8:10 a.m.: I’m in Bellevue this morning for Microsoft’s annual meeting of shareholders, where CEO Steve Ballmer is currently giving the assembled crowd an overview of the company’s business, highlighting the growth of Windows, Office, Windows Server and other products over the past year.
“Importantly, we grew our top and bottom lines, while continuing to invest in key areas for growth,” he said, predicting that the pace of change in the technology industry will continue to increase. “Microsoft is well positioned to embrace and drive those changes and expand our business.”
He noted that it has now been a decade since Microsoft entered the business applications market. “We’re starting this next decade with a great first quarter, where we saw our Dynamics business grow 17 percent.”
8:22 a.m.: Now Ballmer is talking about the growth of the company’s Xbox business, citing the fact that the console has become more generally accepted even in his family, as Kinect as broadened its own usage. The Xbox 360 is no longer banished to the basement in the Ballmer household, he said.
“There was a time when people thought we were crazy for getting into the Xbox business, and people thought we could never compete with Sony and Nintendo,” he said, citing the console’s status as No. 1 in the U.S. and saying it has “clear line of sight” to being the top console in the world.
8:25 a.m.: After showing an Xbox video, Ballmer calls Xbox an example of Microsoft’s ability to make long-term bets (read: spend billions to give itself a foothold) and work across disciplines among different product teams at the company.
8:27 a.m.: Ballmer transitions to the company’s Bing search engine, its effort to chase Google, presumably hoping that shareholders will see what has happened with Xbox and show patience. “We’re clearly on the right path with Bing, a path to profitability,” he says.
8:29 a.m.: Now he’s talking Windows Phone (which might require even more patience from shareholders). Ballmer touts favorable Gizmodo review, talks about exclusive Nokia smartphone partnership, promises first Nokia Windows Phones in the U.S. early next year, and ultimately serving a broad range of geographies and price points.
The company is “extremely optimistic” about Windows Phone, he says.
8:31 a.m.: Ballmer talks about recent Skype acquisition, says company will use technology in part to make its existing products better.
8:32 a.m.: Now Ballmer is talking Windows 8, saying it will power devices from tablets to desktops. Assures shareholders that they can still use traditional mouse and keyboard and it will “work beautifully.” Windows Store will ship at the time of Windows 8 for Metro apps, he says.
8:34 a.m. “There’s never been a time since I’ve been at Microsoft that’s quite as exciting as now,” he says. Technology shifts right now in the industry are as “momentous as anything I’ve seen.” Company has seized some opportunities well and has made significant investments in others, he said.
He said to shareholders that Microsoft will “work hard to make that the best investment you’ve ever made.”
8:36 a.m.: Microsoft’s nine-member board has been re-elected. More than 98 percent of shareholders approve of executive compensation. Shareholders decide they want such a say on executive pay every year, now Microsoft’s board will take that into account. Shareholder proposal to establish board environmental committee, which had been opposed by the board, receives less than 4 percent of votes and isn’t approved.
Official business now adjourned, now the Q&A session.
First question: Why don’t you give us more dividends vs. buying back stock?
CFO Peter Klein: Company has taken a balanced approach, have had a very consistent approach over the years to do what’s right for shareholders and balance sheet through buybacks and dividends..
Second question: Why not split up the company to increase value?
Ballmer: The company doesn’t invest in things that are “idly independent.” Product teams work with one another, same graphics technology whether in automotive platform or in an Xbox. Consumerization of IT also creates connections across groups. Drawing arbitrary lines makes it harder to manage if you try to have different shareholding groups own, in essence, different parts of the company.
Third question: Another call for increasing the dividend. Also encourages shareholders to read Paul Allen’s comments about Microsoft in his book. Asks Bill Gates to talk about how Microsoft can increase its stock price.
Gates: The company needs to be able to take big risks even in the face of uncertainty. I’ve always been a big believer in having a strong balance sheet. Now other tech companies are adopting a similar approach. “The opportunity as the world’s best software company is very strong, strong as it’s ever been.”
Fourth question: Asking Microsoft to explain its approach in China and cooperation with censorship there.
Brad Smith, general counsel, talks about an organization that Microsoft is involved in with other companies, including Yahoo, that is guided by principles including the company’s need to comply with laws where it operates, but it’s also important to work to engage in a dialogue with governments and put in place safeguards to make sure it doesn’t go beyond what it needs to do to comply, and also to encourage change in areas such as freedom of expression.
Fifth question: Are we in the post-PC era?
Ballmer: “We are in the Windows era — we were, we are, and we always will be. … We are in an era in which the range of smart devices is continuing to expand. That’s a fantastic thing for Microsoft.”
Sixth question: Question about overseas cash and tax policy.
Peter Klein: In short term, a tax holiday probably beneficial, but only a short term fix.
Ballmer: Corporate taxes in U.S. gives incentive to U.S. companies to invest outside U.S., and there’s need for broader reform.
Seventh question: Ballmer is using a tablet, why can’t people buy quality Microsoft tablets today? Why Kindle Fire and iPad?
Ballmer: You can buy this today, Samsung tablet. (He happens to be running Windows 8 developer preview.)
Microsoft investor relations exec Bill Koefoed: Meeting is adjourned, shareholder objects from the back to the fact that it isn’t going longer. Koefoed says “we’ve got the meeting scheduled for this amount of time, sir, so thank you very much.”
That’s a wrap from the meeting.