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Ballmer at Microsoft Shareholder Meeting: 'We Are in the Windows Era'

For the most part, Microsoft's shareholder meeting on Tuesday was the usual, speedy, buttoned-down affair; one shareholder even argued that the event should be 30 minutes longer.

During the meeting, Microsoft CEO Steve Ballmer briefly outlined the company's progress and fielded questions from shareholders. In response to a question about whether the company faced a post-PC market, Ballmer gave a reply that had many thinking that Windows 8 would be replacing the Windows Phone mobile OS.

"We are in the Windows era," Ballmer said toward the end of hour-long event (his response begins at around 47:30 of this video). "We were, we are and we always will be. That's kind of what we get paid to do. We've got broad Windows initiatives driving Windows down to the phone with Windows 8. You'll see incredible new form factors powered by Windows from tablets, small, large, pens, smaller, bigger, room-size displays. We are in an era in which the range of smart devices is continuing to expand. That's a fantastic thing for Microsoft. That is a real opportunity. That is an opportunity that we will pursue by leveraging and sharing and driving Windows in new ways."

Ballmer seems to mean that Windows has a broad reach, whether it's with smartphones (using Windows Phone mobile OS) or tablets and PCs (using Windows 8). Still, the comment could be construed differently. While Windows 8 has always been targeted at tablets and PCs, it hasn't been proposed by Microsoft as a mobile OS replacement. However, Microsoft already showed that it is moving in that direction with its Windows Embedded announcement on Monday. In that announcement, Microsoft indicated that its next-generation Windows Embedded Standard OS will be a "componentized version of Windows 8." Windows Embedded OSes are typically used in kiosks, industrial handheld computers and other such devices.

Shareholders Want More
Shareholders' voting results, announced during the meeting, confirmed Microsoft's board members and the company's auditor (Deloitte & Touche). All nine board nominees on the proxy statement were elected. Voters set a one-year consideration period on whether Microsoft executives are worthy of their pay hikes (Microsoft had argued that this "say on pay" assessment period should come up every three years). They also defeated a shareholder initiative that proposed making environmental considerations part of the board's business agenda.

While all of this was fairly rote, the meeting also had a few edgy moments. A couple of shareholder comments sharply addressed dividend issues. One person asked why Microsoft did not treat its shareholders as owners. In response, Peter Klein, Microsoft's chief financial officer, said that Microsoft had distributed more than $170 billion over the last 10 years to its shareholders, and that dividends were increased 25 percent this past year. Another shareholder noted that Microsoft has more than $50 billion in cash reserves. Chairman Bill Gates replied that the important thing was not specific dividend payments but that the company has a profit stream. He added that the company needs its cash reserves to take on big risks during uncertain economic times.

Another shareholder asked about Microsoft abiding by government censorship policies in China with regard to the Internet search market. Microsoft pointed to its membership in the Global Network Initiative, an industry group coalition with few fixed principles for its member companies. Microsoft has to obey the laws in the countries within which it operates, but it also conducts dialogs with governments where free expression is limited, a Microsoft rep stated at the shareholder meeting.

Tax Holiday on $44.8 Billion
Microsoft was asked about its views on a "tax holiday," the euphemistic phrase for a tax break bestowed on U.S.-based multinational companies. In the past, Congress has given such breaks to U.S. companies when they bring revenues earned abroad into the United States. Klein was in favor of Microsoft getting such a tax holiday. Ballmer concurred, and offered to take Microsoft's money elsewhere.

"Corporate taxes in the U.S....they don't look competitive to corporate taxes elsewhere and today tax policy actually gives incentives to companies -- essentially U.S. companies -- to invest outside the U.S.," Ballmer said. "That's why there's a need for a broader set of reforms. And certainly a tax repatriation, as Peter [Klein] said, would be a good thing."

Microsoft's recent Form 10-K filing with the U.S. Securities and Exchange Commission indicates just how much money Microsoft has abroad: about $44.8 billion.

"We have not provided deferred U.S. income taxes or foreign withholding taxes on temporary differences of approximately $44.8 billion resulting from earnings for certain non-U.S. subsidiaries because they are permanently reinvested outside the U.S.," Form 10-Q states on page 32. "The unrecognized deferred tax liability associated with these temporary differences was approximately $14.2 billion as of June 30, 2011."

Microsoft's Form 10-Q also states that Microsoft faces financial uncertainties should U.S. tax laws be changed on foreign earnings. If such legislation were to pass, it would affect the company's cash flow, Microsoft states.

Microsoft's financials can be found at its investor relations page here.

About the Author

Kurt Mackie is senior news producer for the 1105 Enterprise Computing Group.

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