Ballmer Says Microsoft a ‘Two-Trick Pony,’ Working on Third

Photographer: Krisztian Bocsi/Bloomberg

Steve Ballmer, the former CEO of Microsoft Corp., at the Microsoft Atrium at the company's store opening in Berlin on Nov. 7, 2013. Close

Steve Ballmer, the former CEO of Microsoft Corp., at the Microsoft Atrium at the... Read More

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Photographer: Krisztian Bocsi/Bloomberg

Steve Ballmer, the former CEO of Microsoft Corp., at the Microsoft Atrium at the company's store opening in Berlin on Nov. 7, 2013.

Microsoft Corp. (MSFT)’s former Chief Executive Officer Steve Ballmer said he’s sorry he didn’t combine hardware and software development sooner after the company missed out on Apple Inc.’s smartphone success.

“The thing I regret is that we didn’t put the hardware and the software together soon enough,” Ballmer said in a talk at Oxford University’s Said Business School today. Still, “if you really want to bring a vision to market, it is helpful to be able to conceive and deliver the hardware and the software. Our company is in the process of building new muscle.”

While the world’s largest software maker fell behind in mobile, Microsoft has had more success than most and is building up the capabilities to catch up, he said. Ballmer stepped down from the CEO role at Redmond, Washington-based Microsoft last month, replaced by the company’s head of enterprise and cloud services, Satya Nadella, after a five-month search. Ballmer remains on the board.

“You’re pretty genius in our business if you’re a one-trick pony,” Ballmer said. “In our company, I’m very proud of the fact that we’ve done at least two tricks. Tricks are worth billions and billions of dollars.”

Those two tricks were the invention of the modern personal computer, with its Windows operating system and Office software, and bringing microprocessor technology into data centers, he said. For the next, Ballmer agreed to a $7.2 billion deal to buy Nokia Oyj (NOK1V)’s handset unit in September, accelerating Microsoft’s expansion into hardware.

Excessive Price?

In a note today, credit-ratings company Fitch Ratings called the price Microsoft is paying for Nokia’s handset business “excessive.” The firm cited a deterioration in the user base for Windows-based phones and said Microsoft may incur significant future severance costs from the deal, though it also said the acquisition is “a function of strategic necessity.”

Ballmer said it’s also tricky to measure success at new technology companies. He pointed to Facebook Inc.’s $19 billion deal for the messaging platform WhatsApp Inc. as an example of how difficult it can be to value increasingly cheap-to-build startups.

“If your goal was to sell the company, they had the right goal set -- low cost to 450 million, or whatever the heck number of users, and sell for $19 billion,” Ballmer said. “Is it a fad? Well, probably not. I don’t know whether they’ll be successful or not, but you do have to really sit there and say, what’s my goal? Will that asset ever be worth anything?”

The cost of starting up companies for cloud-based services is becoming cheaper, and companies should look beyond user numbers to measure success. WhatsApp will ultimately be deemed successful when they convert their user base into something that generates “enough revenue to pay off.”

To contact the reporter on this story: Amy Thomson in London at athomson6@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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