The long goodbye: Microsoft's Ballmer to step down

[Steve williams]

By Javier E. David | CNBC

Microsoft's (MSFT) CEO Steve Ballmer shocked markets on Friday by announcing he would step down within 12 months, ending a tenure marked by the software giant's declining dominance and struggles to keep pace with its competitors.

In a statement, Microsoft said Ballmer would retire "upon the completion of a process to choose his successor. In the meantime, Ballmer will continue as CEO and will lead Microsoft through the next steps of its transformation to a devices and services company that empowers people for the activities they value most."
Market scrutiny will now likely shift to who will be tapped to succeed Ballmer. Despite that uncertainty, investors applauded the news by sending Microsoft's shares surging by 7 percent - adding a whopping $24 billion to the software company's market capitalization from Thursday's close.

The news came only a month after the Redmond-based technology behemoth announced a broad reorganization, designed to capitalize on the relentless shift toward mobile technology. Ballmer acknowledged the strategic shift, as he complemented the new leadership team.

"There is never a perfect time for this type of transition, but now is the right time," Ballmer said in a statement.
"My original thoughts on timing would have had my retirement happen in the middle of our company's transformation to a devices and services company," he added. "We need a CEO who will be here longer term for this new direction."
Ballmer succeeded billionaire Bill Gates in 2000, the iconic wunderkind whose knack for technology innovation was rivaled only by deceased Apple (AAPL)CEO Steve Jobs. Yet like Apple's current CEO Tim Cook, Ballmer was forced to wrestle with comparisons to his predecessor, despite a much more flamboyant personal style that made for several viral videos.

Under Ballmer's leadership, Microsoft's stock languished and its rivals - most of whom moved rapidly to profit from the explosive growth of smartphones and tablets - began separating themselves from the rest of the technology pack.

 

[amirm]

The calls for him to step down from both inside and outside of the company have been quite strong. While I personally liked Steve, a different person who truly understands hardware and devices needs to be at the helm now. Steve's strength is in sales and that is where he had an ideal position. He is also an "enterprise" person as opposed to consumer. He became the CEO in order to free up Bill Gates to retire and in my opinion, that was a poor choice. Steve was not a technologist and once Bill left, there was a huge vacuum in the company in that regard (Ray Ozzie was supposed to play that role but he never did and also left the company).

So it is not a surprise that stock is up. As I noted though, the man had some superb abilities. He had photographic memory and could remember numbers and people like no one you had seen before. He would know what you ate for lunch even if you had forgotten! He was very personable and made management skills an important ingredient at Microsoft (before that, managers were considered paper weights). So while I agree the time had come for him to leave, Microsoft will lose some of the other assets he had.

 

[Steve williams]

will they create the CEO from within the company or recruit from the outside

 

[amirm]

That is the big question: every high-level external exec they hired was later fired. None could live in the shadow of Bill and Steve. And the culture of Microsoft is that any experience you have had outside of Microsoft amounts for nothing! It would be a hell of a challenge to have an outsider manage the company. He simply won't have the support of the troops. So I would say 60% chance internal, 40% external.

 

[Steve williams]

Microsoft's next CEO isn't who you think

By: Cadie Thompson | Technology Reporter, CNBC.com

Now that Steve Ballmer is out, there's a ton of speculation about who will be taking the helm at Microsoft. While there are plenty of names being floated as potential candidates, odds are the company's next CEO is probably not anyone you would expect.

And that, Microsoft watchers say, is precisely what the company needs: fresh blood.

"Bill (Gates) would like the successor to be someone that he knows and someone that he is comfortable with. I don't think that person is necessarily an obvious person in the company," said Rick Sherlund, head of U.S. technology research at Nomura Securities, on CNBC's Squawk on the Street.

"I do not believe there is a successor in waiting. ... Unfortunately, at Microsoft there has been enormous turnover of senior people under Ballmer, so we are left with no obvious choices here."

But the fact that there is no obvious candidate within Microsoft may actually bode well for the company, because there are major changes needed that are only possible with someone from outside the company, analysts say.

"CEO changes are tough when you are in a business like this. Microsoft missed the transition to tablet, missed the transition to smartphones, those problems are all still there," said Dan Niles, CIO of AlphaOne Capital Partners. "The new CEO needs to be amazingly good because he is going to have his work cut out for him."

Pushed out?

Ballmer's announcement comes just one month after the company's corporate shake-up. While Ballmer had probably hoped that the push to turn the company around would help ensure his position, shareholder activism proved that the shake-up wasn't enough and investors wanted Ballmer out, analysts said.

"This validates that the shareholder activism agenda is likely to be accomplished one way or another," Sherlund said.



Rick Sherlund, Nomura Securities, addresses Jim Cramer's question of whether Steve Ballmer was forced out as CEO of Microsoft. He also addresses who the likely successor will be.
The most notable investor who wanted Ballmer out was probably Gates, Niles said.
"The only way Steve Ballmer is gone is because Bill Gates wants him gone, in my opinion. There's no other way this happened," Niles said.

Microsoft's stock surged by 7 percent after news of Ballmer leaving, adding $24 billion to the company's market capitalization from Thursday's close.

However, investors shouldn't expect the growth to last in the long-term, Niles said.

"In the near-term, the stock probably heads higher, but let's not forget this business has a lot of issues and there's a lot of precedence for replacing the CEO and still having the stock go a lot lower," Niles said. "I hope they do some out-of-the-box thinking and they get somebody from outside the company. If they bring someone from inside the company, I think that's going to be a very bad decision."

But who?

Some big names suggested as viable candidates include Steven Sinofsky, former president of the Windows Division; Scott Forstall, former senior vice president of iOS software at Apple; and even Bill Gates. And while these are all interesting candidates, it's unlikely any of these candidates would take the job, Milanesi said.


Dan Niles, AlphaOne Capital Partners, discusses the jump in Microsoft shares after the announcement CEO Steve Ballmer will retire next year. Niles explains why he is buying some shares now as a short-term play. And CNBC's Jon Fortt shares his thoughts on the timing of Ballmer's departure.
Sinofsky had a reputation much like Forstall (difficult to work with), so it wouldn't make sense for Microsoft to bring him back, said Carolina Milanesi, a technology analyst for Gartner. As for Gates, it's unlikely he would come back to run the company since he has moved onto other projects.

"It's not necessarily going to happen, but it would be interesting for the industry since Jobs is no longer with us. They were both seen as pillars in the industry," Milanesi said. "We don't have a leader like that in the industry right now, there's a lot of good leaders, but not necessarily such a big person personality wise."

 

[amirm]

I went through the list of exec VPs who are left and I can't see any of them being able to have the breath of knowledge and management horsepower to manage a 100,000 person company. The ides of bringing back Sinofsky makes no sense to me. He has no financial background (or respect for the same) and you can't have a CEO of a public company who doesn't. Just because you are a difficult person, it doesn't mean you are all of a sudden Steve Jobs and should become a returning CEO!

So as much as the odds are against the success of an outsider, they may be forced to go that way. In which case, there will be multiple chapters to this as we wait to see if they stay in the job or not.

 

[edorr]

I went through the list of exec VPs who are left and I can't see any of them being able to have the breath of knowledge and management horsepower to manage a 100,000 person company. The ides of bringing back Sinofsky makes no sense to me. He has no financial background (or respect for the same) and you can't have a CEO of a public company who doesn't. Just because you are a difficult person, it doesn't mean you are all of a sudden Steve Jobs and should become a returning CEO!

So as much as the odds are against the success of an outsider, they may be forced to go that way. In which case, there will be multiple chapters to this as we wait to see if they stay in the job or not.

I hear Ron Johnson and Leo Aphotheker are in the market for a new CEO gig....

Seriously though - how about Chuck Philips or Mark Hurd?

 

[asiufy]

Read an article extolling the virtues of Stephen Elop (Nokia's CEO) as the best candidate. He's ex-Microsoft, and ran an important division too. And of course, he currently runs the company partly responsible for the future of Microsoft.


alexandre

 

[amirm]

I hear Ron Johnson and Leo Aphotheker are in the market for a new CEO gig....

Seriously though - how about Chuck Philips or Mark Hurd?

Mark would be good for the business side of the company. I don't think he is a consumer guy. I don't know Chuck Philips.

 

[amirm]

Read an article extolling the virtues of Stephen Elop (Nokia's CEO) as the best candidate. He's ex-Microsoft, and ran an important division too. And of course, he currently runs the company partly responsible for the future of Microsoft.


alexandre

I have read the same. I did not cross paths with him so don't know him that well. As candidates go, he would be on the list I would imagine for the reasons you mention. A crazy idea might be for Microsoft to buy Nokia and make him the combined CEO! Perhaps this is why they are giving themselves 12 months to get this done. Usually the process is shorter if you are just hiring someone.

 

[edorr]

Mark would be good for the business side of the company. I don't think he is a consumer guy. I don't know Chuck Philips.

Chuck Philips was handpicked by Larry Ellison to run Oracle, I met him twice, and he is a brilliant guy. Like Hurd, it appears he has a bit of a zipper problem which could be a dealbreaker.....

 

[Keith_W]

Stephen Elop as Microsoft's next CEO!?! Are you guys out of your minds?

Microsoft is where it is right now because Ballmer has missed every major new trend in computing for the last decade. It ignored the iPod and launched the Zune five years later (and only a few months before the iPhone), it ignored search and allowed Google to grow from a startup in 1997 to where it is today (about the same size as MS). Ballmer thought the iPhone was a toy, and his response with Windows Phone 7 was a couple of years too late. Ballmer laughed at the iPad - despite having a head start of at least a decade, Microsoft failed to capitalize on their lead.

Elop has lead Nokia to where it is because it abandoned Symbian and chose a loser with Windows 7 (and then Windows 8). Despite being one of the first in the smartphone game, it was comprehensively defeated by Apple, and then by Android. And it is still stubbornly sticking with Windows, when most people are suggesting that Nokia should move to Android. Anybody heard of the "Elop effect"?

Both Elop and Ballmer took over companies which were the undisputed leaders in their fields and turned them into also-rans.

Hmm, come to think of it ... Elop might be a good successor for Ballmer after all.

 

[flez007]

Chuck wad mu boss's boss when I was at ORCL, not sure that he would be the right guy IMO, nor Leo - MSFT needs to reinvent itself from within..

 

[asiufy]

Elop had very little to do with Nokia losing the #1 spot. They were also-rans when he got there, and he only got the job in the first place because the Nokia board authorized the move to Windows Phone.

I forgot the (Finnish) guy's name, but that last CEO before him at Nokia did the damage, not Elop.

 

[Mosin]

Out here in the real world...

No one really cares who becomes Microsoft's new CEO, or even if Microsoft has one at all.

At least, that's the case with my customer base. I'm in the copier business, in addition to my turntable endeavors. We network 99% of all the machines we sell these days, and there isn't a day that passes that I don't hear some disparaging remark about Microsoft. People despise it, but lack viable alternatives for the most part. There are exceptions, and the surprising number of Linux servers I see is one example. Another is an appreciable increase in the number of clients who use Open Office. The bloat of recent MS Office packages has taken Office programs to the point they are barely functional for those who were barely computer literate all along. It's as if Microsoft pays people to write code just for the sake of writing code. Then, rarely is anything ever perfected. Silverlight is a great example of that. Of course, there are privacy issues, too. The consumer is fed up, so now is the time for some enterprising company to grab business from MS.

In the browser market, that loss has already happened in a very big way.
http://www.w3schools.com/browsers/browsers_stats.asp

The way I see it, Microsoft is a company in decline. As people become more comfortable with other systems, that decline will surely accelerate.

 

[Keith_W]

Here is an excellent article on how Ballmer lead Microsoft to their death. It was written a year ago, but still relevant. I wonder what Amir thinks of it.

http://www.vanityfair.com/business/2012/08/microsoft-lost-mojo-steve-ballmer

BTW, with Microsoft in decline and Windows 8 being a flop ... there is a hole in operating systems which is about to open. People are scared of moving to Win 8, to them it may as well be a whole new operating system. If Apple have a chance to achieve total world domination, it is now - open up Mac OS and license it to third parties. There are plenty of people like me who won't buy a Mac because it is closed down and proprietary.

 

[Keith_W]

asiufy, suggest you read Tomi Ahonen's comments on Elop.

 

[asiufy]

Well, I disagree with Mr. Ahonen. It's easy to put the blame on one individual. Both Jorma Ollila and Olli Peka Kolasvuo, Nokia's previous CEOs, were facing the iPhone just as Ballmer was, and didn't react appropriately.
Ballmer had a marginal interest on the iPhone at that point, since MSFT wasn't betting the farm on smartphones then. Nokia was. So, Ballmer's blame is less than these two folks, as well as the Nokia board, who kept them there.
The finns had 2007-2010 to "fix" Nokia, and what did they do? Release more and more depressing phones, even letting Nokia's customary excellent fit and finish go to waste, with lots of buggy, malfunctioning hi-end models. And in the low end, they let the Series 40 phones languish, even in traditional markets where they usually led (like my own, Brazil).
Elop joined at the end of 2010. So, he's had about the same run the finns did battling the iPhone, with the added complexity of another major competitor, Android.
How did he do? Well, Nokias phones are much, MUCH better now, in spite of the OS they run. The fit and finish is back to the old standards, with impeccable attention to detail. And in the low end, the Asha phones are gaining momentum (though not in the US, of course). Nokia is actively pursuing developers for Asha, in order to bring smartphone-like qualities (major apps) to its dumbphones.
Doesn't sound all that bad to me.
I don't have time to dig right now on the financials, but I'm pretty sure they were far, far worse under the finns than under Elop...


alexandre