Analysts served up tidbits, spy "doughnuts" at Microsoft meeting

Microsoft's annual financial analysts meeting, referred to as FAM, typically covers the breadth of the world's largest software maker.

This year's version, held Thursday on the Redmond campus, focused heavily on Microsoft's online operations, but managed to take in the range of the company.

Columnist Brier Dudley and reporter Benjamin J. Romano spent the full day there listening to presentations and talking with sources. What follows are snippets of things that caught their eyes and ears.

How much is "negligible"?: Microsoft Chief Financial Officer Chris Liddell took the financial analysts through another rehash of the Yahoo pursuit.

He said the value of Yahoo has eroded since Microsoft made its acquisition offer in January. Going forward, he said, the chances of Microsoft buying all of Yahoo are so small as to be "essentially negligible." A search-only transaction is still a slim possibility.

— Benjamin J. Romano

Listen up, Wall Street: If Microsoft CEO Steve Ballmer and CFO Liddell weren't already bald, they would be from scratching their heads, trying to figure out why their stock is doing so poorly. Especially given the company's recent performance, including 12 percent average growth in Microsoft's core businesses since 2005.

Not to mention Microsoft's 18 percent growth over the last fiscal year.

"Those are fabulous numbers. Those are fabulous numbers for any company of any size," Liddell said to analysts.

— Brier Dudley

Reorg? What reorg? There was little discussion of the significant reorganization of the company announced late Wednesday afternoon. It could be further evidence that Platforms and Services President Kevin Johnson's departure to become CEO of Juniper Networks caught Microsoft by surprise.

Ballmer made little reference to the change, which split the giant division into two groups, one focused on Windows/Windows Live and the other on Online Services. Ballmer is taking direct oversight of both groups.

— B.J.R.

The "doughnut" watch: The most remarkable thing about the analyst meeting is always the way Wall Street types cluster around top executives in the hallways and at meals, straining to hear some valuable piece of extra information like groupies seeking autographs from a rock star.

Bill Gates always drew the biggest clusters, or "doughnuts" as the 'Softies call them. But he didn't attend this year.

The year's doughnut king is Ballmer, who drew a four-deep cluster of starched shirts in the hallway after his presentation in Microsoft's on-campus briefing center.

— B.D.

Yahoo keeps coming up: Interesting tidbit from Ballmer's presentation: The Yahoo deal made sense if the regulatory reviews could be done before the federal administration changed.

Ballmer didn't say that the current administration is more sympathetic to Microsoft than the next one will be, although of course it was under the Bush administration that Microsoft's U.S. antitrust issues were largely resolved.

It may be a different story under Barack Obama and even John McCain, if Google and Yahoo successfully recycle the 1990s Silicon Valley story line and cast themselves as the populist characters in a regulatory showdown with Microsoft.

Ballmer's probably being practical, not political. Changes in administration mean changes in regulatory bodies and approaches, which could prolong the review process and leave a Microsoft-Yahoo merger in limbo for too long.

— B.D.

There was some news: Microsoft has inked an exclusive U.S. search-distribution deal with social-networking site Facebook.

Satya Nadella, senior vice president in charge of Microsoft's search, MSN and ad-platform engineering efforts, said Microsoft "will be providing an API to Facebook where they will create a rich search experience, inclusive of Web search."

It will launch in the fall, he said, and will include both Live Search results and Microsoft search advertising.

— B.J.R.

There was more news: Microsoft server boss Bob Muglia didn't need any more exclamation points for his presentation. His business has been growing 18 percent a year, nearly quadruple the pace of the enterprise-software market.

But he was able to punctuate his speech by casually mentioning the acquisition of data-warehousing company DATAllegro.

By buying the California company, Microsoft can move further into massive-scale enterprise computing systems, with products that companies can use to store hundreds of terabytes of data.

He said the DATAllegro system "will scale well beyond what Oracle can do today."

— B.D.

The Vista report: Bill Veghte, Microsoft senior vice president of Online Services and the Windows Business Group, talked about Windows Vista and the improvements in the product and its adoption in the past year.

On security, for example, Windows Vista is 62 percent more secure than Windows XP SP2, he said.

Microsoft has sold 180 million Vista licenses since the product launched in January 2007. Sales have been "very balanced" between consumer and business customers.

Enterprises are accelerating their deployments of Vista, particularly since Microsoft released Service Pack 1 in March. Veghte said deployment is consistent with what Microsoft saw with Windows XP.

If the question is whether big enterprises are buying Windows Vista, "the answer is emphatically yes," Veghte said.

— B.J.R.

Speaking of the enterprise: Ballmer said there are still huge opportunities for the company in enterprise software. Look out IBM:

"I think palpably we are this close — Microsoft — to be able to claim we are the No. 1 enterprise-software company in the world," Ballmer said.

— B.D.

Time out for the demo: Chief Research and Strategy Officer Craig Mundie showed progress Microsoft has made in robotics and natural user interfaces such as speech and facial recognition. He gave one demonstration: "Robotic receptionists" will perform a mundane task real receptionists do dozens of times a day — scheduling shuttles, Mundie said.

Microsofties make their way around the sprawling, wooded campus in Redmond by taking shuttles. In the video demo, a female face looked out from a computer screen and asked employees who approached, "You want a shuttle, right?"

It asked a pair of employees if they were riding together and where they were headed. After verifying their destination a second time, the "receptionist" scheduled a pickup. "You will be on shuttle 32. It should be here in four minutes. Bye."

— B.J.R.

The road ahead: Tomorrow's online market opportunities are so great, it's worth losing a relatively small amount of money today investing in the business, Ballmer said.

Ballmer said there's a $1 trillion market being transformed by the Internet and Microsoft is one of the best-positioned companies to capitalize on the digitization of content, communities and communication.

"As we go out five, 10 years from — literally, within 10 years — you'll have digital screens that are this light and this thin [waving a sheet of paper] and connected to the Internet. I will not bring paper. Every surface we walk up to and touch will be a window to the world of digital information ... the question is what companies are really going to invest in the big opportunities around this?"

A few minutes later he answered the question:

"I think there's really only two companies on the planet that have the capability and the staying power — Google and Microsoft."

— B.D.