Blunders lead to Ballmer's demise
- 09 September, 2013 10:10
The heap of blunders that piled up at Microsoft under Steve Ballmer's leadership may have hit a tipping point this year, leading to last month's earthshaking announcement that Bill Gates' former right-hand man and heir, as well as Microsoft's fiercest cheerleader, will step down as CEO within a year.
In recent years, Ballmer has been the target of criticism over a variety of issues. Among other things, detractors cited Microsoft's stock performance, the company's inability to challenge Google's dominance in search advertising, the perception that Microsoft reacted late to cloud computing and the company's weak position in the tablet and smartphone markets.
"There have been a whole series of market shifts that Microsoft has either missed entirely or misjudged," said Al Gillen, an IDC analyst.
"[Ballmer] was definitely pushed out by the board," said Patrick Moorhead, an analyst at Moor Insights and Strategy.
The biggest clue, said Moorhead, is the 12-month timetable Microsoft will use to find a CEO successor. "Typically, a board will be working behind the scenes for a replacement, but they've given themselves 12 months," said Moorhead.
"I think this went down very quickly," likely sparked by Microsoft's July decision to take a $900 million charge against earnings to account for a drop in the value of its remaining Surface RT inventory, he added.
The announcement immediately prompted speculation on a successor -- in fact, a U.K. bookmaker has started taking bets on Ballmer's replacement.
Nokia CEO Stephen Elop, a former Microsoft executive, was the early choice of bettors, and he became the overwhelming favorite last week after Microsoft agreed to buy his company's mobile devices and services business for $7.2 billion (see related story). The deal calls for Elop to return to Microsoft to lead an expanded mobile devices team.
"Getting Elop back on board is a clear statement that Microsoft needs additional 'new thinkers,'" said Jack Gold, an analyst at J.Gold Associates. "This puts Elop high on the list of potential successors."
Rebecca Wettemann, an analyst at Nucleus Research, said Ballmer should have left several years ago because of his inability to see market fluctuations and to quickly act on opportunities. "This gives Microsoft a chance to start a new chapter and hire a CEO who has vision to lead the market, and not follow it," she said.
Microsoft is at a crossroads, something Ballmer himself acknowledged during interviews after announcing his retirement plans.
Revenue from the flagship Windows software is declining as PC sales slump badly. Though Microsoft remains very profitable, revenue from its best-producing groups remains tied to Windows. More important, many say that the company missed the boat on mobile and the consumerization of IT, and may not be able to catch Google, Apple and a blizzard of upstarts that are adding customers at astounding rates.
That's why the announcement of Ballmer's retirement, as big as it was, pales in comparison to the task that Microsoft will face after he's gone.
"Steve's leaving is a major event because he's been such a part of the Microsoft story for so long," said Gartner analyst David Cearley. "But the real watershed will be the person who follows him."
Matt Hamblen contributed to this story.
This version of this story was originally published in Computerworld's print edition. It was adapted from an article that appeared earlier on Computerworld.com.
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