Microsoft’s Steve Ballmer on Surface, Phones—and No More Yelling

Microsoft CEO Steve Ballmer is dropping some more hints about what it hopes to accomplish with the Surface tablet and new Windows phones, and the company’s sales strategy to compete with Apple this holiday season.

It’s mostly what you’d expect, and what others have already asserted. But there are some glimmers that Ballmer at least gets that the future of personal computing will be about connected services and an end-to-end consumer experience.

Whether his company and its sprawling network of partners can pull that off will be one of the most important stories to watch in the business world over the next few years.

Ballmer’s latest comments come from an interview with The Seattle Times, which published the Q&A in two chunks online. The interview covers the waterfront in terms of the latest Microsoft news, from smartphones and tablets to public perception, employee evaluations, and the value of yelling in marketing—something Ballmer has first-hand experience with.

Here are the major points from where I sit:

— The Surface tablet, which still hasn’t really been seen outside of a marketing event, is a “North Star” product intended to point other hardware companies toward a new way of building Windows devices.

When asked point-blank whether the Surface’s success will be measured in units sold or its influence on other manufacturers, Ballmer says both will matter. “Yes and yes. They both have to happen.”

But that’s really a way of saying it’s primarily a demo device intended to nudge other companies along toward better Windows hardware. The Surface can’t truly be a big success in both cases, because selling a meaningful number of units would mean it was taking market share away from all of the other manufacturers.

If being a “North Star” is part of the strategy, it’s the whole strategy.

Remember, the Surface will only be sold in Microsoft-branded retail stores and its own online sites. There are only 20 Microsoft stores right now, with another 30 or so “pop-up” stores anticipated for the holidays. It’ll be a niche product for tech geeks, and get a lot of reviews that way. But it’s not a serious retail play.

— Surface will probably be priced at around $300 and $800—not in the $200 range.

Microsoft says there will be two versions of the Surface tablet: One coming out this year that will run the tablet-specific version of Windows, and one coming out later that is supposed to run a full-on professional version of the operating system. There were earlier rumors that the cheaper Surface might fit in around $200, but expert observers like Paul Thurrot have discounted those ideas.

From Ballmer’s comments, it looks like the less-advanced Surface would be around $300, and the higher-end version around $800. But it won’t be a discount device, like the Amazon Kindle Fire or the Samsung Galaxy Nexus—Ballmer says tablets in that price range are cheaper, less powerful, less desirable computers.

Asked if the Surface will compete with the iPad on price or features, he says “We haven’t announced pricing. I think we have a very competitive product from the features perspective.” Ballmer also says that most people don’t consider the iPad to be “a superexpensive device.” Ballmer also elaborates to say that the “sweet spot” for pricing in the PC market is in the range of $300 to about $800.

— Windows Phone’s hope to build up market share rests on connected services.

The new Windows Phones rolled out by Nokia and Microsoft recently were feature-laden wonders. They looked nice. The Windows Phone operating system’s user experience remains the only fresh alternative to iOS.

But it won’t be enough. Apple and Android/Samsung have so thoroughly taken hold of the smartphone category that Microsoft and Nokia are currently battling for an OK third-place, particularly if they can replace the disappearing Reserch in Motion for business users.

To make even that happen, the two companies will have to market the living daylights out of their phones. And despite what some people thought, I didn’t read the recent comments by carrier execs at the Mobile Future Forward summit as a sign the networks were going to champion Windows Phone.

Especially if they want to win over businesses, the real key will be integration with other Microsoft services. Enterprise is the core of Microsoft’s business, and making that software shift over to an always-on, connected online service that people can access remotely is the tie that will bring Windows Phone along for the ride—or not.

Ballmer has this one down cold.

“We’re a very small player, but we have a different point of view in terms of user experience. We’ve got great cloud integration with the rest of the Microsoft world, which a lot of people participate in.

“So I think our point of view on user interface, the great work that our hardware vendors are doing and the integration with Windows should help ratchet us up.”

— The combination of connected services and devices that saved Apple and revolutionized the technology industry is also the future for Microsoft.

It has to be, right? But it’s a big deal nonetheless for the CEO of this company to admit that Steve Jobs’ vision won, and that Microsoft’s old “we just do software” view of the world is over.

Ballmer tells Times reporter Janet Tu that, in the future, “you’ll probably think of us more as a devices-and-services company.”

But no, they won’t be doing the full Apple in controlling every aspect. So that element of the Microsoft DNA lives on—as former Microsoft executive and startup founder Charlie Kindel likes to say, Microsoft is not going to become a hardware company.

“Doesn’t mean we have to make every device. I don’t want you to leap to that conclusion,” Ballmer says. “We’ll have partners who make devices with our software in it and our services built in. … We’re going to be a leader at that.”

— Monkey Boy doesn’t think yelling and screaming works well in marketing.

I was honestly shocked to read this assertion from Ballmer—twice!—considering his classic antics at company meetings and developer conferences in years past.

“Screaming loudly doesn’t work very well in our industry,” he told the Times, adding later that “Just yelling loudly in any business is never going to help. It’s a combination of product, romance, volume.”

I suppose we all mellow with age. Because I can’t imagine those words coming from the guy in these videos.

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