• Reuters, Friday, July 27, 2007 10:30 AM

Microsoft Chief Steve Ballmer conceded to a hammering from financial analysts in a recent meeting, who said the company should focus on its core desktop and software business and get out of the content, video games and electronics businesses. Ballmer responded that the software giants needed to be in every sector if it wants to realize its dream of integrating software, media and distribution.

Despite tepid second-quarter performances from its MSN Web unit, Ballmer said he's more "optimistic" about Microsoft's future than at any point in the company's history. Analysts are concerned that Microsoft is spread thin, remaining in sectors where it doesn't reap benefits. They say the company should be "basking in the profits of established franchises" like Windows and Office, which along with its enterprise edition software account for almost all of the company's profit.

Those businesses are under mounting threat from Web-based software providers like Google. Microsoft is also competing with Google in the area of advertising services, announcing on Thursday the acquisition of AdECN, a stock exchange that brings together buyers and sellers of Web ads. That acquisition comes on the heels of its mammoth $6 billion buy of the ad holding company aQuantive.

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