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00:00You led the search committee that named Satya Nadella as CEO . How do you think he's doing so far . Well I think amazingly well quite frankly none of us could have possibly imagine back in 2013 over really 13 that the perception of our company would have changed as profoundly as it has and just just a little over two years. And I think a lot of that has to do with Sasha himself and the fact that he's a very brilliant but very humble man. The fact that he is a very effective communicator who is willing to engage and is willing to listen as much as he is to talk. And I think the combination of those things has made a remarkable difference on Microsoft in the world's perception of Microsoft. So how do you think he's done when it's come to changing the culture. What's worked and what's happened. I mean you know that it can be really hard for a CEO to single handedly change culture from your time at IBM. Well I don't think we're done yet. I don't think we're done in the transformation nor do I think such is done with the cultural change. But I think he's made the right starting position or points first. It's about thinking horizontally about the company's capability to make sure that we share those things more broadly. Next it's about creating an ecosystem for the company that candidly invites people and who here to for might have been viewed as competitors or arch enemies. And third it's about encouraging our team to take more risk encouraging them to think outside the normal box if you will of Microsoft to push the edge. I mean he did that when he created Azure. He did that when he was in the big business . And so a lot of the things that he had as practical experiences in prior roles really set the foundation for how he'd like for the entire team to operate. As we move forward. So what would you like to see Sara and the company focusing on in the coming year. Well I think the focus is very very good right now . We're focused on cloud. We're focused on a hybrid model of the cloud. We're focused on the application services that we can deliver not just in the cloud but to mobile devices. If ever I would like to see something change it's more about pace. I mean from my days at IBM I can remember we never seem to be running or moving fast enough and I think that's always the case in an established enterprise that while you believe that you're moving fast in fact you're not moving as fast as the startup who wants to eat your lunch. So how aggressive would you want to see the company be in terms of monetizing the cloud which seems to be the future. Well our our business there is doing very very well . Triple digit growth and it's not common to have something of that size and scale still growing at triple digits. But could it grow at twice that rate . It's possible given that there seems to be a titanic tectonic shift that's going on in the industry where everyone is moving to the cloud . So why shouldn't we capture more of that. Should we invest more if we invested more. How much more would our revenue growth be and I think that's a topic of discussion that we're always going to have. Are we moving fast enough to take advantage of this incredible opportunity that's ahead. How do you see the cloud wars playing out whether it's Microsoft or Amazon or Google or startups. Well I think if you look at history in our industry what you see is that in a category typically there are two or three leaders in that category. And we find ourselves in the interesting and quite frankly lofty position of being one of the one or two that's the leader in the cloud space right now. The question is can we sustain that position and move further toward being the number one player in the cloud space. And I think you could do it. Well we're certainly going to give it a Amazons giving you a run for your money well. Amazon has had a head start on us and we've got a lot more work to do to catch up . The question becomes Can IBM and Google and all of the other players who want to be number three if you will in this space can they too catch up catch up not just with Microsoft but past Microsoft and make an attack if you will on a W.S. or on Amazon . We're not going to sit idly by and rest on the past success . We have got to double down as a company to make sure that none of them catch us and we have a good chance of catching a pass . You're also a big startup investor. How important is cloud and a cloud strategy to the livelihood of any startup today. Well I think today if you're a startup investor or startup company it's got to be cloud based. No one is looking for an arm interim perpetual license model anymore. I can remember. Marc Zornberg said to me years ago I only invest in annuity revenue streams . I'm like really I thought that was just and that was five or six years ago. Well guess what. That's about all the bases are doing today. If it's not recurring revenue they aren't interested in it because it has a predictability if you will that once you capture that customer the sustainability of that revenue stream is pretty powerful . And I don't think you never say never but I don't think there's gonna be significant investments made in on premise software quite frankly and hardware any longer hardware will be necessary because all applications run on some hardware layer but proprietary hardware solutions I'm just not sure that's sustainable any longer. Microsoft came out today saying they're against the UK pulling out of the EU. HP has come out and said the same thing. What would the implications for U.S. technology companies be If Brexit happens. Well you don't want any more geopolitical instability because we've got enough instability in the global economy as it is. And so to the extent that there is a material change in the EU consortium that creates geopolitical instability and that's just not good for the environment be it the business environment or quite frankly what's going on for the citizens of the European Union. What about China. Have any U.S. technology companies really cracked the code in China. I think you know the answer to that and it's no I mean we are all trying are living hearts out to do as much as we can to both hold to our standards and principles as a company but find a set of things that we can make as concessions to the Chinese government that it gives us access to the billions of users that are there. And it's balancing the standards that we have and the consistency that we want as we run our business with the interests that we have in having access to those users. Tim Cook is in India this week. Could India be a replacement market for China. No it certainly can be a supplemental market because it's one of the few growing economies in the world. But you can't replace something that's what one point six one point eight billion people big and growing at 7 percent. Now that's down from eleven or twelve percent but their GDP growth is still more than 3x ours here in the US. And so you cannot replace China. You can certainly augment China by having a stronger focus in India but you can't replace it. You were CEO of Symantec for many years they're just now going through another CEO transition for CEOs in seven years. What do you think about what's going on there. It's a huge personal disappointment . He spent 10 years there and I thought we were on a very very good path. Obviously we weren't . I think it's time for not just the team of the company but the board of the company to do a little self reflection on how we made the right calls. And if we made the wrong calls on people have we made the right calls on ourselves. And so I think it's time for a lot more self reflection than perhaps may be going on there. But I don't know. I'm not involved in the company at all. We're seeing Yahoo go through another existential crisis . What would you say to Marissa Mayer right now. Hang in there . I had activist investors engaged in semantic but only for a brief period of time and one of them was in fact Carl Icahn. He was going God. Fortunately for us because of the volatility of our stock. Carl bought low and the stock moved and he sold out . So we never really got the public exposure if you will that Marissa has gotten. I think she started with a tough and that was dealt to her and quite frankly she needs to play it out don't let an activist push you to do something that you don't strategically believe in and to the extent that her board supports her then. Hang tough when it comes to startups in the funding environment we've seen venture capitalists raise record amounts of money but they're not investing it in fact we're seeing down rounds or flat rounds or no rounds. How does this cycle play out. Well I think it's it's the normal ebb and flow that we see in tech. We've seen it forever and so it shouldn't come as a big surprise I think. Was there pressure building up . If anything the pressures on the startups themselves as they look to raise capital or look for valuations that are equal to or better than the last time around. Most of those firms that are in the market looking for equity are looking for capital now or facing a down round. And that's a very very tough thing for some of those equity owners or some of those early startups. Furthermore I think there is an opportunistic view in the minds of the venture capitalists. They watched a lot of these companies valuations accelerate beyond what the revenue would suggest. And now all of a sudden there's some equilibrium that's starting to come back into the marketplace and that's not bad. If you weren't in the last round if you're coming in in a new round and you still believe or you believe now that the team and the technology had promise it's probably not a bad investment given all of the portfolios items that they had. Last question about diversity this is an issue we've talked about a lot when it comes to the technology industry diversity and the lack thereof when it comes to women and minorities. Given how many years you spent in this industry where have you seen the most progress and where do you think there's still the most work to be done . Well I think some of the more established companies have clearly done a better job. I mean older companies like IBM if you will . Companies like Intel they've done a terrific job of at least raising the issue and trying to do something about it but it ultimately comes down to the numbers not the words and the numbers don't necessarily support the words right now. I was quite shocked when I came to the valley in 1999 when everyone was so enamored with the fact that I was the highest ranking African-American in the valley and I'm like what's the big deal . But I now recognize that it is a big deal that we need to do a better job of diversity and inclusion. And I think companies like Microsoft companies like Google are working hard at it but they've got to double down or triple down if they want to make real progress. How are related startups thinking about it . Well I'm an investor in a little startup right now that has two founders that are African-American and they have had probably the most difficult time I've seen of any startup grays around the capital really. They've been at it for over two years now and raised there a round and I don't want to believe that the difficulty is because they're African-American but it certainly makes me wonder you've got a long history of investing. Yes I do. All right . John Thompson Microsoft chairman investor virtual instruments CEO. What is next for you. Well right now another operational role as you. Right now I'm going through a period of what I call decompression. And I spent six years running a startup . It was a wonderful experience. I have this personal philosophy that I should learn throughout my life. And clearly in the last six years where it was a great learning period for me. But this decompression period is all about just kind of relaxing a little bit. I suspect six months from now I'll be investing more in early stage companies. I suspect that I will be an advisor or a board member to some of them. I won't ever never say never but it's highly unlikely that I will be an operator again. That's sixty seven years old it's time for me to spend more time with my wife and her grandkids and friends . I doubt that I'll ever join another public company board. While it's somewhat fascinating and I've had a fair number of people reach out to me of late I'm just not all that interested. So it'll be about what it was to be about in nineteen or two thousand nine when I stepped down from Symantec that is invest in early stage companies an advisory board member where it makes sense and enjoy life. All right. Well John Thompson it's been wonderful to have you here on the show. You should get off to enjoying life. We appreciate you stopping by. Well thank you very much for joining us .

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John Thompson on Microsoft's Cloud Plan and Diversity

Investor John Thompson, chairman of Microsoft, discusses Microsoft's strength in the cloud, the current macroeconomic environment and Silicon Valley's diversity problem. He speaks with Bloomberg's Emily Chang on "Bloomberg West." (Source: Bloomberg)

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