FIVE years ago, as the world’s stock markets bubbled upwards, Steve Ballmer voiced an unpalatable truth: shares in Microsoft were overvalued. Coming from Bill Gates’s right-hand man, this was quite something. In a single day, Ballmer’s comments knocked 5% off his boss’s billions — and his own.

It was the kind of straight-talking that helped Ballmer, always the company’s most passionate salesman, make Microsoft one of the great success stories of the 1990s. It did him no harm. Months later, Ballmer took over as chief executive, after Gates stepped aside to become chief software architect.

As he visited Britain last week, with the fifth anniversary of his appointment approaching, Ballmer had a different problem with his share price.

The software giant has continued to grow at a fair lick. Despite the technology downturn, sales have expanded from $19.7 billion (£11 billion) in fiscal 1999 to $36.8 billion in the year to June 2004.

Yet the company’s share price is marooned at about $28, back to where it was in 1998, and less than half its millennial peak even though Ballmer has been wiping away many of Microsoft’s litigation worries this year. In April the company settled its long-running disputes with Sun Microsystems at a cost of $1.9 billion.

In June it won an important appeal court ruling against the state of Massachusetts — largely closing down years of legal battles over alleged anti-competitive behaviour by confirming the solidity of a 2002 settlement with the US Department of Justice.

This greater certainty has allowed Microsoft to commit to return $75 billion of capital to shareholders. With a 3.8% stake in the company, Ballmer’s share of that is $2.8 billion; Gates is due to receive $7.5 billion.

As Microsoft’s legal problems recede, the focus turns to a more mundane, though perhaps equally difficult, issue — how to sustain the growth of the Microsoft money machine.

Ballmer was in Britain last week to rally 1,200 UK staff at Wembley Conference Centre, and to address 600 of Microsoft’s industry partners — the firms on which it relies to get its software to customers. Microsoft is keen to strengthen and develop these relationships as it seeks to extend its reach into new markets such as entertainment, mobile communications and business management.

Microsoft has three very big and profitable businesses, and four bets on the future. The three big profit generators are the Windows “client” business, which contributed $8 billion last year; the “information worker” division built around Office, which made $7.15 billion; and the server arm, which provides the software for networked computers, and would have made $1.3 billion but for the payout to Sun.

The four smaller divisions — the MSN website, home and entertainment, mobile and business solutions — are more of a mixed bag. “None of my children disappoints me,” said Ballmer. “Some of them just grow up later.”

The child going through a growth spurt is MSN, the destination, among other things, for news, Hotmail, search and Microsoft’s music-downloading service. A 43% rise in online advertising last year helped MSN record its first profit.

“With MSN we’ve had an amazing surge over the last year,” said Ballmer. “That’s a big, profitable business at this stage. Near-term, in the next three or four years — whether it’s search, or mail, or instant messaging, or file sharing, there’s a huge opportunity.”