STANFORD GRADUATE SCHOOL OF BUSINESS—The internet today and the systems and equipment that run it are only a bare beginning of what will be available in the next five or six years Steve Ballmer, president and CEO of Microsoft, told a Stanford Business School audience.

"There's such a great opportunity to build the infrastructure, the infrastructure for TV, for phones and PCs, for clients and servers, and services that run out in the internet. You can power a whole new generation of internet experience," said Ballmer. One of the things that will contribute to change will be the explosion of power available to operate systems, another will be the way applications interact with one another to provide types of services and features that aren't possible today.

"One of the things I'm most proud of is that we are a company that invests passionately in R and D. We've spent almost $4 billion this year. Only Ford, General Motors and IBM spend more."

Ballmer agreed with some observers who argue that intelligent devices such as new types of phones or television sets will perform some of the tasks done today by personal computers, but he disputed critics who argue that these new devices will reduce the need for personal computers. For one thing, 20 years from now PCs will be 120 times more powerful than they are today. "Compare the PC of today to the PC of 20 years ago and they're not the same thing. The PC is a flexible, adaptive device that can be made to do anything."

Addressing the overflow crowd at the Business School on Feb. 15, Ballmer noted "I'm sure many of you will choose to join companies that view themselves as being in the internet business. If any of you choose to join a company that thinks it's not in the internet business, you should probably have your head examined. All business needs to have that kind of customer connection in this age."

Earlier the same day, Jeff Bezos, the CEO of Amazon.com, had told another Business School audience that in the internet age companies need to focus on their customers, not on competitors or other factors. A student asked Ballmer if he thought Microsoft was customer centric enough.

"It's very important that we try to be customer centric, but . . . we could go bankrupt if that was the only thing we were doing. We have to be in touch with what technology permits because our customers expect us to let them take advantage of the latest things in technology. . . . We grew up knowing software developers and the day we stop service to software developers we are no longer the business Bill Gates and Paul Allen founded 25 years ago."

Shortly after Microsoft was founded, Ballmer dropped out of the Business School to join the fledgling company. He and Gates had been Harvard classmates and Ballmer recalled how difficult it was in 1980 to decide between the job with the startup and finishing business school. "When I dropped out back then, they said I could always come back. If I ever needed to get my MBA I had a slot open.

"I'm told the situation is now changed," he told an applauding audience. "If you drop out, you're gone. You can reapply with the rest of them."