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Originally published Friday, April 18, 2008 at 12:00 AM

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Ballmer points out Microsoft soft spots

Microsoft Chief Executive Steve Ballmer gave a forthright public assessment of his company Thursday, confronting the huge advantage Google...

Seattle Times technology reporter

Microsoft Chief Executive Steve Ballmer gave a forthright public assessment of his company Thursday, confronting the huge advantage Google holds in Internet search — even among devoted users of Microsoft products — and calling Windows Vista a "work in progress."

He was speaking in Seattle to a conference of about 1,700 Microsoft Most Valuable Professionals, independent IT experts who specialize in Microsoft software and services. It is an important constituency for Microsoft, one that is friendly but also highly knowledgeable and unabashedly critical.

Ballmer said at the outset that he was expecting to have "a little bit more wild and woolly, rockin' and reelin' kind of a discussion than I do with my average customer group." By the end of the hourlong speech and discussion, he sported a Canada hockey jersey and a Homer Simpson necktie — gifts from the audience — and a sheet of notes he took on ways to improve Microsoft.

Discussing the company's trailing position in online services, Ballmer referred to the uncertainty surrounding Microsoft's $31-a-share bid for Yahoo. Yahoo has reportedly sought several alternatives to Microsoft's acquisition, including, most recently, a tie-up with Google for search advertising.

"In the online area we've got a lot of users. We've got some big competitors. We've got some big whatevers — competitors or acquisition targets, whatever you want to call them. We've got a little bit of everything out there," Ballmer said.

Ballmer said Microsoft is the global leader in e-mail and instant messaging, but in Internet search — the biggest source of online revenue — "we are the clear No. 3 in the market."

In March, 59.8 percent of U.S. Internet searches were done with Google. Yahoo's search engine ranked No. 2, with 21.3 percent. Microsoft had 9.4 percent, according to online measurement company comScore.

Ballmer sought his own anecdotal measure of search share from the audience of IT pros, many of whom have dedicated their careers to becoming expert in Microsoft's products.

"How many of you use Live Search as your default?" Ballmer asked.

A smattering of hands went up. Tepid applause.

"How many of you use Yahoo search as your default?"

Far fewer hands went up and the room was relatively quiet, until it filled with laughter. He asked again and got the same response.

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"Wow, we offered 31 bucks a share," he said, to more laughter.

"How many of you use Google as your default?" Ballmer asked.

The vast majority in the audience raised their hands, cheering and hooting.

Ballmer looked around. Smiled. Scratched his cheek. Rubbed his face with his hand.

He talked about the company's efforts to improve Internet search and asked the MVPs to set their default search engines to Live Search for a week later this year, and send him e-mail describing their experience.

Ballmer gave a muted report on Windows Vista — the company's flagship operating-system product — which, according to some analysts, faces a make-or-break year in 2008.

"Windows Vista," he said, pausing for a moment, "a work in progress.

"A very important piece of work, and I think we did a lot of things right and I think we have a lot of things we need to learn from. Certainly, you never want to let five years go between releases."

Vista, on the market for more than a year, followed Windows XP, which some users and businesses are favoring and even petitioning Microsoft to continue selling after June 30, the scheduled end of most sales.

Ballmer appeared to be open to a discussion about that date.

"We have some customers, a lot of customers using Vista. A lot of customers," Ballmer said. "And we have a lot customers that are choosing to stay with Windows XP and as long as those are both important options, we will be sensitive and we will listen and we will hear that.

He added, "I know we're going to continue to get feedback from people about how long XP should be available. We've got some opinions on that. We've expressed our views, but certainly to this crowd ... I'm always interested in hearing from you on these and other issues."

Benjamin J. Romano: 206-464-2149 or bromano@seattletimes.com

Copyright © 2008 The Seattle Times Company

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