Steve Ballmer retires after 13 years as Microsoft CEO Credit: bayerberg
Within the tech world, Steve Ballmer’s enthusiasm is the stuff of legend. The Microsoft CEO enters conference speeches like a force of nature, jumping and jogging across the stage, admonishing the crowd to “GIVE IT UP FOR MICROSOFT!” Imagine a passionate halftime pep talk, multiply it by 100, and you’ll have some idea of Ballmer’s typical presentations to developers. As an advocate for his company, he’s hard to beat.
But that enthusiasm hasn’t always translated into new technologies. When the iPhone was announced in 2007, Ballmer quipped, “There’s no chance that the iPhone is going to get any significant market share. No chance.” Microsoft didn’t embrace MP3 players until 2006, after Apple had sold nearly 100 million iPods. Last year the company arrived in the tablet market, following Apple’s iPad, Google’s Android tablets, Amazon’s Kindle Fire, and Barnes & Noble’s Nook Color. Google established dominance in the search market long before Bing launched. Microsoft’s forays into social networking — Yammer and So.cl — remain baffling.
On Friday, Ballmer said he would leave Microsoft within a year. Since then, lapses like these have begun to shape his retrospective as CEO. Critics say Ballmer didn’t grasp the changing tech environment. His departure is a step forward, they argue, and stockholders seem to agree. Microsoft’s share prices rose seven percent when word of his retirement leaked.
But that’s not the whole story, of course. Ballmer is one of the tech industry’s true vets, joining Microsoft as its 30th employee in 1980. He’s led the company since Bill Gates stepped down in 2000, and has kept the ship steady as countless tech enterprises came and went. Windows is still the world’s top operating system, Office remains the world’s top enterprise software and Xbox 360 is the world’s top video game console. Under Ballmer, company profits have doubled and revenue has tripled.
Microsoft’s stock price, on the other hand, has remained relatively flat since 2000. This can be seen as a knock against Ballmer, or as another example of his stabilizing leadership. A stable stock price, standard among blue chip companies, is something many shareholders appreciate and respect. Only when compared to the explosive growth of Google and Apple does it seem unimpressive.
However one views his leadership, there’s no debating that Ballmer’s retirement from Microsoft represents the most significant development since the departure of Bill Gates. But unlike Gates, Ballmer wasn’t quite ready to leave.
In the letter sent to employees on Friday announcing his retirement, Ballmer candidly noted “my original thoughts on timing would have had my retirement happen in the middle of our transformation to a devices and services company.” That transformation is currently in its infancy, following Ballmer’s major management reshuffle last month. In an interview after the announcement, Ballmer said that his decision had only been made this week, in the wake of a board call.
The company recently announced that it had built more Surface tablets than it could sell. For the Surface RT, it was almost $1 billion more, and the loss was even higher considering the device’s huge marketing budget. Combined with a recent earnings report that showed tepid reception to Windows 8, Ballmer’s fate was sealed.
For Microsoft’s board, the reason to push Ballmer out is cut-and-dry: He rebranded Microsoft a “devices and services company” then failed to ship any devices with market traction. The Microsoft Phone has been heralded for its innovative design, but like the Surface tablet, only captured about four percent of the market. The company’s share of the smartphone market has been steadily growing — as is Bing’s share of search — but both products lag far behind competitors. The failure of Surface was likely the last straw.
The suddenness of Ballmer’s retirement is made more apparent by the lack of succession plans. As Ballmer told the Seattle Times this past June, “our board has put a lot of time and energy into the notion of both longer-term succession, as well as what I’d call the ‘what if the CEO gets hit by the bus’ succession.” Microsoft seems to have picked an option in between. They’ve given themselves twelve months to pick a replacement, hiring an executive search firm and forming a search committee that includes Bill Gates.
Many commentators have noted that some of Microsoft’s best and brightest have left the company in recent years. Some have stayed in the family; Jeff Raikes, who led the company’s business division, now heads the Gates Foundation. Others have left the reservation; Xbox chief Don Mattrick moved to mobile game company Zynga. For a company that’s notorious for promoting from within, there are many shortlist contenders for CEO: current Executive VP Tony Bates (Skype), senior advisor Craig Mundie and Executive VP Satya Nadella (Cloud and Enterprise) among them. But there are no strong frontrunners.
In his final year, Ballmer set the company on a better path in many ways. While it’s been a rocky start, he launched the company’s necessary move toward devices, services and a more consumer-oriented approach. In a recent interview, Ballmer said he “kicked off a new wave” at Microsoft with his recent reorganization. The hope is that the shift will transform Microsoft into a company that is more collaborative and less dominated by interdepartmental battles. If that happens, it would surely burnish Ballmer’s legacy.
Ever the loyalist, Ballmer always said he’d step aside when it was best for the company. That time appears to have come. The question is whether Microsoft, which during Ballmer’s tenure has been slow to embrace many recent opportunities, can rise to the occasion, and institute the bold changes necessary to survive and thrive for another 30 years.
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