Even though Microsoft’s Steve Ballmer bungled Yahoo and Vista is sticking to store shelves, the company he runs is as dangerous as ever, says the author of a new book about the future of Microsoft post-Bill Gates.

While Gates will remain as Microsoft’s chairman, he will no longer be involved in day-to-day decisions, leaving Microsoft’s showy, sometimes sweaty CEO Steve Ballmer to his own devices.

Many industry watchers are hesitant about Ballmer right now, partly due to the botched Yahoo deal and a bumpy Windows Vista release. Still, Mary Jo Foley, a ZDNet blogger who has covered Microsoft since Bill Gates first emerged from puberty, believes the company has a big future ahead of it.

We chewed the fat with Foley about the release of her book Microsoft 2.0: How Microsoft Plans to Stay Relevant in the Post-Gates Era, the Yahoo fiasco, Microsoft’s biggest challenges and the evolution of Bill Gates.

Wired: What’s your prediction — when do you think Steve Ballmer will give up or get kicked out?

Mary Jo Foley: I think he’s going to stick to what he said. He said last year he would [serve as CEO] for nine years, because that’s when his youngest son will be in college. I don’t think they’ll get rid of him before then.

[The board] would be hard-pressed to find a better CEO than Ballmer. He’s pretty wedded to a lot of old-school ideas — like, he’s never going to say, “Let’s just toss out Windows and start over,” which is what a lot of people think is necessary. But he epitomizes Microsoft.

Wired: Do you think Ballmer’s equipped to deal with Microsoft’s biggest problems right now?

Foley: Their biggest challenge right now is to continue to profit from existing products while not neglecting new business models and strategies that come up. Many people think Microsoft’s biggest challenge is competing with Google. That’s not true. Their biggest challenge is to make sure Windows stays relevant.

Wired: So what do you think of Windows Mobile?

Foley: I’ve avoided it like the plague. Every time I get a new cellphone, everyone always warns me not to get Windows Mobile. The thing’s awful. I think Windows Mobile is a huge challenge for them.

They’ve got this new “consumer” bug where they think they’ve got to be a player in every consumer market. I think they would be better served sticking to their enterprise roots and not chase every consumer trend.

Wired: You’ve covered this company for a long time. Did you have any “Aha!” moments when you were researching this book?

Foley: I was stunned by how quickly people count Microsoft out these days. It’s almost like a knee-jerk reaction, like, “Oh, they’re irrelevant.” In the old days, startups pitching VCs used to have what they called the “Microsoft slide,” they had to plan for what they would do when Microsoft came into their market. Now, instead of looking at Microsoft as a player, people think they don’t matter. But it’s dangerous for companies of any size to count them out. They’re still good at figuring out how to come back into a market and steal everybody’s lunch.

Wired: What did you make of the Yahoo takeover attempt?

Foley: When I first heard they were going to buy Yahoo I was completely incredulous. I thought, “This is going to be such a disaster.” I had just submitted the manuscript the week before so I had to revise it. I knew a lot of employees at Microsoft didn’t want it, and I just could not see how it would be a positive.

I sort of think they dodged a bullet — I think it’s going to be great for Microsoft [to have dropped the offer for Yahoo] and I hope they don’t go back into negotiations.

Wired: And what do you think happens to Microsoft after Gates retires?

Foley: There’s always been this dichotomy between “Bill’s guys” and “Steve’s guys.” Steve’s guys have MBAs and their roots are in sales. Bill’s guys have been traditional technologists. The people who are more like Steve will probably get more power and will run the show, so I wonder who’s going to be the tech champion for Bill’s guys. I think that’s going to be a big cultural and noticeable change once Gates is out from his day-to-day duties.

Wired: How has Bill Gates changed during the time you’ve covered Microsoft?

Foley: The first time I interviewed Bill Gates was in 1984, and back then, he was a really difficult interview. As a reporter you went into a Gates interview knowing that you were going to be insulted. He would say things like, “That’s the stupidest question I’ve ever heard.” Or he would look off into the distance and ignore you. He’s a much better press-trained guy now. People attribute that to his marriage, having kids or getting older. But whatever the reason, he’s more press-savvy now.

Wired: And Steve Ballmer?

Foley: He’s the same. He’s always been unpredictable and crazy. He’s a really fun interview. You never know what he’s going to say. You always walk out of a Ballmer interview with a great sound bite.

Wired.com