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Ballmer sees recession as investment opportunity for Microsoft

CEO says software vendor will continue spending in an effort to increase market share

By Elizabeth Montalbano
February 24, 2009 12:00 PM ET

IDG News Service - Microsoft Corp. CEO Steve Ballmer told financial analysts today that the software vendor plans to continue investing money in an effort to increase its market share in key parts of the tech market, despite the ongoing economic recession.

Downturns such as the current one can be a good opportunity to invest strategically in preparation for the economy's eventual turnaround, Ballmer said during a "strategic update meeting" in New York, where he also said that Microsoft plans to release its Windows Azure cloud-computing platform by year's end.

However, Ballmer reiterated earlier comments that he doesn't expect the economy to improve quickly and said that Microsoft is prepared, if necessary, to hunker down and spend carefully until business conditions do get better. Microsoft made an initial move to cut costs last month, when it announced plans to lay off up to 5,000 workers over the next 18 months.

Ballmer said he's taking cues from how companies handled previous economic crises, most notably the Great Depression of the late 1920s and 1930s. "I've had guys go through annual reports of a bunch of companies from 1927 to 1938 to see what were those guys saying," he noted.

Microsoft is following the example of one company in particular: RCA, which kept investing in research and development during the Depression, and afterward dominated its industry, according to Ballmer. Microsoft likewise will try to make gains in some areas where it can improve its market-share position while the economy is down, he said.

"We'll compete for share -- that's one thing that's economy-independent," he said, adding that he is repeating a mantra of "share" to his staff to remind them of its importance.

Another thing Ballmer took away from his historical research, however, is that the business climate will continue to be difficult for the foreseeable future. The companies he has studied "all have a story associated with them, and none of them is a quick recovery," he said.

Keeping that in mind, Ballmer said, Microsoft expects its revenue growth to be lower than usual for the rest of the current fiscal year, which ends June 30, and possibly beyond.

Microsoft didn't disclose any financial guidance for the remainder of the year when it announced its second-quarter financial results and its layoff plans in January. It was the same today, with neither Ballmer nor Microsoft Chief Financial Officer Chris Liddell, who also spoke to the analysts, giving a specific business forecast. No further layoffs were mentioned, although Ballmer and Liddell both emphasized that they will continue to examine how the company could reduce costs even as it continues to make strategic investments.

Reprinted with permission from IDG.net. Story copyright 2010 International Data Group. All rights reserved.
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