Microsoft’s Ballmer and his ‘brother’ Bill Gates

The Telegraph 15 October 2007

Microsoft chief executive Steve Ballmer is renowned for his whooping enthusiasm. This is the man who ripped his vocal cords while rallying the troops, who has been immortalised on YouTube screaming and jumping on stage in a terrifying display of hyperactivity.

In person, Ballmer only slightly tones it down. A fiercely charismatic presence, he barks out answers, apparently unfazed by jetlag and a minute-by-minute schedule that will see him visit five European and North African countries over the next four days.

His mission: to convince clients and partners that Microsoft can succeed in the brave new world of Google, where people get their software online and advertising is king.

It is a crunch time for Microsoft, and for Ballmer, who will lead the company alone when Bill Gates steps aside to concentrate on his charity work next year.

“We have been like parents or brothers in this thing for a long time,” says Ballmer. “When Bill hired me in 1980, he brought me in to be his junior partner, and I was his junior partner running the business for 20 years.

“Then, seven years ago, he said that he would like to flip it around, ‘You be the senior partner for a while, and I will be the junior partner’.

“Partners, spouses, whatever, we participated together in giving birth to this amazing thing called Microsoft. We always work well together, we do not always agree, we always work through our disagreements.

“That is why I say there is a certain husband-wife, brothers thing, where you have an ability to agree, resolve issues, a fundamental respect, admiration, good feeling. All that lets you make one plus one equal three, in terms of getting the best from two people.”

Ballmer caught Gates’ eye when the pair were at Harvard. A flagrant over-achiever, he managed the football team and published the university’s literary magazine. Unlike Gates, he finished his degree and was later accepted into the Stanford Business School.

But his old classmate lured him away with the promise of a $50,000 ( pounds 25,000) annual salary and a 5pc cut of what was then a tiny software company. The pair were soon sharing not only an office but also a house.

As one half of one of the most successful business partnerships of our time, Ballmer says the key to success is a positive mental attitude.

Recalling a speech to Microsoft executives by Colin Powell, the Gulf War general and former US Secretary of State, he says: “Optimism is a force multiplier. It reminds us all as leaders that while you want to be very realistic – you could never put on rose-coloured glasses and not see the situation where you are precisely – on the other hand, if leaders can’t see a path to success, and cannot be fundamentally optimistic, no matter what the odds, it is hard for an organisation as a whole.

“Whether our stock price has been flat for five years, despite the fact I think we perform well – optimism, optimism,” he chants, clicking his fingers.

“Am I realistic about what is going on and yet optimistic about our future, whether it is share price, innovation, competitive situations? When you are behind you have to say, ‘We can catch those guys’. When you are ahead you have to be able to say, ‘We can keep ahead of those guys’. And yet they both require a certain form of optimism, tempered with the right kind of reality.”

The current reality is that Microsoft must reinvent itself to stay relevant in the rapidly changing technology industry.

In another memorable Ballmer moment, the ebullient chief executive last year told a client summit that Microsoft’s focus was no longer Windows, nor was it the web developers that the software giant had courted for so long.

“Not any more baby, it’s advertising, advertising, advertising!” he screamed to roaring applause.

Perhaps in response to some nervy analysts, he has since scaled that back and is careful to insist that the company will not be abandoning its desktop and server cash cows in a hurry.

“It is sort of like asking parents which of your children you would prioritise,” he says. “We happen to have two children that are a little older, and they are great kids, they are still developing. They are in high school, they are wonderful, they have got their whole future in front of them. That is our desktop – Windows and Office – and our server business.

“Then we have got these two young kids. They are four or five, they are really at a formative stage, and they are building their muscles. That is where we are in online and devices.” Again he resorts to shouting. “I love all four of our kids, I really do.”

His analogy is particularly pertinent as the older kids enter a difficult adolescence.

In its core business of selling software – traditionally shrink-wrapped or pre-loaded on to machines – Microsoft is having to compete against companies selling software delivered as a service, open-source software and online software supported by advertising.

Microsoft is fighting back. This month it launched some web-based features for Office, which allow users to edit documents from different machines and share them with colleagues.

Ballmer expects this shift to continue, with software-as-a-service overtaking sales of shrink-wrapped software in five or 10 years’ time. Consumers, he says, will generally opt for an ad-supported model of the service.

In servers, which provided more than 20pc of revenues last year, Microsoft faces the potentially devastating impact of virtualisation software. This allows companies to run several applications on a single server, saving money on the amount of hardware they need to buy. Analysts predict that when it becomes mainstream in the next couple of years, it could eliminate growth in server sales.

“I think there is still a huge server market,” says Ballmer. “Although if the world was not going to change I suppose it would be a little bit bigger. But the world always changes, so it is kind of a silly hypothetical.

“The question is how well Microsoft will do in both providing the virtualisation layer and taking advantage of it in our own applications.” He accepts that VMWare, which recently floated in New York, is ahead of the game, but says Microsoft will become a “very competitive” player.

Although Ballmer is keen to avoid picking a favourite, of the two younger kids the online services group is clearly the company’s focus.

Microsoft recently splashed out $6bn ( pounds 3bn) on advertising group aQuantive, and is rumoured to be looking at buying a stake in social networking site Facebook.

Advertising revenues, says Ballmer, will be “very, very important” although they will not represent the majority of Microsoft’s revenues for at least three or four years.

It remains to be seen if this is enough to drive Microsoft’s share price higher. After more than a decade of share splits that made scores of Microsoft investors and employees phenomenally rich, the stock has been trading within a range of $20-$30 for the past five years.

Ballmer, at least, has his interests fully aligned with those of the shareholders, with a 9pc holding that has helped contribute to his $15bn fortune. He is also in the game for the long term with no plans for an early retirement. In an unusual moment of understatement, he says: “I have a personality that does not lend itself very well to pure rest and relaxation.

“Plus the fact that I have young kids, and it is important for young kids to have role models, people working hard, making a contribution. I want my kids to feel good about that.”

One can only hope that he is referring to his three sons this time, and not the company’s product lines.