What is Microsoft? CEO Ballmer seeks an answer

Google (GOOG) is barging into the business of computer operating systems—via Chrome, due next year. Microsoft (MSFT) is vigorously defending its turf–via Windows 7, its new operating system due in October. Simultaneously, Microsoft is striking at the heart of Google, via Bing. “We should have been earlier in search,” said CEO Steve Ballmer two weeks ago in France when asked to name his greatest regrets over the years.

We may be at a tipping point in tech. The spending will rise. So will the sparring. And as the sparks fly, have you noticed? Google and Microsoft both seem to be doing their own searching…to answer that most basic business question: Who am I?

Ballmer riffed on this question, actually, at the Cannes Lions International Advertising Festival. I did an  on-stage Q&A with him there (you can find details and video clips by searching “Ballmer” on Postcards‘ homepage), and afterwards, I followed him to a meeting with the Cannes “Young Lions.” These are rising-star marketers and creative execs age 3o and under. One of them asked: “What does Microsoft stand for?”

Ballmer seemed to love the question. “This is a real debate inside Microsoft,” he replied. “It’s rumored that we’re going to open retail stores,” he added, and then he surveyed the Young Lions about whether it would be wiser to call the stores “Microsoft” or “Windows.” Ballmer suggested that “Microsoft” means “software company” and “well-run business.” What does “Windows” mean? “Access” and “guide to technology,” he said.

Ballmer didn’t get what he hoped for in this mini-focus group. The young stars of the ad universe appeared evenly divided on the ideal name for the prospective retail outlets. Microsoft’s chief ended the discussion by asking: “How many people here use Macs?” Most in the room raised their hands. “Biased!” Ballmer bellowed.

For what it’s worth, we’ll likely see in October what Microsoft can do retail-wise. The company is mum on its plans, but it’s a pretty safe bet that stores will open this fall, accompanying the Windows 7 marketing onslaught. Retail is a gamble; except for Apple (AAPL), consumer tech giants have stumbled. Managing conflicts with existing retailers, like Best Buy (BBY), is tricky too. Moreover, who would bet that Microsoft, which has never oozed sex appeal or product-intro pizazz, would be good at this game?

Then again, Microsoft is redefining itself–or trying to, at least. To command its retail drive, the company recently recruited a heavy-hitter: David Porter, previously head of worldwide product distribution at DreamWorks Animation SKG (DWA). Before the movie gig, Porter spent 25 years at Wal-Mart (WMT).

One of the smartest takes on consumer tech retailing is a story that Fortune ran in 2007: “Why Apple is the best retailer in America.” It’s worth reading again.