@ D6: Gates, Ballmer: Scale Is Key; Still Great Team Without Yahoo

27052008043Here at D listening to the Bill and Steve show — Gates and Ballmer this year, no repeat of last year’s star turn by Steve Jobs. It starts with the Microsoft-Gates farewell video from CES with a few tweaks.

And now it’s a group interview with Kara, Walt, Bill and Steve (not quite Bob, Carol, Ted and Alice). We’ve been through Harvard, where the two met in a residence hall. Quite a bit to go before we get to the unveiling of Windows 7.

Transition: Ballmer says the switch to Gates working part-time won’t be nearly as difficult as the initial role change eight years ago. Gates: “We’re going to figure out the projects Steve wants me to work on.” Ballmer: “Bill’s available to me; that’s an incredible resource.” Kara asks what if Bill says what he wants to do is stupid? Won’t it weight on your mind? “For 28 years, I’ve heard these words and they have weighed on my thinking.”

Yahoo: Ballmer: “We walked away. Now we’re talking about other things. … We’re not rebidding on the company.” But he didn’t rule out a new bid. Egged on, Ballmer sketches on a white board why Yahoo (NSDQ: YHOO) was worth the attempt. It’s all about scale. What would the new deal be? No details but it would have to have value. Lots more in extended entry…

27052008044Going against Google: Meanwhile, Gates watches quietly while Ballmer bounces up and down. When he does talk, it’s about search. “The most important thing is to have a team that builds a great search product…Steve and I have picked great people from around the company. There’s a great competitor in the space. … ideally, you’d build up that scale as fast as you can.” Gates says you can see lots of places where they win reviews over “the other guy” — Google (NSDQ: GOOG). Neither wants the new “cash for search” program to be viewed as a gimmick … but it is. Ballmer: “The most important thing is we have a great team and we’re patient.” Pounds his hand into his fist — “keep coming and coming and coming.” (Have to agree with Walt: it is a little scary but we should all be that intense after 28 years at one company.) He stresses patience and investment.

Needing to do everything all at once: Ballmer: “You need business innovation and technology innovation, we need breakthrough innovation and incremental innovation, and we need innovation at the search level and at the ad platform level. We have to bring it all together such that it accelerates things, and then have the scale to do it.”

Windows 7: A very small demo of touch-based Windows 7, where you’ll be able to do everything you can do with a mouse by touching the screen instead. Talking late 2009 for delivery. Users will need special screens to be able to use the nifty features we’re seeing now like playing the piano by touching the keys on the screen. Ballmer is pretty defensive when it comes to Vista but admits the rollout of Windows 7 needs to be handled differently when it comes to compatibility, upgrading, not changing the way things look too much.

Competing with Apple: Speaking of defensive, comparisons with Apple (NSDQ: AAPL) rankle Ballmer, who points to how different the companies are on nearly every way. Ballmer: “Our partners will sell 290 million … Apple will sell 10 million.” Ballmer talks about enabling partners to make multiple form factors. Walt talks about how slow Vista is compared to older systems. Ballmer: “Marketing helps. Marketing matters. We’ll do more marketing…Every share point Apple picks up is a point we don’t like.” But pressed again by Walt to say he’s unhappy with Vista, Ballmer says, “You’re repeating yourself.”

Back to Yahoo: Question from a D reader: Has pursuit of Yahoo tarnished Microsoft’s (NSDQ: MSFT) image? The quick answer from Ballmer: “No … It’s certainly something we thought of .. on balance, the answer is no.”

And back again: Gates: “I’ve been supportive of everything Steve has done …” Ballmer: “I’m not frustrated at all …”

Browser vs. Client: Gates: “It’s really giving people the best of both.” As for widgets and Facebook: (Ballmer prefers “gadgets,” of course): “I don’t use them … I got overwhelmed and resigned.”

Update: a short video demo of the multi-touch function of Windows 7…pretty underwhelming for now:

Video: Multi-Touch in Windows 7