Microsoft CEO Ballmer calls for more innovation as he launches Windows 7

TORONTO - Microsoft Corp. (NASDAQ:MSFT) chief executive Steve Ballmer has a little advice for Canada's businesses and governments: Be careful not to let a battered and weakened economy frighten you away from vigorously investing in tech sector innovation.

TORONTO - Microsoft Corp. (NASDAQ:MSFT) chief executive Steve Ballmer has a little advice for Canada's businesses and governments: Be careful not to let a battered and weakened economy frighten you away from vigorously investing in tech sector innovation.

Ballmer told business leaders during a speech in Toronto on Wednesday that the technology industry must be focused on driving growth - and not just cutting costs - even as it deals with the impact of revenue declines that came with the recession.

"You cut costs because you have to and the money you have left you invest smartly for growth," the 53-year-old CEO of the software superpower told business executives at the Metro Toronto Convention Centre.

"Now is not a time to be conservative, in my opinion, about those topics. Now is the time to make those bets that will drive innovation, that will drive your growth and growth in the economy."

Ballmer drew parallels between the Great Depression and the current economic crisis, saying that many successful business and technological innovations can be born during economic turmoil.

Since the dot-com bubble burst in the early part of the decade, telecom, software, hardware and other technology companies have cut jobs, streamlined operations or consolidated. Many simply went out of business as revenues dried up and financing became harder and harder to get.

Insolvent technology giant Nortel Networks - once the poster child for Canadian technology know-how and achievement - has been selling off its operations piece by piece and winding down its business, while others have lopped thousands of workers out of slow-growth business divisions.

Ballmer said the presence of Nortel enhanced the country's international clout in the tech sector, but he was reluctant to characterize the impact its absence will have on Canada's reputation within the industry.

"I don't think it has to be terrible, but it can't be helpful to not have quite the strength that has been present before through Nortel," he said.

"There's no question that having a few big, successful tech companies breeds more tech companies. You see that in Silicon Valley."

He added later that Canada will find growth through small startup companies, as larger corporations scoop them up and place their stake in certain regions.

"If you acquire something of some size, oftentimes you'll end up anchoring," he said.

"That tends to go with where there are startups and businesses to be purchased."

A recent study by IDC Canada suggests the technology sector will create more than 1,000 new businesses in Canada by the end of 2013.

"The question is, will some of those companies wind up being of interest to the business strategies we're pursuing? It's quite possible," Ballmer said, referring to the study.

"We don't look to acquire in a country, we look to have business strategies, and if an acquisition can help us anywhere in the world, we will do it."

While some technology companies such as Nortel have been unable to weather the burst of the high-tech bubble, others have harnessed new ideas and prospered.

Since Nortel's downfall, BlackBerry-maker Research in Motion Ltd. (TSX:RIM) has become Canada's top technology company with the huge growth in sales of its mobile devices around the world, while computer company Apple Inc. (Nasdaq:AAPL) has hit a home run with its iPhone smartphone.

Microsoft, which is sitting on billions of dollars in cash, has developed new technology every few years to run the world's computers as it fights off other software rivals.

However, the Redmond, Wash.-based company has generated mixed results in its expansion into the Internet search business, failing to acquire Yahoo Inc. (Nasdaq:YHOO) in an effort intended to compete more effectively with web search giant Google Inc. (Nasdaq:GOOG).

The company has also tried to lure iPod loyalists with its Zune music player and launched an effort to grow in the rapidly expanding social media business, both which have delivered mixed results so far.

Microsoft's cash-rich position has allowed it to make some business fumbles, rework some of its future plans and push ahead with projects it believes in better than most smaller companies during the recession.

Last year the company opened its first Canadian development centre in Vancouver, which added 300 jobs to the area.

Shortly afterwards, the economy hit a landmine, and Microsoft responded by slashing 5,000 jobs, or about five per cent of its total workforce.

In Vancouver, the company responded by pulling back on its growth plans.

"Now everything's a little slower," he said.

"Our pace of accelerating our workforce was higher when we got this thing started, but we've continued to grow."

Still, earlier this year, Microsoft bought Vancouver-based game developer BigPark Inc., which was seen as a major commitment to the video game industry.

Balmer said he believes Microsoft will prevail despite its challenges because the company aims to be dynamic, branching out from PCs to enterprise businesses and other consumer products.

"If want to view yourself as static, you will be static. If you view yourselves are static, so will your customers," he said.

"Being narrow in your view is probably a formula for extinction in our business because at the end of the day, the tech business is dynamic. You either move forward, or you die."

Ballmer's comments came a day before Microsoft releases the Windows 7 operating system to consumers. The new system is the follow-up to Windows Vista, which was poorly received by both critics and the market when it was released over two years ago.

Some users complained that Vista was incompatible with certain software and had too many security prompts which made it frustrating to operate. The negative reception appeared to slow down the adoption of Vista with many consumers, while others chose to stick it out with the previous Windows XP operating system.

However, Microsoft has been quick to move past Vista's reputation by offering numerous software updates, as well as the new Windows 7. At this point, it seems Win7 is off to a better start, receiving favourable reviews from some critics and a relatively smooth launch with business consumers earlier this summer.

Ballmer also added that governments should play a role by increasing supporting for education in science and technology at high schools and universities. He complimented Canada's immigration initiative, which allows foreigners with needed technology and other skills to move to Canada more quickly.

"The Canadian government is more welcoming of getting the best and the brightest from around the world than the U.S. government," he said.

"I think that's just a great asset for a country to have."

Ballmer took over the role of CEO from Bill Gates when he stepped down from the position almost 10 years ago.

Since then, has built a reputation as one of Microsoft's most exuberant and aggressive public personas, known for delivering public speeches more akin to pep rallies than corporate board rooms.

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