Microsoft: stodgy or innovative? It's all about perception

Microsoft executives responded to many analyst questions about how it can solve negative perception problems in the market.

When many people think of Microsoft, they think of a stodgy old corporation churning out boring PC software.

But is that image accurate?

Some analysts say no, and at Thursday's annual Microsoft analyst get-together they urged executives to do more to improve the company's image and to let the wider world know that it is developing great new products and services.

At the meeting, Craig Mundie, chief research and strategy officer, showed off a futuristic application for Surface, Microsoft's multitouch tabletop computer. He virtually entered an art gallery on a downtown Seattle street, browsing through items that he could pick up and spin around to look at them from all directions.

In another demonstration, he took a photograph of a street and his handheld computer identified it in real time and began displaying information about shops on the street, including information about table availability in a restaurant.

After the demo, one analyst commented to Mundie that the technology looked great but that the rest of the world doesn't get to see such demonstrations, and he urged Mundie to spread the word so that people will perceive Microsoft as the innovative company that it is, rather than as a legacy software vendor.

Mundie pledged to do just that. "That is a commitment I can make to you and to shareholders," he said. For years, he and Microsoft founder Bill Gates spent a lot of time on the road talking about Gates' vision of the future, he said. "Over the last few years, both of us got out of the habit of going out and talking about it. I think we share your observation that we haven't done a great job in recent years communicating about the tremendous things this company does."

As Mundie and others begin talking more about new innovations, however, the company runs the risk of being accused of marketing "vaporware," a criticism it has faced in the past. In fact, Microsoft has been accused of announcing its work on technologies very early as a way to discourage other companies from developing similar products in competition.

But Microsoft needs to address the perception problem, which runs deep and could have repercussions on sales of future products if the company doesn't manage to fix it. Executives showed just how real the problem is by running a brief video collected during a recent customer study conducted by the company. Microsoft chose people for the study who continue to use XP and who said that they weren't interested in upgrading to Vista because of its bad reputation. Microsoft offered to show the people the next version of the operating system to see if they might be interested in it when it comes out.

The people loved the future version and said they'd definitely upgrade. Then they learned that the software they loved was actually Vista, not some future version of the operating system.

Perhaps with that video containing the user comments in mind, another analyst at the meeting asked Microsoft executives how the company expects to be able to sell Windows 7, the next version of the operating system, when people have such a poor perception of Vista. Executives didn't have a great reply, beyond assuring the audience that the problems that plagued Vista at its initial launch are now fixed.

Vista initially had serious compatibility problems but SP1 largely fixed the problems, so with Windows 7, Microsoft "takes that issue effectively off the table," said Bill Veghte, senior vice president of the online services and Windows business group. Starting later this year, his team plans to spend a lot of time spreading the word about Windows 7 and explaining that it won't encounter the same issues that Vista faced, he said.

The perception problem stretches into the online services market, where Microsoft has struggled to attract users. Another analyst at the meeting asked executives if they planned to make changes to the company's online branding and offer a single place where end-users could discover that some of Microsoft's online tools are better than the competition. Currently, Microsoft offers a host of online services, including maps, blogs, e-mail and instant messaging. But the services are difficult to find, sometimes available under different brands including Live and MSN.

CEO Steve Ballmer assured the crowd of analysts that the company is working on streamlining its online brand and developing a single page where people can find all available Microsoft online services. The page will predominantly feature a search bar, since that's an opportunity for revenue, but it will also display content tailored for each user, he said.

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