Microsoft and Cisco: Collaborating for the Future of Technology

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Steve Ballmer, CEO, Microsoft Corporation;John Chambers, Chairman and CEO, Cisco Systems;Bob Muglia, Senior Vice President, Server and Tools Business, Microsoft Corporation;Charlie Giancarlo, Executive Vice President and Chief Development Officer, Cisco Systems;Charlie Rose, Moderator (New York, Aug. 20, 2007)" title="Microsoft and Cisco: Collaborating for the Future of Technology">Participants:Steve Ballmer, CEO, Microsoft Corporation;John Chambers, Chairman and CEO, Cisco Systems;Bob Muglia, Senior Vice President, Server and Tools Business, Microsoft Corporation;Charlie Giancarlo, Executive Vice President and Chief Development Officer, Cisco Systems;Charlie Rose, Moderator (New York, Aug. 20, 2007)

Announcer: Ladies and gentlemen, please welcome executive producer and host of the Charlie Rose Show, Mr. Charlie Rose. (Applause.)

Charlie Rose: Thank you. Thank you. Can you hear me? All right.

When I got this call not a week or two ago, said, would you like to do this, it was irresistible to me, because I’ve known these guys for a while. But also I’ve been focusing on a lot of other things, and it gave me a chance to get up to date on what was going on in technology.

And what we’re going to do this morning is have a conversation with them for about 45 minutes, Q&A here, and then I think there’s some kind of demo, and then right after that I’m going to jump into the audience and give you guys a chance to talk to both of them about anything, as long as you want to - I think they’ve scheduled it for 45 minutes or so - and have a real dialogue. So, I’ll come out there so you don’t have to get up and go walk to some microphone. I’ll have a microphone, and we’ll talk.

It was irresistible for me to come here simply because I watched a perfect example of why. It was yesterday, I was watching George Stephanopoulos, and he would say to Senator Clinton, "Senator Biden said that Senator Obama is not ready to be president; what do you think, Senator Clinton, about Senator Biden’s remarks?"

So, I thought, this is irresistible. We’ve got two of the titans in terms of technology, and all the kinds of things that have been said, and I’ve got them together I think for the first time that they’ve been in a public forum. So that was an opportunity for me in a sense to raise some questions that as I’ve been reading I always wanted to ask one or the other or both, but to have them both here.

This is - we will see what they have to say about how they see the future, how they see it for their two companies, how they see competition, and also how they see they might be working together.

It is really an opportunity for me to look. Some of this may appear on our television show or not. We’re in hiatus now, so I don’t know if it will be able to do anything along that line. But I really do want to talk about the future. You guys know a lot more about that than I do. So, I think the second half would be as good, if not better, than the first, and an opportunity for you really to talk about the subjects that interest you, and the questions that interest you, and get a direct and candid response from both of them.

So, please join me in welcoming first of all the CEO of Cisco, John Chambers; and the CEO of Microsoft, Steve Ballmer. (Applause.)

Let me ask the question that many of us in this room might be wondering is, why are you guys here now today? What’s this about?

John Chambers: Well, I think it’s about a form of partnering and competing that’s very important to the future of the industry. We’re at the forefront of what I’d call market transitions - ranging from data, voice, video coming together - which is a nice way of saying any device, any content, in whatever format we want; combined with collaboration, Web 2.0 that can transform countries or companies.

So, you have two of the industry leaders in our respective fields saying here’s where we see the vision of the industry going; and secondly, this is candidly being driven by our customers. They’ve said we need to understand better what you’re going to do, where you’re going to interoperate, where you’re going to compete.

Charlie Rose: I want to talk about that later. Did you initiate this or did he initiate this?

Steve Ballmer: I’ve got to say John initiated this round of this discussion, but John called and said, ’Hey, look, we’re supposed to be good at this; and by the way, have you noticed our customers are talking a lot about the need for our cooperation?’ And I said, ’Yes, we have.’ So, we spent a lot of time over, what, about the last six, seven months really trying to make some advances, and building off actually some pretty good momentum that we had between our R&D teams coming into it.

Charlie Rose: So, there’s going to be no merger announcement? (Laughter.)

Steve Ballmer: That you can count on. Today, as I come up here, you can count on for sure. John agreed. I can’t be his boss, and I’m not going to work for John, today.

Charlie Rose: We could have two co-CEOs, couldn’t we?

Steve Ballmer: There you go. That always works so well. (Laughter.)

John Chambers: Yeah, it does. Great track record.

Charlie Rose: Exactly. There’s rarely ever been one.

Here’s what I would like to happen, talk of some kind about this. Tell me how you see the future. I mean, we have seen the rise of Google, we have seen the rise of Web 2.0, we have seen the rise of social networking; all kinds of things have happened that are part of the conversation. Where do you see it all going, and where do you see Microsoft fitting in, and then where do you see Cisco fitting in, in terms of what you have to do to maintain your marketplace, and grow? Let’s start with you.

Steve Ballmer: I think that there’s a big transformation going on in our industry, which is relevant to this partnership, and then there’s the transformation that’s happening sort of more broadly in the customers. I’ve talked a lot about how software is evolving to be software plus service, which means in some senses the very definition of what’s software. What’s getting delivered over the network, what’s network infrastructure - it’s more vague than it has been in the past as let me say our fundamental commodity evolves. That’s sort of the underpinning, that’s the plumbing, that’s the infrastructure, it’s the platform.

On top of that, though, there’s also the evolution in the applications people want to do. John was talking about what we sometimes refer to as quad play: voice, video, data, mobility, this notion of convergence. It is fundamental, and people say, are we early stage or are we late stage? Some people want to act like we’re down the path. Sure, we’re a little down the path, until you try to do something like have a videoconference, or you go to a hospital where a doctor is using online x-ray data for the first time, and you’ll find out things aren’t quite as simple and advanced as we think. So, I think we’re actually on the verge, as John has talked about, the vision we both share, of a big market transition on that front.

We talk about collaboration, and kind of e-commerce and Web 2.0. Well, that’s all great until you meet a customer - I was with one of the large container shipping companies, and they still pass completely by paper all the documentation that’s required to get a cargo container onto a ship. There’s not one piece of automation in that process today; it is entirely paper-based.

You know, you confront things like that, and you say we’ve got market transition going on, both in our fundamental comm

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