Ballmer: Patient investors rewarded

Each July, when its fiscal year is new, Microsoft assembles financial analysts at its Redmond campus to make a pitch as to why the software giant is a good investment.

The daylong, high-level Financial Analysts Meeting sets expectations for the coming year and beyond, and provides a rough barometer of what's on Wall Street's mind. (Although it was tougher to take a reading Thursday as Microsoft's stock dropped as the market took a substantial dive.)

"This meeting, this time of year, what we really try to reflect on is shareholder value and the growth of shareholder value," Microsoft Chief Executive Steve Ballmer said.

"I think we've proven that our commitment is to our shareholders, but our commitment is in folks who want to be with us for the long term because most of the bets — the things we do in this business — have a very long-term time frame," Ballmer said.

He went on to describe just what that value looks like, from his perspective.

In the last five years, Ballmer said, Microsoft has:

• Doubled profits and nearly doubled its sales to $51.12 billion

• Returned more than $100 billion to investors in dividends and stock buybacks

• Acquired more than 80 companies

Ballmer said Microsoft had the highest operating income of any company outside of the financial-services and energy sectors.

He also noted an upcoming milestone for the company.

"By the end of our fiscal year '08, there will be more PCs running Windows in the world than there are automobiles, which is to me at least a mind-numbing concept," said Ballmer, whose father worked at Ford.

(A company spokesman clarified that the 1 billion figure includes all versions of Windows shipped by the company, as well as some pirated copies.)

Ballmer also talked extensively about the company's key priorities for continuing its success, including recruiting.

He said Microsoft is getting 90 percent of the people it tries to hire. That equates to 12,800 new hires globally in the fiscal year ended June 30. He also said the company experienced total attrition of 8 percent.

That would bring the company's total global employment to about 78,280, up 10 percent from a year ago — a slower pace of growth than in recent years.

Before Ballmer, Chairman Bill Gates took the stage and outlined his view of the big technology trends driving the industry. Gates hasn't said whether he will continue to participate in these meetings after he moves from day-to-day involvement with the company next year.

He said Moore's Law — the prediction by Intel co-founder Gordon Moore that computer processing power will double approximately every two years — is still intact but that it's manifesting in a different way.

Before, individual microprocessors got progressively faster. But the "clock speed" of the chips is reaching its limit because of the amount of heat they are generating.

Processing power, Gates said, will continue to grow through parallel microprocessor architectures — so-called multi-core chips.

The most important trend, Gates said, is the ubiquity of broadband access. More than just getting video on the Internet, broadband access changes computing itself.

The early PC was a self-contained device, Gates said. "As you get broadband to be widely available, you can change that paradigm," he said.

He described some of those changes: Storage doesn't have to be in one location. Users can move easily back and forth between multiple devices. If you're near a bigger display, you can make use of it.

The most underappreciated trend, Gates said, is the emergence of more natural user interfaces such as speech recognition, touch and vision.

He complimented two competitors' products — the Apple iPhone and Nintendo Wii — for taking advantage of touch and motion-sensing interfaces.

Gates demonstrated Microsoft's most visible offering in this area: a table-top, touch-sensing computer called Surface.

Of all the demonstrations Gates has given in his career, he's been surprised at how well people are responding to Surface, which allows direct manipulation of digital objects on the screen.

"People can quickly envisage what kinds of things would become very easy for them to do ... that are very complex today," Gates said.

Benjamin J. Romano: bromano@seattletimes.com