Safeco Field, where more than 17,000 employees had gathered for their annual meeting. Click image for larger version and a gallery with a few photos from inside the company event.

Gates, Ballmer Q&A

Microsoft marked its 30th anniversary during its annual employee meeting Friday at Safeco Field. Afterward, Bill Gates and CEO Steve Ballmer took some time to talk about the company's prospects for the future. See this Q&A for excerpts from my interview with them, in which they addressed topics including Microsoft's efforts to expand beyond Windows and Office, its competition with Google, and how long Ballmer and Gates themselves plan to stay with the company.

Xbox exec on Revolution

Microsoft's Peter Moore, in an interview with GamesIndustry.biz: "First of all, I want to give kudos for Nintendo, for its attempt at innovation with the new controller -- bringing people in that, as Iwata-san said, are either lapsed gamers or gamers that are intimidated by the complexity of the controller." (Via 1up.com)

You could spend a lot of time parsing that out, looking at the underlying motivations, and trying to figure out what it says about Microsoft's feelings toward the Nintendo Revolution console as a competitor in the next console generation. Suffice it to say you don't hear Xbox executives giving compliments to market leader Sony's controller design for the PlayStation 3.

For more on the Nintendo Revolution controller, unveiled last week at the Tokyo game show, see these hands-on reports from Wired News and IGN.

PDC behind the scenes

Venture capitalist Rick Segal was given a Microsoft staff badge at last week's Professional Developers Conference, letting him hang out in staff rooms and prep rooms "and other places attendees weren’t supposed to be." The situation gave him an unfiltered look at Microsoft employee interactions. He reports his findings in this post. (Via Mark Relph.)

Mac BU in Microsoft reorg

How does Microsoft's Macintosh Business Unit fare in this whole corporate reorganization thing? That's what Glenn Fleishman was wondering, via e-mail. It's an interesting question, particularly to people who use the Mac versions of Microsoft Office, so I looked into it. Here's what I found.

Prior to the reorganization, the Mac BU was in the company's Home and Entertainment Division, led by senior vice president Robbie Bach, best known as the head of the company's Xbox group. Under the reorganization, Home and Entertainment comes together with the Mobile and Embedded Devices division to form the new Microsoft Entertainment and Devices Division ... still led by Robbie Bach, now as divisional president.

Why not put the Mac BU in the Microsoft Business Group, along with the Office applications for Windows? People who use Macs at work would no doubt argue, but Microsoft groups its Mac software among its consumer offerings for purposes of its corporate structure. Others in that category include the Xbox, Microsoft hardware products, and the Microsoft Works productivity suite.

Corporate shuffles can be complicated things, and often the implications aren't immediately apparent. But a representative of the Macintosh unit says the company doesn't expect the reorganization to affect the group other than making it part of the larger overall division.

Ballmer Q&A: Online Extra

Microsoft Chief Executive Steve Ballmer was quick to answer yesterday when I asked him whether the company's newly announced corporate reorganization, establishing three larger Microsoft divisions with their own presidents, could be a possible prelude to spinning off any of them as a separate company. The answer wasn't among the excerpts included in this morning's Q&A, in part because there wasn't much to it.

Microsoft Reorganization: Click image for P-I graphic Coverage elsewhere: · Business Week · Wall Street Journal · USA Today · PaidContent.org · Associated Press · New York Times · Washington Post · CNet News.com

"No," he said. "Absolutely not."

Along those lines, I've heard some people in the industry wonder aloud whether Microsoft would have been better off in the long run if the antitrust breakup of the company had gone through as originally proposed -- creating two independent companies, focused on operating systems and applications, each able to follow its own aims without worrying about the interests and strategies of the other. It's interesting, in that context, that the latest changes create two divisions focused on platforms and applications. Acknowledging the huge difference -- namely, that the divisions are still part of the same company -- I asked Ballmer whether the restructuring in some small way achieves one of the effects of the proposed antitrust breakup.

In short, Ballmer's answer was no to that, as well. Those two companies would have had "no financial reason to cooperate in the customers' best interest," he said. The new divisions still have "one common financial interest that we can apply against one common set of customer interests, and there are customer interests that still span these divisions, absolutely."

Microsoft held an internal webcast yesterday in which Ballmer and Bill Gates answered employee questions. The company didn't let reporters listen in, but the anonymous Mini-Microsoft blogger, now of Business Week fame, gives a sense of the tone in this post -- asking why Ballmer and Gates weren't more blunt in their explanations of the reasons for the change.

Regarding Ballmer & Gates' take on the reorg: why does it all have to be forward looking, positive reasons for doing the reorganization? What's wrong with a little bit of backward looking honesty as to why it was best to do a reorganization? Was Windows a mess? Was MBS adrift and in need of a strong Office integration strategy? Were mistakes made? Admit at least there were and are problems and that the reorganization is going to be effective in dealing with those problems and that executive management will be held accountable for making sure that is so.

Allchin on 'hard lessons'

In an e-mail to his team yesterday, top Microsoft Windows executive Jim Allchin was careful to point out that he still has a long time left with the company, even after the disclosure yesterday that he plans to retire at the end of next year. "This is not a retirement announcement mail," he wrote. "It is planning for the future in the responsible way."

Along those lines, he wrote about one of the issues that he plans to address during his remaining time -- the internal complexities that have caused some employees to complain that the company has become too weighed down by its own processes to bring new products to market as quickly as it needs to. The most prominent example has been the delays in bringing the next Windows version to market.

Microsoft CEO Steve Ballmer says the restructuring announced yesterday is intended to make the company more agile. Beyond that, here's what Allchin had to say on the subject in his message yesterday:

"We've learned some hard lessons over the last few years and my hope is that we will use those lessons wisely. My dream is for a much more agile, quality driven engineering organization with fewer roadblocks and more open highway to speed on. I also have a dream about fewer bad dependencies, better layering, and choosing when we do integration at the right time in the product cycle -- avoiding doing it too early. The result will be better code and more innovation, sooner for customers. I see these dreams across all products. We have made good progress on these dreams over the last 12-18 months or so. And I plan on devoting even more of my time to ensure that we continue making these dreams a reality."

Major Microsoft reorg

Microsoft today announced plans to divide itself into three new business units, each headed by its own president, with a greater degree of autonomy than under the current corporate structure. See this online story for more details, including comments from Steve Ballmer in an interview earlier today.

Another change announced today: Windows chief Jim Allchin plans to retire at the end of next year, after the release of Windows Vista, the next version of the PC operating system.

Ballmer says the changes are intended to make the units faster at making decisions and getting products to market. The company has been criticized by employees and others, most recently in two magazine cover stories, for becoming too bureaucratic and interdependent as it has grown older and larger.

Here's how the new structure works out:

• Microsoft Platform Products & Services Division: Windows, Server and Tools, and MSN. Headed by Kevin Johnson and Allchin, as divisional co-presidents, until Allchin's retirement.

• Microsoft Business Division: Information Worker (Office) and Microsoft Business Solutions. Headed by Jeff Raikes as president.

• Microsoft Entertainment & Devices Division: Home & Entertainment Division and Mobile & Embedded Devices Division. Headed by Robbie Bach as divisional president.

PDC '05 coverage roundup

Recapping some of the news and commentary from Microsoft's Professional Developers Conference in Los Angeles last week:

Coverage elsewhere: · Windows SuperSite · USA Today · Wall Street Journal · Associated Press · New York Times · CNet News.com · CNet Microsoft blog · CRN: Gates Q&A · Jerry Pournelle · Tom's Hardware Guide · ComputerWorld · BetaNews · Joe Wilcox · Michael Gartenberg · Gates' Dynamite video · Mary Jo Foley · Unofficial Microsoft Blog · Rob Enderle · Jorge Matos · Sean Alexander · PDC photos, via Flickr · PDC posts, via Technorati

From the P-I:

Microsoft's 'troubling exits'

This week's Business Week cover story by Jay Greene is an exhaustive examination of the current state of Microsoft -- looking behind the recent series of employee departures to explore the company's disproportionate reliance on Windows and Office, its sluggish pace of major product releases, its layers of bureaucracy, and calls from inside and outside to institute reform.

Microsoft CEO Steve Ballmer responds in this Q&A, saying that employee morale remains high overall and that it's good for the company to have a culture that encourages self-criticism: "We obviously can always improve. We've set high expectations for ourselves. But, man oh man, have we got an incredible pipeline of innovation coming in the next year."

In this related story, Business Week's Greene meets with "Microsoft's Deep Throat" -- the anonymous employee whose Mini-Microsoft blog has emerged as one of the key voices for change. There are lots of interesting comments, from employees and others, on the related Mini-Microsoft post.

More reaction:

• "Uh oh -- I'm in Business Week," writes Sean Blagsvedt, one of the two Microsoft researchers whose "Ten Crazy Ideas to Shake Up Microsoft" memo to Bill Gates was excerpted and cited in the story.

• Microsoft employee Rob Chambers: "It’s true that Microsoft is a different company than it was 10 years ago, but it’s not as bad as what this article tries to make it out to be."

• Business Week's Tech Beat Blog tells the story behind the story, and examines Microsoft's top ranking in a survey of computer science graduates. How could that happen, given Google's buzz? The search giant wasn't among the pre-written choices given to students, but it still fared well as a write-in.

• Investor Paul Kedrosky notes that Forbes is also running a cover story with similar themes this week, "Microsoft's Midlife Crisis." (Free registration required.) Kedrosky concludes that it's a good time to buy Microsoft stock, given the big product releases coming up next year.

• That link came via Om Malik, who observes that Microsoft is "in a street brawl with everyone from Sony, Nokia, Apple, and every tiny start-up that is coming up with new ideas. That is an energy sapping, tiresome battle on many fronts, especially at a time when the company is slowly becoming a collection of fiefdoms." However, he adds, "I am loathe to bet against Microsoft. They just have too much money."

• Some of the related commentary on Slashdot is well-reasoned and interesting.

• Microsoft's Robert Scoble: "Am I proud to work here at Microsoft? Yes. Is my morale high? Yes although there are definitely issues I'm working with management on that I'm hearing from around the company. The way we compensate people, for instance, is just not optimal. Is Microsoft becoming less relevant? I'll let our customers answer that one. Is Microsoft a fun place to work? Absolutely."

• Ed Brill considers Ballmer's comments about blogging.

Meanwhile, some are reacting strongly to this vow by Ballmer in the story: "We won the desktop. We won the server. We will win the Web. We will move fast, we will get there. We will win the Web."

Writes Molly Holzschlag, a steering committee member for the Web Standards Project, on her personal blog: "The Web is not a prize to be won, and Mr. Ballmer’s attitude is deplorable in the light of what the Web means to the world, to users, to designers and developers and to put it into Microsoft parlance, customers." (Link via DL Byron)

Ballmer explains what he means by "win the Web" as part of the Business Week Q&A: "[W]e have to be best in class, not only in taking advantage of those devices that you hold or you type on on your desk, or that will end up on the server, but also those services that are out in the Internet itself."

The Mono 'experiment'

At Microsoft's Professional Developers Conference this week, I was able to spend some time with Miguel de Icaza, pictured at right, the leader of the open-source Mono development project. If you're not familiar with Mono, it's a software development system that, in simple terms, mimics the core of Microsoft's .NET development system in a way that lets .NET developers write programs for Linux and other operating systems. More significantly, it also can be used to convert existing Windows programs, written using .NET, into new versions that can run on Linux.

As you can imagine, that has caused a certain degree of consternation for some people inside Microsoft. For more details and explanation, see this morning's story that I wrote on Mono's presence here at the PDC, and a separate Mono meeting Tuesday night at a nearby hotel.

As Miguel explains in this post on his weblog, that meeting was arranged after Mono was unsuccessful in securing a spot among the "Birds of a Feather" sessions at the PDC itself. Miguel and the Mono sponsor, Novell, were inspired to hold that meeting by this post from Stephen Walli, who left Microsoft last year and is now vice president, of open source development strategy at Optaros. During his time at Microsoft, Walli's work included overseeing the release of some Microsoft tools under open-source licenses.

As noted in this morning's story, I got a chance this week to ask S. "Soma" Somasegar, corporate vice president in Microsoft's Developer Division, for his take on the Mono project. Here's a more complete version of what he had to say:

"Whenever somebody does something on the .NET framework, I get excited. The first thing that comes to mind is, hey, they see value in the .NET framework and they want to do something with it, so I'm excited about that. These guys now have made good progress in terms of reverse-engineering the .NET framework. Good for them. To me, it means that the .NET framework is that much more interesting to people who have different opinions, different ways of looking at things."

We didn't talk directly about any of the questions that people often have about whether Microsoft would ever try to pursue Mono for patent infringemement. Apart from that, however, I did ask Soma whether he sees a risk of Mono succeeding on a level that further fuels Linux as a competitive threat to Windows.

"We can cross that bridge when we get there," he said. "To me it's a good science experiment that is happening there, so we'll see."

An AOL-MSN merger?

The New York Post, citing two unidentified sources, reported this morning that Microsoft is in talks with Time Warner to buy a stake in AOL and combine it with MSN. Allison Linn of the Associated Press reports that the companies "are in long-term discussions about various online partnerships" but that "no deal is imminent," according to two sources.

Also see related coverage by Bloomberg News, MarketWatch, and Reuters.

Wall Street's reaction: Microsoft shares are relatively flat on the report. Shares of Time Warner are faring considerably better.

For the cynical take, a roundup of the reports on tech site Slashdot prompts one reader to suggest a slogan for the potential MSN-AOL service: "Now combining all of the worst features of both into one incredibly tortured interface."

This isn't the first time the NY Post has reported what it describes as inside details on MSN-related deals. You may recall that the paper said earlier this year that Microsoft and NBC Universal were in talks to end their MSNBC cable deal. For what it's worth, that hasn't yet come to pass.

Xbox 360 launch: Nov. 22

Microsoft announced tonight that the Xbox 360 will launch in North America on Nov. 22, to be followed by launches Dec. 2 in Europe and Dec. 10 in Japan. See this story for more details.

Gates Q&A: Blog Extra II

Another excerpt from the Bill Gates interview that didn't make it into the Wednesday morning story. This was my follow-up to the earlier question about Windows vs. Web-based development:

Q: Do you envision Windows being as central to the PC industry in 10 years as it is today?

Gates: "Well, the PC industry is itself broadening to embrace all the different devices. What do you call it when you're in the car, using Windows Automotive? What do you call it when you're on your smart phone, connecting up using the Windows Mobile software we have there. We've always been the most prolific in terms of doing software for all the devices. Our IPTV effort is doing the next generation of set-top box, we're doing Xbox on the video games. This wave is very user-centric, and we actually started talking about that all the way back in the year 2000, that you were going to have many devices.

"The full-screen device will always play a special role. If you want to write a document, edit a document, you're going to sit at two feet and do that. That's the PC, and the PC is where you're able to take notes. This is the Tablet, I don't know if you've seen this Motion machine. [Gestures to a Motion Computing Tablet PC.] Just think of that two years from now, four years from now, in terms of the thinness, the cost. Every student, instead of having textbooks, they're going to have a Tablet PC, and so the PC is very significant.

"We use the word Windows to encompass not only the PC client software but also the phone client software, and the automotive. Because of the broad way we talk about the Windows platform, I can say yes to your question. But it's because Windows is not static."

Gates Q&A: Blog Extra

What's the future of Windows-based software development in a world where Web-based programs are generating so much buzz? That's one of the questions I asked Bill Gates yesterday during my interview with him at Microsoft's Professional Developers Conference here in L.A. His answer wasn't among the excerpts included in this morning's story, so I wanted to publish it here. This is what he had to say on the subject:

"Well, you've always had software that ran on servers, whether it was mainframes or Unix, and the question was how do you take the data, information from those applications, and connect it up to the desktop machine. You do see people like Google doing desktop software, eBay does desktop software. Siebel does desktop software. When you get down to the place where you want to present and integrate, you need what we call the smart client capability. I think that's as evident as always.

"Those Web server applications, they often run on Windows Servers. They can obviously run on Windows competitors, as well. So, for example, the search thing we've done, we take a few thousand Windows Server boxes and use those to build the MSN Search capability. There will be a lot of innovation both on the client and what you can do with things like ink and speech. A lot of innovation up at that server end, things like Virtual Earth, and finally getting search to be decent, so it's not just a treasure hunt. Lot more to be done on both ends, so you'll always see a balance of what gets done on the server piece, where Windows is part of that, and then on the client piece, getting better where Windows is a very, very high percentage of what goes on there."

The return of the sidebar

Microsoft showed a number of new Windows Vista features for the first time at its Professional Developers Conference here in L.A. on Tuesday -- including one that looked strangely familiar, in more ways than one.

That would be the "sidebar," shown at the PDC two years ago but not evident in public demonstrations as recently as the Windows Hardware Engineering Conference this past spring. The sidebar was back during the demonstrations at the PDC Tuesday morning, as evident in the accompanying screenshot. (Click for larger version.) The new incarnation will probably resonate with anyone who has used "widgets", the small applications that are part of the Dashboard feature in Apple's latest Mac OS X operating system.

Microsoft calls the small applications in its sidebar "gadgets."

For what it's worth, this also comes just a few weeks after Google released its new sidebar feature as part of a second release of Google Desktop Search.

Gates and 'Dynamite'

The new version of Office got much of the attention at Microsoft's Professional Developers Conference on Tuesday, but the most entertaining part of the day may have been a video in which Bill Gates appeared with actor Jon Heder in a spoof of the movie Napoleon Dynamite. Here's a photo by Reuters and a related story explaining the video's plot, in which Napoleon Dynamite prevailed in a slapping match to take over as Microsoft's top executive. Gates also showed some impressive dance moves toward the end of the video.

For a considerably more serious side of Gates, see this story for excerpts from my interview with him earlier Tuesday here at the conference.

On the floor at PDC

Posting from Los Angeles ... The Phillies have the Phanatic, the Mariners have the Moose -- and Microsoft, apparently, has the Channel 9 guy. That's him, at right, walking around Microsoft's Professional Developers Conference in Los Angeles today. He's the mascot for the company's video weblog and community site for software developers, although I had previously never seen him in this larger-than-life incarnation.

The company's last PDC, two years ago, coincided with the big Los Angeles fires. (I have some vivid memories of driving overnight to the conference from Las Vegas after my connecting flight was cancelled.) Monday, during some pre-conference sessions, there was a major blackout in the city. See this story by CNet News.com's Ina Fried for details on what happened at the conference when the electricity went out. Is someone trying to send Microsoft some sort of message?

I arrived at the conference Monday afternoon, and everything seemed to be pretty much back on track after the blackout, except for some delays in the schedule. As you can see from this picture, Robert Scoble was hard at work on the PDC floor, breaking some news about a cool new (non-Microsoft) Web service, so all was right with the world, or at least with the blogosphere.

Meanwhile, some of the buzz leading into the conference has centered on Paul Thurrott's report that Microsoft is contemplating seven different varieties of Windows Vista, running the gamut from Windows Vista Home Basic Edition to Windows Vista Ultimate Edition. At least one online post has questioned whether that reflects the company's final plans, and it isn't yet clear whether Microsoft will address the issue of the potential versions during this week's conference.

Bill Gates and Windows chief Jim Allchin are slated to kick things off Tuesday morning with keynote addresses expected to focus on subjects including the next versions of Office and Windows.

Oracle and eBay deals

Oracle's agreement to acquire Siebel Systems, announced today, creates a bigger competitor for Microsoft and IBM in the market for business software. See coverage of the $5.85 billion deal from the Associated Press, CRN, and CNet News.com.

Whether Microsoft will try to answer with a big deal of its own is anyone's guess, but these types of deals are watched closely by Microsoft executives. When Oracle announced its intent to acquire PeopleSoft, for example, it prompted Bill Gates to suggest to Steve Ballmer that it was time for Microsoft to consider acquiring enterprise software company SAP AG in response. (See "It's Time We Bought SAP.") That was part of the evidence that emerged in the Justice Department's challenge to the Oracle-PeopleSoft deal.

Meanwhile, eBay's plan to acquire Skype (PDF news release) makes the online auction company a player in Internet voice communications, an area that Microsoft, Google and Yahoo are all targeting in conjunction with their instant messaging products. (See the earlier news about Microsoft's acquisition of Teleo, for example.) The initial Associated Press story on the Skype deal is here.

Previewing the PDC ...

I'll be down in Los Angeles this week at Microsoft's Professional Developers Conference, writing stories for the newspaper and posting here. Among other things, this is where Microsoft will try to make sure that outside software developers are working on programs that take advantage of features in the new Windows Vista operating system, due out next year. See this morning's Software Notebook for more about what's at stake for the company this week.

In the meantime, here's a collection of coverage and commentary from around the Web leading up to the conference.

• Steve Gillmor writes that Bill Gates and Microsoft aren't likely to do anything that matches the sly build-up and surprise unveiling of the iPod Nano by Apple's Steve Jobs last week.

• Jupiter Research analyst Joe Wilcox hints that he's aware of some big announcements planned by Microsoft: "There will be lots of new stuff, which I can't talk about right now."

• A PDC event blog by Microsoft's Ari Bixhorn with links to additional information related to the conference.

• InternetNews.com reports that Microsoft will show "Sparkle," its new graphics and animation tools that could rival Macromedia Flash and other programs. The product "is still in development and it's unclear whether it will be ready to ship with Windows Vista next year," the news site reports.

• A retrospective from a PDC veteran, Adam S. Cartwright.

• One of the winners of Microsoft's "Best Seat in the House" competition looks forward to his cushy accommodations for the keynote addresses.

Robertson on Microsoft

Michael Robertson was embroiled in his own legal dispute with Microsoft as the leader of the company formerly known as Lindows. In his latest "Michael's Minute" essay, published today, he weighs in on Microsoft's current competitive situation, and its legal dispute with Google, asserting that the Redmond company hasn't changed its ways.

Gates and the Scobleizer

It had to happen: Robert Scoble interviews Bill Gates on Microsoft's Channel 9.

Microsoft vs. Salesforce

Microsoft's CEO Steve Ballmer caught the attention of Salesforce.com with his assertion yesterday that the Redmond company will give Salesforce "a very effective run for its money" in the market for Internet-based customer-relationship management software. Responded Salesforce.com CEO Marc Benioff in a statement issued to reporters:

"Microsoft's failed enterprise software strategy has let the industry down. We have competed against them in the CRM market since 2002, and they have failed to deliver a competitive product. They just cancelled version two of that legacy application and skipped ahead to three. In the meantime, we are on the 18th generation of our service in just six years. Customers are tired of waiting for Microsoft to innovate."

See additional coverage by CNet News.com and ZDNet.

Ballmer on Linux rivalry

Microsoft CEO Steve Ballmer took written questions from the audience of partners and customers during yesterday's Business Summit on the company's Redmond campus. (See this morning's story for more on the event.) One of questions wasn't the type you'd ordinarily expect from such a crowd: "How should we think about Linux in our long-term IT strategy?"

Ballmer was clearly amused.

"It's me! You don't have to, would be my answer!" he said, laughing. "More seriously ... two things are true. Number one, it is great for every company, including our own, to have competition. And we certainly feel competition with Linux. That's our primary relationship with Linux, is as a competitor. And I know that the competition with Linux motivates and drives us to think creatively."

Ballmer went on to talk about about the ways that the company tries to differentiate its products to offer "a more complete and interesting value proposition," with things like management and security tools. He also said the situation causes Microsoft to watch the pricing of its products more closely to make sure they're a good value.

"I think if I asked you, do you really enjoy day-to-day having competitors, you'd say, no, I prefer that they not exist, but let's face it, it's a good thing, and so we compete with Linux," he said.

He continued to talk about the differences that he sees between Windows and Linux, and then concluded by trying to answer the question with what he acknowledged was a sales pitch: "I hope you'll mostly think about it as that nice competitor that drives Microsoft to do the work that makes Microsoft our most important vendor."

Access recorded webcasts of speeches by Ballmer and Bill Gates here.

From Microsoft to Google

Joe Beda, one of the former Microsoft employees who left to join Google's Kirkland office, reflects on his first year at the search company in this post on his weblog, concluding that he made the right decision. He concludes with something that's particularly interesting in light of the issues raised in the dispute over a different Google hire, Kai-Fu Lee:

"Oh yeah, and my non-compete and non-solicit contracts with Microsoft have now expired," Beda writes. "If you are looking for new challenges feel free to send me a resume." (Link via the Mini Microsoft blog.)

On the subject of the Kai-Fu Lee case, King County Superior Court Judge Steven Gonzalez finished listening to testimony and arguments today in Microsoft's request for a preliminary injunction against Lee and Google. He's expected to issue a ruling on that request next Tuesday.

Google court hearing

Microsoft and Google were back in court today in their dispute over Kai-Fu Lee, the executive who left Microsoft to head Google's new research and development center in China. See our story on the hearing for more details.

While the case is, on the surface, about Lee's non-compete clause, it's also providing some interesting glimpses inside the Microsoft and Google executive suites. Today, for example, videotaped depositions were shown in court from Google's Sergey Brin and Eric Schmidt, and Microsoft's Bill Gates and Steve Ballmer. Here's a transcript from Microsoft of the excerpts that were shown: PDF.

The depositions got into lots of important details, but also brought out some humorous situations. Here's one of the incidental highlights of Steve Ballmer's deposition:

Ballmer: Kai-Fu had a -- a distinct commitment and responsibility on behalf of the company for being the senior executive here in Redmond, with responsibility for godfathering, shepherding all of our R&D activities in China. It's a structure we also use for India. We have a senior executive with knowledge of India be the R&D godfather for India, encourage work to go there, shepherd, and -- and mentor people in the area. Kai-Fu had that broad, important responsibility for China. ... "

Deposing lawyer: "This term, 'godfather' -- is that an official title within the Microsoft organization?"

The people in the courtroom watching the videotape had a good chuckle over that exchange. On the tape, Ballmer explained that no, in fact, the correct title was "executive sponsor." On a related topic, see this story from last week on an exchange with Ballmer that was allegedly not so good-natured.

Microsoft's detectives

Today's Wall Street Journal has an interesting look inside Microsoft's Internet Safety Enforcement Team and its investigators.

Tussle over Office format

Massachusetts has caused a stir with a draft plan calling for state agencies to adopt the OASIS OpenDocument format by Jan. 1, 2007. Such a move would shift those agencies away from Microsoft Office to alternative programs.

More information is available on this Massachusetts site. Here's the statement on the issue from Massachusetts Chief Information Officer Peter Quinn. The draft document (PDF, pages 16-20) outlines the plan to shift to open formats. It defines open formats not as those "controlled and supported by just one software developer" but rather as those that are "based on an underlying open standard, developed by an open community, affirmed and maintained by a standards body and are fully documented and publicly available."

Microsoft is shifting in the next version of Office to a format that it calls "Microsoft Office Open XML." As noted previously, however, the format doesn't seem to fit the traditional definition of "open." Responding to the Massachusetts developments, Microsoft today issued a statement that read, in part:

We share the view that XML is the ideal format for data interoperability and archiving of public records, and that is why deep support for industry standard XML has been key for Office development for many years. However we don’t believe the answer to public records management is to force a single document format on everyone which may be less functional than what they already have.

It’s an odd proposal when other Massachusetts state agencies are actively talking to us about how our products can best meet all their data and records needs – from traditional documents to pictures, audio, video, voice, voice-over-IP as it develops, data, database schema, web pages, and XML information. As we look to the future, all of these forms are becoming increasingly intertwined. Locked in formats like OpenDocument do not adequately address that issue – as this proposal acknowledges. It’s specifically this need for choice and flexibility led Microsoft to design Office in a way that supports any XML schemas that a customer chooses, a capability lacking in less functional formats.

See additional coverage by the Financial Times, BetaNews and CNet News.com. Microsoft's Brian Jones weighs in here, and David Berlind of ZDNet comments on Jones' post in this blog entry.

Phones: Windows, iTunes

Michael Gartenberg, Jupiter Research: Why the iTunes phones get buzz and MSFT music phones don't.

The problem is that Microsoft continues to focus on a complex message of functions and Apple keeps it focused on music. The MSFT Smartphone platform does RSS, Email, Web, games, GPS and mapping and whole slew of other functions. In the meantime the real story is on music and the emphasis that all you need to know is iPod, iTunes and now perhaps a new iTunes capable cell phone. ... Once again it looks like Apple will seize the high ground and leave Microsoft and her partners in reactive (as opposed to) proactive mode.