Microsoft has adopted a tough mantra for an age of austerity, arguing that innovation must take a back seat to cost-cutting and productivity gains when it comes to selling technology.

"Things have come down. I see them staying down and slowly growing," Steve Ballmer, Microsoft's chief executive, said today in a speech to British business leaders.

But does Microsoft's "New Efficiency" slogan describe the future of the technology industry?  Or just the software giant's own subdued outlook?

In recent years, Microsoft has settled into managing mountains of cash and established customer relationships in late middle age. Its share price has also been less than dynamic, down 30 percent since the beginning of 2008.

But instead of making big bets on future growth, Ballmer contends that  innovations must be funded based on their prospects for helping customers become more lean and efficient. The company recently froze funding for research at $9.5 billion -- still the world's largest such budget.

"I believe the new normal requires a new kind of efficiency built on technology innovations that enable businesses and organizations to simultaneously drive cost savings, improve productivity, and speed innovation," Ballmer argued in a manifesto published last week.

Ballmer acknowledges that the "New Efficiency" is partly a marketing message to underscore the potential productivity benefits of Microsoft's upcoming products -- the next version of its operating system Windows 7 and Exchange Server 2010.

Microsoft suffered its first-ever drop in annual revenue during its fiscal year ended in June -- a decline of 3 percent. Wall Street forecasts revenue growth of just 1 percent in revenue for fiscal 2010 and flat to modest growth of 5 percent in profits in the coming year.

But the company insists that there is a silver lining in its new focus. Refocusing technology innovation around efficiencies can help job growth, taxes and the creation of small businesses, Ballmer says.

Microsoft recently commissioned market research firm IDC to study how spending on technology and jobs compare with the economy at large in 52 countries around the globe.

Technology spending in the European Union is forecast by IDC to grow by 2.1 percent and employment increasing by 559,000 jobs between 2008 and 2013. By contrast, overall gross domestic product and employment in the EU is set to decline slightly.

The IT sector will create 5.8 million jobs worldwide over the next four years. Even in the European Union, where economies are still in decline, technology spending is set to rise and create more than half a million jobs by 2013.

Still, there will be no more innovation for its own sake, Microsoft says. New technologies will be funded from savings wrung out of less efficient ways of doing things or they won't survive.

Microsoft's message is in tune with times of slumping economic growth and organizational budget-cutting. But it is also a convenient one for a company that may have run out of disruptive new ideas.

You can read some of Eric's recent columns here.

(Photo credit: Reuters/Eric Auchard)

Never one to let an opportunity pass to tweak a competitor, Microsoft CEO Steve Ballmer got off a few zingers at long-time rival Apple at the software giant’s analyst meeting on Thursday.

“Share versus Apple, you know, we think we may have ticked up a little tick, but when you get right down to it, it’s a rounding error,” he said. “Apple’s share change, plus or minus from ours, they took a little share a couple quarters, we took share back a couple quarters. But Apple’s share globally cost us nothing. Now, hopefully, we will take share back from Apple, but you know, Apple still only sells about 10 million PCs, so it is a limited opportunity.”

Shipments of Apple’s Mac PCs rose 4 percent in the June quarter, while the global PC market shrank 5 percent, according to Gartner.

Ballmer also touched on the advertising war that has blossomed between Microsoft and Apple, and said the Windows ads have proven to be “quite effective”:

“Starting about two years ago, I started to get the question, what’s up with the Apple ads? It was one of the few places where I had a lot of investors pushing me to spend money as opposed to constrain the spend of money. Well, those folks ultimately won.”

Microsoft, of course, also plans to open its own chain of branded branded stores, some right next door to Apple’s outlets.

The worst-kept secret in tech was finally made public as Microsoft CEO Steve Ballmer lifted the wraps off the company’s new search engine: Bing.

The revamped engine, intended to take a bite out of Google’s dominance, is being rolled out over the next few days, with a full launch next Wednesday.

Here are a few screenshots to tide you over until then.

Times are tough for car makers, so Ford’s CEO Alan Mulally is going the extra mile by delivering cars to customers himself.

Unfortunately you have to be CEO of a very large company to qualify. Here’s Microsoft’s Steve Ballmer taking possession of his new Ford Fusion Hybrid at the software company’s Seattle-area campus.

 
“This is awesome!” Ballmer declared, before climbing into the car for a quick seminar on how it works. He didn’t seem too interested in the fuel consumption figures, but said his wife insisted on a hybrid.

The car was the millionth with Ford’s SYNC system — powered by Microsoft technology — which allows you to control a phone and play music with voice commands. So people in the back seat can embarrass you by shouting “Play Abba”.

The high-octane double-act of Ballmer and Mulally — CEO pitch-men par excellence — seals an interesting alliance between Seattle and Detroit. Ford’s Mulally lived in the Seattle area in his 30-plus years at Boeing’s nearby commercial plane operations, while Ballmer’s father — who raised his family in and around Detroit — was a long-time Ford employee, starting in the company’s financing unit in 1950.

Steve Ballmer knows how to pack a house.

Stanford University’s Memorial Hall was filled to its almost 2,000 capacity on Wednesday, as the voluble Microsoft CEO took the stage.

For the MBAs and engineering students who showed up, the event was a chance to get inspiration from the chief of one of the world’s most powerful corporations (and from someone who dropped out of Stanford Business School to join Microsoft). The press in attendance was mainly interested in comments Ballmer might make about Yahoo.

Indeed, with Microsoft and Yahoo reportedly in talks about a search partnership, speculation has risen in the blogosphere that Ballmer and Yahoo CEO Carol Bartz would have a sit-down during his swing through the Bay Area.

Ballmer addressed the speculation with his standard lines about Yahoo: He’s disappointed last year’s acquisition offer didn’t work out, but still thinks there’s potential to team up with Yahoo to create “a better search product” which would attract more customers and advertisers.

He declined to comment on any discussions that “may or may not” be occurring.

When it comes to Microsoft’s existing efforts in Internet search, Ballmer said the company needs to be more disruptive.

“We’re more like a start-up than we are more like a big guy in the search market,” he said, referring to search giant Google. “We can’t invest in everything the big guy can.”

And although Microsoft had just announced the second phase of its layoff of 5,000 employees a day earlier, Ballmer encouraged students to come work at the company, telling the crowed that Microsoft is always hiring and giving out his personal email (steveb@microsoft.com) on two occasions.

“Shoot me a little piece of email,” he said.

Two days ago, Microsoft CEO Steve Ballmer said Yahoo should team up with his company on search so they can take on Google. That’s not a new idea; after all, Ballmer’s been talking about a search deal of some sort at every public forum for months.

But then, Yahoo CFO Blake Jorgensen sent out a message loud and clear the following day, endorsing the idea of a search partnership. Yahoo is “not opposed” to doing a deal on search, he said, adding that such a deal could be in the form of a partnership or a sale of it search business. When Carol Bartz took over as Yahoo CEO last month, she said her first instinct was to hold on to search, but of course, “everything is on the table.”

So could something be brewing on that front?

Collins Stewart’s Internet analyst Sandeep Aggarwal thinks so. In a research note today, Aggarwal writes the “posturing” from both sides suggests that a search deal is in the offing:

Less than 36 hours after Microsoft’s CEO mentioned about increasing likelihood for a possible MSFT/YHOO search deal due to recent management changes at Yahoo (new CEO), yesterday Yahoo’s CFO essentially not only expressed Yahoo!’s interest in a search deal but also publicly set the stage for some possible negotiations with Microsoft. As we highlighted several times before, we continue to believe that a MSFT/YHOO search deal is very likely and appears to be a near-term event. We believe that a search deal with Microsoft can provide $8 to $10 per share lift to Yahoo.

Aggarwal even goes so far as to suggest that the next step for a possible search deal between Microsoft and Yahoo is the deal announcement itself. Do you think Ballmer and Bartz will be shaking hands soon?

Keep an eye on:

• Don’t write off Steve Jobs yet. Apple tells shareholders he will return. (New York Times)
• Gannett slashed its dividend 90 percent, but if you’re an investor in publishing companies, maybe you’re just happy it didn’t get scrapped entirely. (USAToday)
• Cablevision posts a loss on Newsday writedown. (Reuters)
• If Apple can make mobile phones, why can’t Nokia make laptops? (Reuters)

(Photo: Reuters)

Google just keeps on truckin’. The Internet powerhouse posted results yesterday that show advertisers haven’t completely cut their spending — at least not on search.

Excluding one-time charges, profit was $5.10 a share, beating the average analyst forecast of $4.95 according to Reuters Estimates.

Revenue rose 18 percent to $5.7 billion — a shadow of the 50 percent growth levels that Google used to enjoy, but considered by analysts to be a robust performance given the weak economy and corporate cutbacks in advertising spending.

But CEO Eric Schmidt also took pains to keep investors, analysts and the press realistic about the world today: “Now clearly we’re in a worldwide recession as everybody knows, rising unemployment, foreclosures, that sort of thing,” he said on a conference call. “But we don’t know how long this period will last. We obviously hope it will be short.”

Shares of Google were up more than 4 percent in early trade, and analysts offered mostly upbeat responses to the earnings despite Schmidt’s caution.

“We would be buyers of Google shares coming out of 4Q earnings. Macro risks remain, but we think Google grows high-single digits in ‘09 & is among the best-positioned companies to weather the storm,” wrote Barclays analyst Douglas Anmuth, who reiterated an “overweight” rating on the company and set a price target of $460.

You just know this sort of talk drives Steve Ballmer bonkers.

Keep an eye on:

• Tribune Co selected Tom Ricketts, the head of a Chicago investment bank, as the lead bidder for the Chicago Cubs baseball team, after receiving support from the bankrupt media firm’s creditors (Reuters)
• General Electric Co reported a 44 percent drop in quarterly profit, while media division NBC Universal’s profit declined 6 percent as strong cable earnings were offset by declines in the local stations (Reuters)
• The New York Times is in advanced negotiations to sell a substantial portion of its 52-story headquarters building on Eighth Avenue in Midtown Manhattan to W. P. Carey & Company (NY Times)

(Photo: Reuters)

1975

Microsoft (then spelled “Micro Soft”) is founded by William “Bill” Gates, a 20-year-old Harvard dropout, and Paul Allen, his 22-year-old school chum. They begin selling its first product, a BASIC programming language interpreter.

1980

Microsoft signs an agreement to build the operating system that became known as MS-DOS for IBM’s new personal computer, which was launched in 1981. Microsoft was allowed to license the operating system to others, spawning an industry of “IBM-compatible” machines dependent on Microsoft software.

1983

February: Paul Allen, ill with Hodgkin’s disease, resigns from active management of the company but remains on the board of directors.

1986

March 13: Microsoft’s stock goes public with an initial price of $21 a share, closing the first day of trading at $28. Revenue for its previous fiscal year (which ended June 1985) $140.4 million.

1989

August: Microsoft introduces earliest version of its “Office” software suite, which includes the popular word processing program “Word”. Today, the company says it has more than 500 million users.

1990

June: The U.S. Federal Trade Commission begins a secret probe focusing on possible collusion between Microsoft and IBM. Microsoft remains under the microscope of regulators for another 18 years.

1992

January: Gates, 32, is named the richest American, with more than $6.5 billion, thanks to his one-third stake in Microsoft.

1993

June: A federal judge rules in favor of Microsoft, ending 63 months of litigation by Apple Computer Inc., which charged that Windows copied the look and feel of its Macintosh computers.

August: After the FTC deadlocks twice on the issue, the Justice Department announces it has taken over the Microsoft investigation, which now focuses on its business practices.

1995

January: Microsoft unveil one of it more celebrated flops, a software companion called “Bob”.

July: Gates is named the world’s wealthiest man for the first time with an estimated worth of $12.9 billion.

August: Microsoft launches Windows 95 with a marketing blitz five times bigger than any of its previous efforts. Experts say the system offers no technological breakthrough but adds features enjoyed for years by users of the rival Apple system.

1999

Microsoft added to the Dow Jones Industrial Average. Its revenue for the fiscal year ending in June reaches $19.75 billion.

2000

January: Steve Ballmer named to succeed Gates as CEO. Gates remains Chairman.

June: At an event with university students in Tokyo, Gates is asked what more he wanted in life. He promptly replies, “privacy.”

2001

May: Microsoft launches Windows XP operating system.

November: Microsoft jumps into the interactive game business with the launch of the Xbox , taking on rivals such as Sony and Nintendo. Its most important day-of-release game, “Halo: Combat Evolved”, is a huge hit, helping to drive Xbox sales, and eventually sells more than 5 million copies

2003

February: Microsoft shares split for the 9th time. One original share is now equal to 288 shares.

2006

June: Gates says he will transition out of a day-to-day role in the company in July 2008. Steve Ballmer is the companies top decision maker; Ray Ozzie steps up to be Chief Software Architect.

2007

January: Microsoft launches “Vista” , the latest version of its ubiquitous Windows operating system software, in 70 countries, and expects it to be installed on over 100 million PCs worldwide. Influential Wall Street Journal columnist Walt Mossberg, in his review of Vista, called it a “worthy, but largely unexciting, product.”

2008

January: Ballmer makes a $44.6 billion takeover offer to Yahoo’s board. Yahoo later rejects the offer, setting off a lengthy battle over the future of Yahoo.

March: While still wealthier than many nations, Gates falls to third on the list of Earth’s richest man, behind famed investor Warren Buffet and telecoms tycoon Carlos Slim. Forbes magazine estimates Gates wealth at $58 billion.

June 27: Bill Gates steps down out of a day-to-day role in the company, to focus on philanthropy. He still holds nearly a 9 percent stake in Microsoft, and remains its biggest shareholder. Since 2000, Microsoft’s stock has fallen 52 percent.

2009

Microsoft announces job cuts of 5,000, which are expected to help in reducing fiscal year 2009 capital expenditures by $700 million. They represent the largest cuts ever by the company.

(From Reuters, Microsoft.com, Flickr, Google Finance)

It’s a tale of two companies in the technology world on Thursday. There’s Apple, whose quarterly profit beat expectations on strong iPod and Mac computer sales. And then there’s Microsoft, whose dismal earnings sent shockwaves through financial markets.

There should be plenty of interesting questions for CEO Steve Ballmer on the company’s conference call this morning — some of which he likely wouldn’t answer if asked.

Why didn’t Microsoft give investors a warning if the results were going to look so lousy? Why release the results Thursday morning rather than when it was supposed to, later this afternoon? What’s going on with Yahoo? Will 5,000 jobs cuts — the biggest ever by Microsoft — be sufficient? And, seriously, why is Apple doing such so much better?

Already, there is no shortage of opinions on what’s happening over at Microsoft, and more will tumble out after the conference call. For now, check out this Instant View by Reuters, which gives a pretty good idea of what Wall Street is thinking.

Or just read this comment by Frank Lesh, a futures analyst and broker at FuturePath Trading LLC in Chicago: “This is not good news for Microsoft, there’s nothing here to inspire buying, not even buying on weakness at this point.”

Keep an eye on:

• Sony Corp warned it would post a record $2.9 billion annual operating loss due to sliding demand and a stronger yen, and unveiled fresh restructuring steps to revive its ailing electronics operations (Reuters)
• “The Curious Case of Benjamin Button,” a drama in which Brad Pitt plays a man who ages backward, led the field of Oscar contenders with 13 nominations (Reuters)
• Meredith posted a lower quarterly profit on Thursday, and forecast a bleak advertising market for the rest of the year in its magazine publishing and broadcasting businesses (Reuters)

(Photo: Reuters)

After all the excitement, endless public service announcement ads and electronics retailers salivating over anticipated high-definition TV sales, it turns out that the United States might not be switching to digital television just yet.

President-elect Barack Obama is backing a move to delay a mandatory switch to digital TV signals on Feb. 17 because viewers might not be prepared. Also, the government has run out of $40 coupons to help pay for converter boxes.

The idea that as many as 8 million homes (according to Nielsen data) might lose TV reception in a few weeks is not the kind of headache a new White House administration wants to deal with so it’s perhaps not surprising talk of a delay, possibly up to four months, is gathering support.

Traditional over-the-air broadcasters, who already have a shrinking viewer base, will probably appreciate the breathing room, says  Wall Street analyst Thomas Eagan of Collins Stewart. But Eagan thinks that cable TV companies will be less pleased if the digital transition is delayed.

A delay of this length would be a slight negative for the cable operators as they stand to benefit from over-the-air viewers becoming cable subscribers with the transition. [This is because the digital transition would not affect cable subscribers, who would still be able to watch TV on their old sets. -- ed.]

Since we expect Comcast to be the biggest beneficiary of the transition (due to the high percentage of over-the-air viewers not having registered for a coupon in Comcast’s franchise areas), a delay could translate to a higher ratio of new subscribers foregone for Comcast.

It’s not all bad news for Comcast, Time Warner Cable and friends, watch out for more ads for cheaper entry level cable packages says Eagan:

That said, the cable operators could use any delay to more aggressively market their economy priced 2-play package (entry-level cable and telephone) to over-the air viewers.

Keep an eye on

• Microsoft chief Steve Ballmer has increased pressure on Yahoo to hand over control of its search business (Financial Times)
• Yahoo is in the final stretch of its search for a CEO to replace founder Jerry Yang and former Autodesk chief Carol Bartz is on the list of candidates. (WSJ)
• Watch out iPhone; here comes Palm’s Pre and it has multi-touch screen as well (New York Times)

(Photo: Reuters)