Check back at 8:00AM PT!

9:40AM And that's all folks! Thanks for joining us!

9:40AM Q: Are the days of compiling for different platforms over, due to HTML5 and Silverlight...

A: Will there be great HTML5 apps? Yeah. If you look at phone apps, they're pretty lightweight. And it's well worth the effort. We have a bit of a cross platform approach, but we'll be the first to tell you to optimize for Windows and Windows Phones.

Walt: Does Silverlight run on Android or the iPhone?

Steve: It certainly doesn't run on the iPhone! My guess is if it did it would be blocked! That's just my guess!

9:37AM Q: In round one with Apple, I think you guys won. You only did software, they did both hardware and software. But now in round two, both RIM and Apple are winning with that model. Do you think something has changed?

A: I don't know that there's one approach. We won't allow ourselves to be constrained in our thinking. We appreciate the benefit of working with partners, but we were prepared to do what we did with Xbox.

9:35AM Q: I have two different devices with me. An iPad and PC. But I'm always worried that this PC's battery will die on me. What are you doing about it?

A: We're doing work in Windows. Our partners are doing work on the hardware.




9:32AM Steve is answering a question about movement on their health records work. "It's moving slowly."

9:31AM Q: You guys have had some antitrust issues... any advice for Apple and Google?

A: You don't give advice to your competition... I just wish them good luck getting lots of experience.

Huge laughs on that.

9:30AM Q: Steve I want to give you a chance on comments you made about Google and China. 1: Talk about your degree of comfort in following the laws of China, and 2: what about the security challenges of China?

A: Let me put a line between the two. They have nothing to do with one another. Are there hackers everywhere in the world including China? Professional hackers? Yes. Do you think any large government is trying to look at what people are doing on the internet? Maybe, I don't know. I'm going to guess it wouldn't be unique. We're going to have to protect ourselves from this stuff. I didn't find any of that all that interesting. As it comes to the issue about what you can and can't show, and if you'll take orders from the Chinese government. If you're going to do business with someone... we have a few thousand people there, I'm not going to put them in harm's way. You have to comply with their laws in that country. All countries have different views about what is acceptable... we joined a coalition, we don't take things down outside of China, and we let people know what we did take down in China. That's responsible, and we're not putting people in harm's way. When I was kid, we dealt with things like this during Apartheid in Africa. We read a book and it asked what was the best way to deal with something like this? Stay, go, or stay and be a part of a reformation... I think that's the way to do it.





9:24AM Someone asked about a stylus on tablets.

Steve: We'll have different devices with different input. It's not the most common thing, but we have people right now using Windows devices with a stylus. I think people want to be able to do those things.

9:22AM Q&A time -- we're going to ask something...

9:22AM Walt: But you could have an app in there, that's very good at X...

Steve: That is what we have... the question is how extensible?

9:22AM Walt: One more question on Bing... we didn't talk about it last year, you have these beautiful presentations, where I don't have to leave the search site. It's almost like there's an app ecosystem for your search. Can you talk about how that might evolve?

Ray: I can't say where it will go, but we're trying to figure out the best way to get information to users. It's something we'd like to experiment with letting people use it in some ways like that, we're letting people tap into maps...

Steve: But rarely when you search do you want to search... you're not trying to see a list of websites. You need to do something. You need to take an action. You don't want to 'find websites'. If we can help the user take actions more quickly, that would be a great breakthrough.

9:18AM Steve: It's been a year. We're the first search engine to gain marketshare in a long time. We're up from 8 to 11 something. Depending on what kind of day you're trying to have, you can say 'wow, we're up 11'. Our marketshare is highest with youngest crowds. We've done a lot to establish a name, a general view that we deliver a product that is different and relevant. And we're going against a very large behemoth...

Walt: You're calling someone else a behemoth?

Steve: It takes one to know one!

9:16AM Steve: You need some coherence. Apple has some against their existing PC. Having two approaches... go ask them what they're thinking about.

Walt: Last time we talked about search, you used this forum introduce Bing. How do you think you're doing?

9:15AM Ray: I think where Chrome is going is the future.

Walt: He gets it.

Steve: Why have two? Then why have Android? That's not an aid!



9:14AM Steve: On larger screen devices? Who knows... I don't understand why they have two different operating systems!

Walt: What about Chrome?

Steve: What am I supposed to think about it?! They're saying 2, 2 -- but they're not even in one! What am I supposed to say?! Ask them!

Walt: Well we invited Eric...

Steve: And then you get this WSJ picture of me... I look like I'm about 90 years old. And stiff!

Whoa, Steve is going for it!




9:11AM Walt: What about Google? They're on a lot of fronts. Phones, tablets... does it concern you? Does it have legs?

Steve: On the phone, they're a real competitor.

9:10AM Walt: Is it a problem for RIM and Nokia that they don't also make PCs, like you and Apple?

Steve: It could be. The internet was designed for the PC. Then optimized for the search engine... then there's the smartphone, and people say, I'm not a phone, how do I deal with that. I think people give Apple a lot of credit for dealing with how to deal with that. But maybe it gives other people clarity of view to not have a PC side.

9:09AM Walt: Apple?

Steve: They've done a great job of coming from nowhere. They have a following that's interesting. They've done their best work on the browser. It's what really distinguishes their phones from the competition. They're a good competitor.

9:08AM Walt: What about Nokia?

Steve: You know, I live in this country, so you get a skewed view. They're knocking it out of the park everywhere else. They can deliver a good product at a good price to remote parts of the world. But I think on the software side they're trying to get their act together. We collaborate with them.

9:07AM Walt: When you look at your competitors... I'll throw out some names. Let's talk about RIM. They're trying to do a reset.

Steve: They're a good competitor. People don't realize how good a job they've done with the consumer side. They're not just an enterprise company. Everyone has vulnerability.

Walt: What's there's?

Steve: Their platform is less robust than anyone in the market. And yet when it comes to people who want to communicate vigorously, people love them. They're number one in this country.

9:05AM Walt: So there are some shakeups at Microsoft. So the mobile team will report to you?

Steve: These are two separate things -- we had an employee who wanted to retire, and that extra layer just didn't make sense. On the phone side of the business, we learned the value of excellent execution. We were ahead of this game, and now we're not. We haven't fallen off the planet, but we're not where we should be.

Walt: What do you mean about execution?

Steve: We missed a cycle. And I want to be more involved in leading the people who are making these products. We have new talent, we had to do some cleanup, we did it for Windows, and we're doing it for mobile. And excellence in execution is also part of the equation. Good news for us, there was bad news, but we're dealing with the fact that we're not at the front of the pack. Who was the leader three years ago? Six years ago? You had Motorola, SE... they're not where they were. The market is pretty dynamic and that's an opportunity. We have to execute.

9:02AM Walt: But the Mac has done pretty well for Apple. Even during the recession.

Steve: They had a heck of a quarter.

Walt: But c'mon...

Steve: They're not going away. Our cars will get bigger and sleeker and faster and better... but they're still cars.

9:00AM Walt: But Apple did make the iPad a productivity device too.

Steve: They built what they could build when they could build it. Is it a flat device? Well yes, but then you plug it into a dock when you need to do more typing on it. The ad from our competition in 3 years won't be Mac vs. PC, it will be whatever this new device is versus the PC. It's obvious that they're moving in that direction, the Mac will keep its 3% marketshare... and the race is on.

8:59AM Walt: Ray, do you think this tablet movement now is going to take off? Is it going to work for a broader market?

Ray: I think there are going to be appliances, in our living rooms, there will be handheld devices. Our role is to drive out complexity and make these simple to use. Productivity and creation experiences are inherently additive. Consumption experiences are subtractive -- both will coexist.






8:57AM Walt: So will there be something more customized, not just straight Windows, say for entertainment or media?

Steve: Yes, but I think the bulk of the market will be multipurpose.

8:55AM Walt: You've done a lot of work on tablets. They haven't been a mainstream hit. Are you going to go back at it? Lots of people are creating tablets. Here at D we've seen some tablets. Are there going to be tablets that look something like the iPad that run Windows.

Steve: Sure.

Walt: Will it look and act like my Windows PC?

Steve: You'll have a range of devices, there will be different looks. Some people will want the comfort of Windows as you know -- some people might want it to be more customized. We're very well suited with what we have today, we see opportunities coming up ahead. It's going to be competitive. There's going to be a lot of competition around form factors. We'll work with partners on building form factors with Windows, and on smaller screens Windows Phone...

Walt: There's Android... that's going to be on tablets.

Steve: Well we saw a bunch of small netbooks that had Linux on them about a year or two ago -- they didn't sell real well.

Walt: But you cut the price of XP.

Steve: They didn't sell well, why should I give someone else an opportunity?

8:52AM Walt: So you're using the term PC to envelope things that people don't think of PCs. Is the iPad a PC?

Steve: Of course it is. If you ask an average person what is this, they'll talk about what it is, what it does... I had a guy try and take notes on one. There's a saying -- to a man with a hammer everything looks like a nail. We have our hammer, and they have theirs. I see our competition trying to eliminate products out there's that haven't been popular and try to push a new product that might be more popular.

8:50AM Steve: I don't think there's going to be one device that will do everything you want. Maybe in the bubble of this resort! I think there will be general purpose devices and specific... the PC will continue. The quote about trucks, maybe there's a reason why you call them MAC trucks... Windows PCs are not MAC trucks. You're going to have different devices, one in your pocket and one not in your pocket, and they'll have different use cases. The question is -- what do you push?

8:48AM Steve: I think people are going to be using PCs in greater numbers in the years to come, but I think PCs will start to look different. They'll get smaller, lighter, sometimes they won't have a keyboard. Sometimes the UI will look different, the underlying infrastructure will move to SOCs. The question is what's a PC? Nothing that people do on PCs today will get less relevant, there's no question that what people do on a PC they'll do on other devices...

8:47AM Walt: So the other night, Steve Jobs said he thought that we were on a course, 5 to 7 years, where fewer people would be using PCs, and more people would be using tablets or smartphones. I stopped him and I said, 'when you said PC, you're including Macs?' and he said yes. He said this is what I believe. What do you believe?





8:45AM Steve: If I said we'll pay you $5 a month to get information about what you're doing on your computer, my 15 year old son would say "money making opportunity", I would say no way. Different customers have different comfort levels -- we're trying to find a way to let people make those choices.

8:44AM Walt: But you've made me pay for services for privacy...

Steve: You'll pay and 80m Chinese people won't this year. If they paid, you wouldn't have to.

8:43AM Ray: With Windows, we set expectations that we're not snooping on users.

Walt: Well there were controversies...

Steve: We had controversies, but we don't have a business model dependent on it! We have competitors out there that, for better or worse, that's their business model.

8:42AM Walt: So clarity, transparency... but there's a lot of back (hand) (end?) stuff... (could hear it there). But something like Facebook connect is a business advantage right?

Steve: It is... think back 5 years... the cookie debate? The hardest thing is that users didn't know what the cookie was. How do you recraft dialog with the users so they understand what they just said someone could look at?

8:40AM Walt: Zuckerberg said something similar.

Ray: Well you have to ask who is in control of the data? If the user is in control you have a lot less problems.

Steve: You want to put the user in control, that's the right thing to do, but you end up with a complexity level that most people don't want to deal with. Looking at our next Live or IE steps, getting the UI right is an innovation challenge.




8:39AM Walt: Why isn't that obvious and built in today?

Ray: Well right now we have ActiveSync in most devices people have here right now. And sync is hard, but it's straightforward as an engineering task if you know that the server side is private and yours. What's happening is unusual now because we're spreading our personal data all over the web. It's easy for us to conceptualize how to do it, but what we all want when we think about long term record keeping, how are we going to agree as an industry on what meta data to use to track this. I don't think everything will end up on one site.

8:37AM Walt: Ray you touched on syncing. You do a lot of work on that. I've always felt that this was one of the unmet needs as people acquire more devices. I have folders here and there, I have files everywhere -- I would really like this stuff to be in sync. I would like it be all there.

Whoa, Walt -- have you read our Continuous Client piece?

8:35AM Walt: Who is your competition?

Steve: I think the obvious guys. TV will be an interesting place to play. And of course we always have what's coming out of the open source community. Firefox...





8:34AM Walt: So you don't think you're at a disadvantage?

Steve: Well the trends are good for us. But there's always troubles in the trends. We're moving from a world that's good for us to a world that's even better for us. There are guys who say we'll play the game differently, so we get a new class of competitors. Now we have these new competitors in areas where we've been strong -- it's our job to out innovate them, out hustle them.

8:32AM Ray: People want their devices to be more client like. They want to buy, log in, and light it up. Regardless of what the device is -- applications will feel more cached. Data is synced, so if you feel like choosing a device for form and function, fashion... we have different screens for different places.

8:31AM Walt: So you don't think there's an opportunity to build cheap, dumb devices?

Steve: You'll get cheap devices, but the experiences people want will be products with a reasonable CPU, reasonable storage, graphics... it's all about getting a little smarter on the client.

8:30AM Walt: Well it's not all binary...

Steve: Well everyone in the industry is going to be doing a lot of code on the client. When people say they love HTML5, they're saying they love how their code on their devices runs HTML5. Everyone has a different way of saying it. But the world we're talking about is "smart cloud" talking to mostly "smart devices" -- apps that execute locally, but are controlled or seamlessly integrate with the cloud.

8:29AM Ray: If we're all carrying around devices like cameras and voice recorders -- how does the phone tap into those? How do we repivot to the cloud? How do the various screens, which are becoming more appliance like, how do they work together?



8:27AM Walt: Ray you've done a lot of work in the cloud -- MSFT has been the dominate company in local clients, or programs, apps -- you said you guys are 'all in'. Can you tell me what that means, what the opportunity is?

Ray: I can't remember a time where it's been so exciting with so many transitions. We've got everyone and all devices connected on the internet. Everything used to have its own APIs, now we're coming together around standards. At MSFT, I've been saying 'forget about how you viewed things before, and repivot to how people are using them now' like in the case of Office.

8:25AM Steve: Emerging countries fall into two categories. Resource driven countries reflect the market. Russia is good, and China is going like gangbusters, but then you have big IP issues there that I think will effect our industry.

8:24AM Walt: Where do you think the economy is right now? You've been very clear headed in talking about it.

Steve: I would say developed world, things have come off the lows. Our industry is even MORE REVVED UP! We've got a lot of product cycles going on. Consumer market is coming back. We're starting to see some comeback in business spending... what's the famous expression... burn me once shame on you... burn me...

Wow, Bush moment!







8:21AM Now Steve and Ray!


8:21AM With a wand, apparently!

8:20AM Walt is out.


8:20AM "There has been much talk here about 'the magic'" Ha, he's comparing Walt and Kara to Harry Potter characters.

8:19AM "This is the first conference where I haven't heard the words 'pick the low hanging fruit'."

8:18AM "We thought we could put a chip into a newspaper. Does this look odd?" He's holding a paper up to his ear. This cat is actually quite humorous.


8:16AM "Who wouldn't get up early to get a peek at Steve Ballmer?"

8:15AM "Ladies and gentlemen, WSJ managing editor, Robert Thompson." Wha?

8:13AM Hey that song from the "Where the Wild Things Are" commercial is on. Who is this, the Walkmen?

8:11AM Aaaaand... more music. Why are you doing this to us, D8?


8:06AM "We kindly ask that you silence all devices."

8:03AM "Ladies and gentlemen, we are about to begin."

8:01AM Extremely rocking country music? Check.

7:57AM Okay, we're in our seats and things are about to get underway. Get ready for some serious Ballmer action.

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Steve Ballmer and Ray Ozzie live from D8