A10 Economy & Business


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Microsoft sets sights on cloud computing


by Cecilia Kang


Microsoft got nothing but grief when it killed its Kin smartphone this month, a decision that looked like a misstep for the software gi- ant as it struggles to stay on the cutting edge. The move could not have come


at a more delicate time, with Mi- crosoft’s longtime business of sell- ing software in a box rapidly be- ing replaced by the sale of applica- tions over the Web. The company is facing competition from rivals, such as Google, offering word processing and spreadsheets on- line free of charge, and it recently lost its place as the most valuable tech stock to Apple. Microsoft is now working to


transform itself into a one-stop shop for Web-based software and, as part of that strategy, is betting big on the growing popularity of cloud computing, which takes software off the desktop PC and moves it to networks of data cen- ters accessed via the Web. That’s the vision that Microsoft


chief executive Steve Ballmer out- lined to partners gathered at its annual partners conference in Washington on Monday. “If you don’t want to move to the cloud, we’re not your folks,” Ballmer told an audience of 9,500 partners packed into Verizon Center. In an interview with The Wash-


ington Post after the speech, Ball- mer talked in further detail about the company’s efforts to establish a firmer foothold in cloud com- puting and its hopes for smart- phones and tablet computers. Here is an edited excerpt: Seems like a tough time to get people to buy more technology. How does the economy pose a challenge to your cloud strat- egy? The economy has a lot to do with a lot of things, but not this. The inevitability of the cloud is absolutely clear. When and how is not 100 percent clear. The pre- ponderance of our partners are moving with us. Some partners may move slowly, and maybe a few won’t even move with us. But the new guys jumping into the fray are saying, “Hey this is new opportunity.”


on washingtonpost.com


A conversation with Steve Ballmer


Learn more about Microsoft’s policy


priorities and the challenges of remaining nimble after 35 years in a video conversation with the software giant’s chief executive.


t’s much easier to look for a magic solution than it is to adapt to reality. Take energy, for instance. These days “clean energy,” also known as “green energy,” is being presented as the magic solution for global warming, our dependence on foreign oil, and the BP disaster in the Gulf of Mexico. Maybe even for warts and bad breath. A typical example of the hype, from one of President Obama’s speeches about BP: “The tragedy unfolding on our coast is the most painful and powerful reminder yet that the time to embrace a clean-energy future is now.”


I Embracing a future —


What are your biggest priori- ties in Washington? Number one is clear: We would


like to see better global enforce- ment of intellectual property laws. If we are going to do our fair share and the industry is going to do its fair share for the president’s desire to double exports, that will involve the federal government. That is particularly true in China. You said several slates and


smartphones are coming out in the next few months. How did you fall behind, and how will you catch up? We have a form factor, where we need to push with our hard- ware partners and silicon part- ners: the slate platform. Windows runs Windows apps. The key is that we actually have software technology now to drive the in- tegration of software, hardware and silicon. In the case of phones . . . we missed. We just didn’t execute well. Now we are jamming hard. We’ll sell millions of units this year, but we’re not where we want to be. But with Windows Phone 7, we are back in it. And those devic- es will ship within the next months. How do you make Microsoft,


now 35 years old, more entre- preneurial? You want a company that’s driv- en, doing good work. You want a company that is perfect — but hardly any company will be. You want a company that is not only trying to be perfect but is resilient when it makes mistakes. That is important. Hopefully you are right every time, but if you aren’t, do you have a toughness and abili- ty to stick to things? kangc@washpost.com


whatever that means — isn’t the same as solving a problem. That’s a lesson I learned almost 40 years ago, the first time I realized there was an energy problem in this country. That was during the Arab oil embargo of 1973, which is history to most people but a scary memory to those of us for whom it was a current event. We had huge lines at gas stations, a horrible sense of vulnerability, and the same combination of helplessness and outrage that so many people have today when it comes to BP. Government price controls, designed to protect people from the higher crude oil prices resulting from the embargo, made a bad problem much worse. The magic solution? “Energy


independence.” Sounded great, would fit on a bumper sticker, made for a terrific slogan. We’d finish the Trans Alaska Pipeline, drill for more oil, beef up production of natural gas, step up nuclear power generation, apply technological wizardry to use our vast coal reserves to generate clean electricity, liquefy coal to reduce our need for petroleum. We wouldn’t be dependent on foreigners (except maybe Canada, then as now our biggest outside oil source). It was all going to be great. Do those things sound familiar? They should, given that stepping up nuclear generation and cleaning up coal are integral parts of plans to reduce carbon dioxide emissions, though they haven’t gotten the buzz that green energy has.


Alas, the energy independence thing hasn’t exactly worked out. In fact, things have gotten seriously worse. When the Arab embargo hit, we were importing 37 percent of our oil, according to the U.S. Energy Information Administration. When the shah of Iran fell in 1979, sparking another oil crisis, we were importing 43 percent; currently it’s about 52 percent. Flash forward to the present magic plan. Green energy, which is promoted endlessly by business as well as the government and various pols, is a great idea. It sounds great, and


it would be great. But it’s being way oversold and will take years —or decades — to have any major effect. That’s because green energy is


starting from such a low base. Wind power, solar power and biofuel, the three most highly touted new technologies, together accounted for less than 3 percent of U.S. electric power generation in 2009, according to the Electric Power Research Institute, a nonprofit group. So even when we step up


production sharply, we have a long way to go before those technologies make a serious impact on the overall electricity situation. “I think it’s going to take 20 years for these technologies to mature, provided that the economic conditions are attractive,” says Revis James, director of the institute’s technology assessment center. Even if we had windmills on


every front lawn, we’d still have an energy problem, because vehicles account for so much of our oil use. And green technologies aren’t without economic or environmental problems. We’ll be outsourcing lots of green-product manufacturing to low-cost places such as China, which will help their economies, but not ours. Then there’s the whole lithium question, which is integral to stepping up battery-run vehicles.


DEALS Allan Sloan


Imagine our becoming dependent on countries like Afghanistan — not exactly a model of stability — for that essential mineral. So now, you ask, since I don’t


believe in a magic solution, what should we do? It’s easy, though not politically palatable. You put a heavy tax on electricity, gasoline and other energy sources whose use you want to discourage. You make that tax refundable — at least quarterly, maybe even monthly — for people who can’t afford it. Of course, nothing like that is


likely to happen. Because “Raise prices, support some energy research, but don’t shove solutions such as compact fluorescent bulbs down consumers’ throats” doesn’t make for a good bumper sticker or sound bite. It’s not magical. It’s just right.


asloan@fortunemail.com


With reporting by Fortune’s Marilyn Adamo. Allan Sloan is Fortune magazine’s senior editor at large.


TUESDAY, JULY 13, 2010 Magical thinking is not an energy strategy


Benefits gone for many longtime jobless benefits from A1


remember since he lost his con- struction job two years ago. He has tried car dealerships, Kmart, Home Depot and the funky shops on the boardwalk in Seaside Heights, near Toms River. He looked into becoming a commer- cial crabber, working in title in- surance and as a bail bondsman. But no dice.


While searching for work, he


lived on $585 a week in un- employment payments. But the checks were cut off in May when he reached 99 weeks. Now Fra- zee, who is married and has a 5- year-old daughter, is in a finan-


cial free fall with no safety net. “My life has been total stress. I sleep maybe four hours a night, worrying about money,” he said. “I understood the president and Congress had to stabilize the banks, get Wall Street going. I figured something would be done for middle-class Ameri- cans, that they couldn’t abandon us. But I was wrong.”


Since the recession began in December 2007, lawmakers have passed several extensions that stretched the normal 26-week limit for unemployment benefits to as long as 99 weeks in the hardest-hit states. In the Wash- ington area, only workers in the


Total unemployed for 99 weeks or more 221,000


June 2007


June 2010


SOURCE: Bureau of Labor Statistics Not seasonally adjusted.


District, where unemployment is 10.4 percent — well above the 9.5 percent national rate — qualify for the longest-term unemploy- ment benefits. Virginia and Maryland residents can receive benefits as long as 86 weeks, in- cluding 60 weeks of federally fi- nanced benefits. The Labor De- partment has no statistics on the number of workers in each juris- diction who have exhausted their benefits.


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With the federal extensions now up for renewal, Congress has shown decreasing enthusi- asm for them amid increasing concern about the ballooning deficit. On several occasions, Senate Republicans have said they would not vote for stimulus bills that included unemployment ex- tensions, saying any new spend- ing must be offset by cuts else- where. With the extensions ex- pired at least temporarily, more than 2million Americans have lost their unemployment ben- efits, according to the Economic Policy Institute, a liberal re- search organization. A report by the House Ways and Means Com- mittee estimated that 21,700 Vir- ginians, 12,300 Marylanders and 5,200 D.C. residents lost their benefits when the extensions ended.


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Congress’s inaction has been accompanied by a growing senti- ment among lawmakers that long-term unemployment ben- efits create a disincentive for the jobless to find work. “Workers are less likely to look for work, or accept less-than- ideal jobs, as long as they are protected from the full conse- quences of being unemployed,” said Michael D. Tanner, a senior fellow at the Cato Institute, a lib- ertarian think tank. “That is not to say that anyone is getting rich off unemployment, or that un- employed people are lazy. But it is simple human nature that peo- ple are a little less motivated as long as a check is coming in.” That was disputed by Rep. Car- olyn B. Maloney (D-N.Y.), chair- man of the Joint Economic Com- mittee, who cited a recent study ordered by congressional Demo- crats. “These benefits do not in- hibit job seekers from vigorously looking for or accepting work,” she said. The growing backlash against unemployment insurance has left the 99ers with few political advocates. President Obama, buffeted by GOP criticism of his economic policies as unemploy- ment rates hover at their highest levels in 28 years, has been strug- gling to win support for renew- ing the extended jobless benefits. Consequently, any help for the 99ers is off the table, at least for now — leaving them angry at their political leaders. “President Obama talks a lot about making the victims of the gulf disaster whole, but what about the victims of this eco- nomic disaster?” Frazee said.


1.4 million


PERCENT OF ALL UNEMPLOYED


9.2% 3%


THE WASHINGTON POST


“Nowadays, he seems mostly concerned with image. Now, he doesn’t want to be seen as a big spender. But people need help.” A 34-year-old resident of Vien-


na, Va., named Brian, who with- held his last name because of his embarrassment about being out of work, worked in corporate fi- nance for nine years before being laid off three years ago. He ex- hausted his unemployment ben- efits long ago and has been living off savings and credit. “Before this, I figured that if you can’t find a job in two years, you’re not looking,” he said. “But I keep looking and jobs just are not there. The economy is not recov- ering. It’s being propped up by government spending. But when that ends, I think this whole mess is not over with.” Here in Toms River, Frazee has not earned a regular paycheck since working as a $75,000-a- year laborer during the construc- tion of the Borgata hotel in At- lantic City. That was in July 2008, just as the economy was implod- ing — and just after he was re- turning to health after having a cancerous appendix removed. Since then, he has not worked,


save for a recent four-day stint cleaning up a construction site at a nearby state college. He has fallen behind on mortgage pay- ments for his sunny townhouse, and he is staring at the prospect of foreclosure even after negoti- ating a loan modification with his lender, Wells Fargo. Most of the time, Frazee said, he has been confident that things would work out, if only because they always have. He started as a construction worker after his fa- ther’s endorsement helped him land a spot in the Laborers’ International Union Local 415 shortly after he graduated from Toms River South High School in 1978.


When he wasn’t working con-


struction, he had jobs on oil rigs off the coast of Santa Barbara, Calif., and in the Gulf of Mexico. He also was a bounty hunter. “I’ve never been one to feel sorry for myself,” he said. “I’ve always worked.” Until now. The longer he is out of a job, the more unemployable he feels. He suspects that poten- tial employers are turned off by his age and by the fact that he has been out of work for so long. But he is moving near the top of the hiring list for his union. And in the meantime, he has been buying mail-order children’s quartz watches from China and selling them on consignment at local convenience stores. He clears close to $3 per watch. “I’m a union construction


worker, but I think I can be a hell of a salesman,” Frazee said. “A lot of the stores around here are owned by Indian Americans, and they like me. They’re taking my watches. Maybe India and China are going to help me out of this jam if my country won’t.” fletcherm@washpost.com


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