Microsoft CEO defends move beyond desktop

By Daisuke Wakabayashi

REDMOND, Washington (Reuters) - Microsoft Corp. (MSFT.O) Chief Executive Steve Ballmer defended the software company's expansion beyond its Windows and office software businesses, saying Web services and consumer devices are key to the company's future.

Speaking on Thursday at an annual meeting with financial analysts, Ballmer acknowledged he had been "hammered" by investors who argued Microsoft should focus on its core desktop and server software business and forget businesses like digital music players and video games.

Microsoft aims to make software that integrates the best features of desktop software, higher-end corporate software, Web services and devices, and it needs to be in all of those areas to keep up with the pace of innovation, Ballmer said.

"Great things don't happen overnight," he said. "Most successes require long-term investment and innovation ... and that's our perspective."

Ballmer said he is more "optimistic" now than at any point in the company's history and sees more opportunities for growth in the next 10 years than in the past 30 years.

Microsoft's expansion into new businesses has not always been smooth. Ballmer said the $1.06 billion charge the company took to fix problems with the Xbox game console was "painful," teaching it a lesson about hardware design.

Microsoft has been under pressure from investors in the face of faster-growing rivals, especially Google Inc.(GOOG.O), and analysts noted that the company on Thursday was setting out a road map rather than basking in the profits of its established franchises.

"The focus of the message today seemed to be about where this company is going for the next few years," Bernstein Research analyst Charles Di Bona said.