 I'm very excited about our next guest. She's been covering technology for 25 years, 10 years on Microsoft. She's the author of Microsoft 2.0, How Microsoft Plans to Stay Relevant in the Post-Gates Era. And she writes for CNET, ZDNet, has written for eWeek, Baseline. Let's just get her out here. Ladies and gentlemen, please welcome Mary Jo Foley. Be careful with the sofa. Oh, boy. Oh, oh. We, yeah, Neelai, during the interview, Neelai pushed the sofa off. I extremely dropped it. It's fine. Just don't make any sudden movements. I won't. Mary Jo, thank you for being here. Really, really appreciate it. So we wanted to have you on because we want to talk about Microsoft. I don't know if you've heard, they've been in the news a lot lately. I have. What was that? Is everything OK? Are you all right, sir? OK, good. Microsoft has been in the news a lot lately. You've been covering Microsoft. You cover Microsoft. You get some fantastic scoops. When I see them, I don't get angry or sad. I just think, what a great scoop. I wish I had that scoop. Anyhow, but you do. You've been covering Microsoft for a long time, and you really know them and all the people there. Yes. They've just announced some pretty major stuff. Windows 8 we knew was coming. We knew there was going to be another version of Windows phone. The Surface is not something that was necessarily like a slam dunk. Like, oh yeah, of course they're going to do this. What is your take on that? What do you think? Is this the right strategy for Microsoft in 2012 to make their own tablet, their own PC, essentially? What do you think? All I can tell you is, until I saw that Surface, I kind of thought Windows 8 was going to be a disaster. Really? But once I saw it, I was like, OK, now there's hope. There's a hardware form factor that has got me really excited. So up until the Surface, I just want to be clear. Yes. You were like, Windows 8, total mistake. You didn't see any partner hardware? No ASUS? No HP? It all kind of felt the same to me. And I really wanted something really exciting. Because I have an iPad. I shouldn't say that? No, I know. You actually wrote. It's like, mom, are we going to arrest you? Actually, if I can digress for one quick second, you wrote a post years ago when you got your iPad. And it was like, I got an iPad. And we had this big debate when we were at Engadget. We were like, should we cover this? I was like, well, Mary Jo buying an iPad doesn't seem like news. We had this big debate. And we actually ended up creating, was it Engadget Alt? We ended up creating Engadget Alt because we want to be able to hit the stuff that is interesting to us, but not news necessarily. And we actually brought a lot of that thinking to the verge. You basically are the reason we exist, when you think about your purchase of an iPad. So you bought an iPad. I bought an iPad. In fact, there was a headline somewhere that said, blood rains down on the holy land, the day I bought my iPad. Who wears that? Business ID? I think it was TechCrunch. TechCrunch. I just like those kinds of really explosive headlines. Exactly. You know, the reason I bought an iPad was because I couldn't find a Windows tablet that I loved. Because they're all terrible. They were all terrible. Just terrible. Like, horrible. I mean, if Bill Gates, if that was the Gates vision, he needs glasses. Right. Agreed. Well, he wears glasses. He needs stronger glasses. He needs X-ray vision. I don't know what he needs, but anyhow, go on. Yeah, so but when I saw the Surface, and I haven't even gotten to see one in person yet, like I've just seen pictures. I've seen one in person. You have. I've seen it, and I was allowed to touch it briefly. For a moment. Yeah, for a moment. You couldn't really use it. It's a nice piece of hardware. It is really nice. And I will say that I felt, maybe this is how you felt, but they'd been telling this story. And I spoke to people, Microsoft reps. I'm sure you talk to the same people. And they're like, you'll see. You'll see. We've got a plan. And I was like, I don't get it. This thing's not good to use on a laptop. And your tablet offerings are garbage at the moment. Nobody's really making a great Windows. It's not just that the software doesn't really work that well. But it's like, the hardware just isn't that good. So it was like, how is this going to work? And what is this transitional device where I'm going back and forth? And when I saw the Surface and I saw the, what do they call them? Smart covers. No, smart cover is. Wrong vendor. Smart cover is Apple. Touch cover. They're type cover and touch cover. Oh, I could see how this would work. I could really see this working. But why Microsoft? Why aren't they partnering? Why didn't they go to partners and say, we want five of you guys to make these things? I know. I wonder if they did. You think they couldn't get them to make them? You can get a Suze and Samsung to do almost anything. They'll do anything at all. It doesn't have to be making stuff either. You like, take them out. Anyhow, I'm sorry. I don't know where I'm going with this. But yeah, why Microsoft? I'm not totally sure why they decided to take the plunge. Because it's not a really popular move with their partners, as you might imagine. They've been very quiet about it though. At least on the record, they've been quiet about it. Who said it was like, Asus or Acer or something? I always get confused. Yeah, it was Acer, right? Johnny Shee? They pooh-poohed the idea. He's like, oh, it's just a gimmick. Don't worry. This is just a fake thing. They're not going to go through with it. Well, they don't have a choice. What are you going to do if you're Dell? You're going to leave Windows? Well, Dell is basically, but they said they're not really doing consumer stuff. Right, but if you make laptops and you're at Apple, what are you going to sell if you go away from Windows? And that's kind of like Microsoft just woke up. Android tablets and phones? Linux? Linux desktop? Yeah, Linux desktop. Mary Jo, that's real funny. You keep cracking jokes. They're going to sell Linux. Dell tried that. Dell was doing that, right? They're still kind of trying. Lenovo was doing that. This kind of feels like Microsoft woke up and was like, oh, they're all screwed. We can do whatever we want. And they're just kind of doing whatever they want. I mean, they're going to make a phone eventually. I guarantee it. So Mary Jo, do you think Windows 8 will be a success? And do you think that what is success for Windows 8? And then what is success for the Surface? Yeah, all interesting questions. Just small, you know, whatever. Right. I think Windows 8 is going to be successful on tablets and not just on Surfaces. I think on a touch tablet, it's a really interesting and good user interface. I think on PCs, especially for business customers, maybe. I mean. Not as sold on that one. But business customers are really important to Microsoft. They are. I mean, they're really important to Microsoft. Yes, they are. I mean, if you were to say, I mean, just, and you tell me, because you're the expert. I'm just nothing. I don't know anything. But if Microsoft were to lose, I'm just saying, like, suddenly it lost its enterprise customers, would it be in business? No. OK, so they kind of have to make those people happy. They do. Although, you know, if you look at what they did with Windows phone, OK, not a gigantic seller, but I'm one of the 3% who has one. That's a very positive spin. Mary Jo has, we talked backstage, she has a Windows phone. I do. Which one do you have? I have the HTC Trophy, which is the only one right now on Verizon. Yeah, because Verizon was like, why? Wait, was there one clap? I heard one. I heard literally a single set of hands come together one time. It was like. No, come on. We have our own shirts. We are the 3%. You do. We're like the Occupy. We are the 3%. That's us. But you know, like, I don't wear, how should I feel about the 3%? Because the 1%, they're bad, right? They're bad. They're evil. They've got to be stopped. They're just downtrodden. We are. 3% are still super rich, right? I just want to be clear. They're like the masters of the universe. We think different. They can afford a Windows phone and then the iPhone that they actually use. No, we think different. And I don't have an iPhone. Wait, what? You think different? Have you heard that somewhere before? We got some real mixed messages going on here. I'm still curious about the first answer of Surface saving Windows 8. Just from a consumer perspective, that was all they were lacking? I feel like they have a ton to prove consumer-wise, not just in hardware. They have a ton of software to prove. Again, I think with a tablet, your hardware experience is so tied to the software experience. You know, like when people see an iPad, what draws them to it? It's not the software. Like, people don't go, wow, I want that operating system. They want the hardware. They don't say those words. But do they even think that? Well, OK, but hardware will only get you so far. Right, right. Hardware is like, when you turn it on, if it's a terrible experience, you're like, ah, god. It doesn't matter how sexy the hardware. I mean, let me put it this way. I think the N, is it N900? I always get the Lumia. Is it N900? No, the Lumia 900. The Lumia 900. Sorry, I'm thinking the N9. Can they just figure out a better naming scheme? There's the N9, the 800, and the 900. It's confusing. But I think the 900 is the most beautiful-looking piece of hardware in phones on the market. But because of the software and because of some hardware limitations just in terms of what they put in it, I mean, I wouldn't buy it. And I think a lot of people feel that way. And so it will only get you so far. But it helps. It helps a lot. It does. But what would be great is if you pick it up and it's also like an amazing software experience, which is where they haven't gotten on phone. I mean, the HP Touchpad was a nice piece of hardware. Well. It was all right. Are you saying one person? There's this guy, and then there's the wood guy. It's a couple sensor width. That's very sad. All right. So let me shift gears a little bit here. Well, not completely. So Microsoft posted its earnings recently. $492 million loss, but they had this equine of write down of $6.2 billion, which is no laughing matter. They paid, how much did they pay for Skype? $8.5 billion, which is insane, by the way. That number makes no sense to me. But how are they as a company? Like where do you rank their health right now? Yeah. Yeah. But I mean, because they had a loss. Are they in critical condition? No, but they had a loss, but in other areas, their performance is actually quite good. Yes. So they've had big growth in the entertainment device division. So I'm just curious to know, like where do you, what does that mean? Does it all even out? Yeah. You know, when I looked at their numbers this time, because I look at them every quarter when they come out, obviously, what struck me is what's still powering Microsoft is their enterprise software. So products that some people in this audience might know, SharePoint. Woo. Come on. Are you rocking SharePoint on your touchpad? SharePoint, go on. Office, System Center, all these enterprise products, right? This is what is powering Microsoft. And so as long as these products continue to be healthy, they can keep taking losses on things that they're kind of thrown at the wall and seeing what's going to happen. So are they just going to sell Windows 7 for a decade like they did with XPE? Maybe. Maybe. That's super sad. I mean, I guess the question is like, is that as other people move into their spaces, that you've got Google coming on strong, Apple's not, believe me, I'm sure if they can get their hands on an enterprise customer, they're working hard to do that. As their products become less and less, they become less and less desirable, certainly to consumers, doesn't that have a kind of echo effect? And by the way, I just want to, I need to preface. I know everybody thinks I'm like the worst guy in the world because I gave the Lumia 900 a 7 out of 10. But I am excited about 8, and I'm excited about the Surface. From what I saw, I really like it. And so I have this hope that this is going to be the thing that kind of changes their placement in the market, in the minds of consumers. But if they keep losing consumers, if it isn't, and if they have it on this little bit of a downward movement in the consumer side, doesn't that eventually pull away from the enterprise with all these other forces competing? Yeah, I'd say that's the thing they're trying to hedge against in what they're doing, right? So they're kind of still very rooted in the enterprise. But the ultimate plan, I think, is to start turning things around, starting with Windows 8. It's going to be a long process, I think they know. It's not going to be an instant overnight success, I don't think. I think even in the most optimistic Microsoft projections, nobody is going to say Windows 8 is going to just come out of the gate, boom, and knock Windows 7 off. No, it's not. What's going on with the desktop? I mean, I think that's the thing, right? Because Windows 7 has, people know it. It looks like every other version of Windows. Right, and what if this version doesn't stick? That's too weird. And do they just try something else? You know, what I'm guessing is going to happen, and this is just a pure guess. No one from Microsoft has told me this. Pure, 100% guess. Do we have people at the ready to hit this statement, if it sounds really juicy? Go on. Maybe. Go on. I think you're going to see, after Windows 8 comes out this October, I think you're going to start seeing Microsoft change how often they do Windows releases. To go to yearly or whatever. Right, to go closer to yearly, if not yearly. Right now, it's every three years. That's too long. And it's a lot of pressure every three years. It's like, you've got to come with a big. It's almost like when you look at what Apple's doing, the change from Lion to Mountain Lion is really iterative stuff. It's like a service pack. Exactly. And if they called service packs up, like actual, they gave them names or something, because that's service pack, whatever, it might change the picture. What does Windows 9 look like? Can you tell us? If I knew, I would be writing a blog post right now. I asked a Microsoft rep, who shall remain nameless, but he knows who he is. I said, at the service event, I said, so if this is the transition, then Windows 9 won't have any Windows desktop in it, will it? He was like, you don't really expect me to answer that question, do you? So and then he winked at you and he threw a mouse in the garbage. Exactly. That's a really, first I was like, why a mouse? Like a live mouse? Like, but. There's a lot of deep symbolism. What you just described would make a tremendous comic, and I would like to see somebody pen that. OK, a couple of things. I wish we had more time. We went, if only I hadn't done that stupid intro. Couple of quotes, and then I have a big question for you. Ballmer said that the coming months, it's the most exciting launch season in Microsoft history. Do you agree or disagree? Agree, 100%. This is like the highest pitch launch. Like every single product at the company is about to be revved in the next 12 months. And then on the flip side, well, I mean, he's obviously excited, but Valves Gabe Newell said this recently, like a day ago. I think Windows 8 is a catastrophe for everyone in the PC space. I think we'll lose some of the top tier PC OEMs who will exit the market. I think margins will be destroyed for a bunch of people. If that's true, then it will be good to have alternatives to hedge against that eventuality. I'm smirking because you know what his alternative was. Linux. Well, that is insane. Can you throw some more burns at Linux? I don't understand. I can do like a half hour of Linux burns with Mary Jo. I don't. I mean, we know he doesn't like Apple because they're too controlling. Right. And now he's mad that Microsoft's going to be more controlling. Right. He just hates control. Right. Which is why he runs Steam. You don't agree. But you don't agree at this point, having seen the service. You don't think Windows 8 is a catastrophe. Though you did say prior to the surface, you thought it was a disaster. I don't know how bored you are. Did you say disaster? I think you did. Maybe I did. I don't know. We'll add it in now. Disaster. Disastrophe. Disastrophe. It's waiting for you. It's like, different. I'm going to tag like, Windows 8, disaster. No. I think, like I said, I think Windows 8 is going to be very interesting on touch tablets and possibly on touch laptops. I think people who install it on existing non-touch laptops are going to be surprised, if they haven't tried it already, about what that experience is like. Surprised. In a negative way. That makes me feel very sad. Those are the people who are going to be installing it, though. I mean, it's not everybody's going to be a new PC purchaser. Well, the way most people get Windows anymore is getting it on a new PC. Most people aren't techies. They don't go put a new operating system on. They're kind of like, we're going to take our chances. But I mean, if you get it on a traditional laptop, the experience is your start menu is suddenly. No more start button. Right. There's no start button. It's a completely different experience. Like, people will be shocked and confused. Like, people who only know that, who are using like, it's going to be a learning curve. Vista or XP right now or something. There's going to be a learning curve. How's that? What was the learning curve for you? Like, it was really weird for me. Yeah. It's really weird. Yeah. I'll tell you, I don't use Windows 8 on my laptop that I use for work. I don't. Well, that's not a ringing endorsement. You use Linux. I use Linux. I shouldn't have told you that. You use Linux. She loves Linux. All right, final question. And I wish we had more time. I do. We've got to have you come back. Maybe as we get closer to the launch, around October or something, we could do like a round, a real, get rid of these guys. Get Tom Warren here. And get a real table. Get Paul Thrott here. That's a wrap. Do a real Microsoft round. I won't be here either. Is Balmer destroying the company? A light question to end. Yeah, just a little light. I mean, because there was this vanity fair article. There was like, Balmer's just spent the last 10 years dismantling Microsoft. But then I will say this. The counterpoint to that is this whole write down of the quantity of the numbers. There he is. It's the end of the Gates era. And now we're truly in the Balmer era. I agree with you. Which is kind of like revisionist history. No. It's been the Balmer era for a while. Like, has he just been like, and Steve Balmer is not the sort of man who lies in wait. No. He's there. Oh, you don't know. But boy, would it be scary if he was. You like get into your car, and Balmer's in the backseat, and he's like, just drive. Just drive and don't say anything. Turn the radio to the sports station. Or else. Or else. No. I don't think he's just been laying around waiting. But I think he also is cleaning up some messes that were left to him when he took over as a CEO. What were the messes that Bill Gates left to Steve Balmer? A number of projects that weren't making money. Tablet initiative. That they've kind of gotten rid of. Downplayed some things. Closed divisions. Gotten rid of things like Aquanove. Aquanove was not a great. It wasn't a great. Anyhow, we have to wrap up. Mary Jo, thank you so much. You got to come back. I will. Mary Jo Foley, everyone. Thank you. so You