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Its stock price has stagnated since the technology bubble = burst, and=20 nimble Web-based competitors such as Google and Salesforce.com are = presenting new challenges. Though Microsoft has expanded into = markets such=20 as video-game hardware and software for mobile phones, it is = having=20 difficulty replicating the fat profit margins of its Windows and = Office=20 franchises.

Microsoft chief executive Steve Ballmer was in town yesterday = to speak=20 at an event co-hosted by the Ottawa Centre for Research and = Innovation,=20 and later an innovation and productivity conference co-hosted by=20 Microsoft. Here's an edited version of his comments at a round = table with=20 reporters:

Q: It's clear that Google is making some inroads against = Microsoft. Are=20 you confident that Microsoft can take on Google on its own?

A: First of all, Google has made no inroads whatsoever in = anything we=20 do. In the areas where we've been strong -- operating systems,=20 productivity software, email, communications -- we've had = effectively no=20 impact from Google.

Google has done a nice job building a new business around = searching and=20 advertising. We can give them some credit for that. Do I think = Google is=20 invincible in its core business? No, I do not. Right now, 50 per = cent of=20 the time people search for something on the Internet, they fail to = get a=20 good result. I think we will have passed Google in terms of the = relevance=20 of the answers we give to people's searches over the next six = months, at=20 least in the U.S. and Canada, not necessarily in all markets.

I am mindful of good competitors. Google is likely to be a good = competitor. We've beaten many good competitors before.

Q: Your stock price has been relatively flat over the last few = years.=20 Is that a concern to you, and what do you plan to do to get the = markets=20 excited about Microsoft's stock again?

A: (Nearly shouting, face reddening) Grow! We've done a lot of = growing=20 over the last five years, and our stock, as you've pointed out, = has been=20 basically in a flat line. I can't control how the markets see us. = I have=20 some ability to control what we really do. At some point we'll = have grown=20 so much, our stock price will have to go up.

Our operating profits pre tax in the last five years are up 70 = per cent=20 -- 70 per cent! -- and the stock has been flat. If our operating = profits=20 are up another 70 per cent, I challenge the stock to stay flat. = There's=20 really two things we can do. Number one, we can really drive = innovation,=20 number one. Innovation in the short term can take a hit on = earnings, but,=20 in the long run, innovation drives operating profit, and operating = profit=20 is the number one driver of the stock price. The other thing we = can do is=20 figure out what to do with the cash on behalf of our = shareholders....

Q: If you cast ahead 10 years, what do you see as the next big=20 innovation in technology that will affect the socioeconomic = landscape?

A: First of all, the ubiquity of computing. We kind of think = we're=20 there. We're not. Look, not one of you brought a computer to take = notes on=20 today. The fact of the matter is there are still reasons for this, = whether=20 it be cost, complexity, tradition. There are plenty of places = where we=20 don't use computers where we can. Ten years from now, I think = people will=20 not do nearly as much reading on paper as they do today.

Number two has to do with interoperability. One of the great = challenges=20 for individuals as well as corporations is getting things to work=20 together. There's a lot that will happen with so-called XML as a = lingua=20 franca for the Internet that will matter to individuals, as well = as=20 mattering to big corporations.

Number three is the evolution of the user interface to what I = might=20 call the natural user interface. People usually think this means = voice,=20 but voice isn't nearly as important as natural language. That is, = that the=20 computer understand my intent, not just my voice.

Q: Obviously your company has experienced incredible revenue = growth=20 over the last 10 years or so. Is it possible that the company can = continue=20 to grow at that pace?

A: I see nothing that limits our ability to grow revenue and = profit.=20 People say, 'Well, at what per cent?' Well, now you're in the law = of large=20 numbers. Growing 20 per cent when you're at $40 billion U.S. in = sales is a=20 little different than 20 per cent when you're $1 billion U.S. I = accept=20 that fact. I recognize the law of large numbers. But there are = plenty of=20 companies (that can keep growing.) Wal-Mart is a huge company, = biggest by=20 revenue in the world, yet it continues to grow. (General Electric) = continue to grow. Toyota continues to grow....

Q: You came here to talk about innovation, but some critics = have said=20 the rate of innovation at Microsoft has slowed significantly, and = that has=20 resulted in many employees going to Google and elsewhere. Isn't = that the=20 biggest challenge you face, to reverse this trend and boost = employee=20 morale?

A: Is our greatest challenge driving innovation? Yes it is. It = was the=20 greatest challenge when we were smaller. The challenge of driving=20 innovation at our size is different than when we were smaller. The = second=20 big challenge we've had forever is to make sure we have the best = and=20 brightest.

We actually have better talent today than when we were 50 = people. Our=20 talent base actually improves, by and large, every year. We = continue to=20 hire the best and the brightest. Eighty per cent roughly of people = who get=20 offers from us accept them out of college, which is unbelievably = high. Our=20 attrition rates continue to be roughly the same as in the past, = which is=20 another thing that has been misreported. We did lose a guy to = Google.=20 We're actually suing over that. So I'm not going to say there's = not some=20 issues. Google has lost of some people to us, so there are some = people=20 moving both ways.

Q: What advice would you give to Canadian politicians for = making Canada=20 a world leader in information technology?

A: I would put the money into doubling the size of computer = science and=20 electrical engineering departments at Canadian universities and = figure out=20 how to fill the seats. If the goal is to become a world leader in = this=20 field, it will start with the educational institutions. The other = thing I=20 would do is review the climate for venture-capital investments and = startups. Canada is pretty good. There are plenty of countries I = visit=20 where the venture capital and startup culture is woefully = underdeveloped=20 compared with North America.

Q: The Xbox 360 has been a hot seller, and there have been = shortages at=20 some retailers, but some people say Microsoft has been creating = the=20 shortages as a marketing ploy.

A: All stores are getting new units each week. Can we make as = many as=20 people want? The answer is no, but not because we don't want to. = In these=20 new consumer electronics devices based on new chips, there's = always the=20 question of what yield will you get out of the manufacturing = process of=20 the new chip. We're getting a little less, but not much less than = the=20 yields we expected, and we know that the yields we expected will = probably=20 outrun supply. But we decided to go ahead and launch rather than = wait=20 until post-Christmas and get a few million units out into the = hands of=20 users. We're doing our best.