The Windows Media Center edition is positioned as the hub for the digital home but Xbox also has enough processing power and connectivity. Do you see a convergence between the two devices?
Ballmer: In a lot of homes Xbox will have an important role, and in a lot of homes Media Center will have an important role and in a lot of homes both will. They are very different business models so it's hard to say they will converge. Does that mean that the PC will continue to run a new, and different, and broader set of games? And new and different content, the kind of stuff we featured in our online spotlight with Media Center. At the same time Xbox is going to continue to pick up additional capabilities that people will think of as PC-like. I see them as complementary. There are certain kinds of things you do from a two-foot interface that you just aren't going to do from a three-metre user interface.
To go back to the Web 2.0 discussion: what are you doing to sell the developer community on the idea that you are embracing Web 2.0, and overcome a perception I think some people in the developer community have that Microsoft is a bit inflexible when it comes to tools that can be used to develop on your platform.
Ballmer: I think people think we have the best tools for developing Web style applications in the world. And certainly with the stuff we brought to market with our Visual Studio release this year, people just say that our visual Web development tool has taken further steps forward in a pretty dramatic way.
What people are saying to us is, "What is the full complement of service capabilities that you'll make available to us as developers up on the Web? How does that let you integrate with important applications offerings that you have, Microsoft? How does it let us do our own service offerings?" People are really saying to us, not how flexible, but how quickly are you going to let us add in and what's that gonna look like.
At CES you are unveiling the first phones that can make Internet-based calls using your Internet-based chat software. You have a pretty hearty competitor in Java, in Linux. How are you confronting that competition?
Ballmer: Firstly, there are two classes of mobile phones; there is the stuff we are announcing here with Uniden and Philips, which are not cellular phones, they are cordless phones that work in the home and connect in VOIP style with our Live Messenger software. And there's really no Java/Linux competition [there]. The second area is mobile phones that work on a cellular network. The competitors today are number one, dumb phones - these basically don't run anything; they don't run Linux, they don't run Java.
And then I'd say there's a few contenders above that. Some people will do Linux phones with the Java APIs; there's the Nokia stack, there's the Microsoft stack, and somebody might say there'll be a Palm stack - and there's the BREW stack, that's important. I think we are gonna do really quite well, but we are still in the middle of a dogfight.