The day after Microsoft’s TellMe aquisition, I was at Microsoft’s eighth annual VC Summit. Unfortunately, I missed Steve Ballmer’s opening discussion, which in my opinion, is always one of the most entertaining and informative sessions of the event. For the last few years, Steve spoke at the end of the event but for some reason they switched it on us and had him at the beginning. Anyway, I am waiting for some other bloggers to summarize his discussion. Notice the picture I link to from Paul Jozefak’s blog titled "Expanding Platform to the Cloud." I must say that I came away quite impressed by Microsoft’s progress in its cloud and Windows Live strategy. Last year, all of the Windows Live talk seemed quite rushed, disjointed and forced and seemed it was more of a response to the market saying that Microsoft did not get the SAAS thing. This year the strategy seemed much clearer and well defined and the executives knew how the Internet and cloud fit into all of the various business units. In the end, Microsoft has made some huge strides and will certainly be worth watching over the next year. In addition, as with each year, I did find the Microsoft executives more willing than ever to network with startups to fill gaps in their product line and to be a more open, gentler Microsoft versus years ago. There is nothing like real competition to get a company to change its mindset. Sure, they didn’t tell us much in the public sessions as sometimes you can come away with the impression that Microsoft is doing everything and the only opportunities for startups are niche verticals built on Microsoft’s platform. But truth be told, if you actually did get a chance to spend some one-on-one time with the executives, you will find a much different story. Reflecting on that point, Microsoft made a little over 20 acquisitions last year and plans on doing a similar amount this year. One sure way to not get any partnership done is openly ask the Microsoft executives, "How do I get my portfolio company acquired?" The real point is to find and network with the key executives at the summit and figure out how the individual business unit’s process works on a partnership discussion and get that started.
The consumer mobile breakout session was one of the more informative discussions that I attended. Basically as the world moves to three dominant operating systems for wireless (Symbian, Windows Mobile, and Linux), Microsoft will look to increase its penetration by leveraging an extensive development platform to allow third party partners to develop new consumer services which can be easily deployed via its worldwide carrier partners. Naturally, one of the questions asked was if these apps only worked on Windows Mobile or across the various operating systems. As you might suspect, these apps would likely work better on the Windows Mobile platform, but the Microsoft folks did stress that it does and has to work with other competing operating systems as well. The gaps that Microsoft was looking to fill through partnerships or acquisition were, broadly speaking: games/entertainment, location aware services, TV/video (although the one Microsoft executive acknowledged it was overhyped), ad management, mobile content mgmt, and billing and payments. One of the value propositions offered by the Microsoft mobile folks was key relationships with carriers across the world.
Another engaging talk was Peter Moore’s (Corporate VP, Interactive Entertainment Business) presentation on Microsoft’s move into the digital home with its Xbox360. Of course, after a long day, seeing a commercial for the yet-to-be-released Halo 3 was quite energetic and refreshing. Interestingly enough, it is quite amazing to see that as these gaming machines get more powerful, the games themselves end up being the commercial (think about The Gears of War commercial on television). Despite the fact that Peter could have spent hours demoing games, his presentation centered around the full featured entertainment capabilities of the device which included the ability to synch with other PCs in the home and buy movies, television shows, and music in a simple way. Once again, it is amazing how much progress is being made throughout the many divisions at Microsoft and how the Internet and on-demand services are getting weaved into the very fabric of the applications and infrastructure. For a large company, one year has made a huge difference. Finally, one of the other recurring themes I heard throughout the day was the importance of advertising in many of its product lines ranging from mobile to MSN to the digital home and video gaming. If there are other acquisitions to be done, I am sure that some interesting advertising related technology and services will be on their radar screen.
Just to be clear, this is not in any way, shape or form a Microsoft love-fest. I am just pointing out that while so many people are counting them out that they have lots of cash, renewed energy, and a long-term view towards winning in their markets.