MICROSOFT has an impressive collection of modern photography in the lobby of its conference centre in Redmond, Washington. Among the artists is David Maisel whose aerial photographs of Los Angeles give a disturbing, apocalyptic, bird’s eye view of the sprawling metropolis.

Black and white, teeming with a network of crazy roads, it’s hard to imagine how anyone could navigate the chaos. It seems an oddly apt choice of artwork for the world’s biggest software company.

Microsoft is huge. Valued at close to $233 billion (£117 billion) it counts Windows, XBox, Hotmail and a host of other services among its products. Its sales of $60 billion are growing at 18% a year, a rate it has achieved for the past six years. Windows is published in 96 different languages and runs on 90% of the world’s computers. But for all its size and many triumphs, as analysts filed into the conference centre for their annual meeting with Microsoft’s top executives last week, what they saw was an empire in trouble.

Co-founder Bill Gates retired this year, leaving his friend and successor Steve Ballmer with some big problems. The software industry is moving online — offering services over the internet and paying for them with ads or renting them out. It’s a trend known as “cloud computing” — all those services now float somewhere above our heads and are not trapped inside a PC. The trend is clearly a cloud — over Ballmer’s head.

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Microsoft is still selling most of its software in boxes, just like Procter & Gamble sells soap. Arch enemy Google has been beefing up its online services and is after Microsoft’s crucial business clients. Google dominates online searching — the entry point to the web — in the way Microsoft once dominated the PC.

Despite spending billions to catch up, Microsoft is still a poor third in online search. The on-off, on-off merger with Yahoo hasn’t helped Ballmer’s mood. He had made the case that Yahoo was critical to the future of Microsoft’s saggy online services. Now he has to make the case that it’s not.

Then there’s Vista, the latest incarnation of Microsoft’s world-beating Windows computer-operating system. Last year’s rollout was a bug-ridden disaster. And let’s not forget the rise and rise of Apple. Apple’s share of the computer market is tiny compared with Microsoft but it is growing fast. People queue through the night to get hold of new Apple gear. They don’t do that for Microsoft.

Since November last year Microsoft’s shares have been sliding hard. The company lost about $90 billion in market value this year as it danced with Yahoo. The day before the conference, Kevin Johnson, the executive in charge of the division that houses its online business and a man tipped as a potential successor to Ballmer, quit to head Juniper Networks, a Silicon Valley hardware firm. Nice timing.

When Ballmer took to the conference stage, no-one clapped. But by the end of the day few could doubt that this is a man and a company with a mission.

“What’s the fundamental message here? There is a technology shift. You could say shift means risk — I say risk means opportunity,” said Ballmer. “The real question is not what’s going to happen but who’s going to win and how it’s going to happen.”

During the presentations, the audience was asked to rank the speakers on what sort of job they did. Microsoft weren’t giving out the score cards but a straw poll gave Ballmer a nine. When the going gets tough, the tough get going. And they don’t get a lot tougher than Ballmer.

Before Ballmer’s big show one member of the audience was having dinner with some former Microsoft employees and local venture capitalists in Redmond. There are a lot of very rich, retired Microsoft employees in the area. Many are still sitting on piles of Microsoft shares. “I was surprised by how negative they were,” she said. “Apparently it's never been easier to hire people away from Microsoft.” She said local opinion was that Google was now the clear first choice for the brightest talents coming out of the area’s prestigious universities. Some of the shareholders were suggesting Microsoft had just got too big and should be broken up.

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