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Mr Ballmer's long goodbye

Stuart Lauchlan Profile picture for user slauchlan August 22, 2013
Steve Ballmer is out - well, almost. But will a new person at the top of the company within 12 months be enough to get Microsoft back on track?

"We need a CEO who will be here longer term for this new direction."

With those words, Steve Ballmer confirmed what many had been calling for for some time: Microsoft's going to need a new man or woman at the top if it's going to reinvent itself in the age of the cloud.

A succession committee has been set up within Microsoft, with Bill Gates one of its members, charged with finding a replacement to allow Ballmer to retire at some point over the next 12 months.

In an email to all Microsoft staff, Ballmer admitted:

"There is never a perfect time for this type of transition, but now is the right time. My original thoughts on timing would have had my retirement happen in the middle of our transformation to a devices and services company focused on empowering customers in the activities they value most.

"This is a time of important transformation for Microsoft. Our new Senior Leadership team is amazing. The strategy we have generated is first class. Our new organization, which is centered on functions and engineering areas, is right for the opportunities and challenges ahead."

"This is an emotional and difficult thing for me to do. I take this step in the best interests of the company I love; it is the thing outside of my family and closest friends that matters to me most."

Frankly it's remarkable enough that Ballmer lasted this long. Wall Street's been screaming for his head for long enough and most people reckon that he wouldn't have clung on without the support of his friend Bill Gates.

Things have gone badly wrong on Ballmer's watch. In July, it took a $900 million write-down on its Surface RT tablets and had to cut prices on its higher-end Surface Pros. Windows 8 has been a resounding flop. And the online side of the business - including Bing and MSN - is reckoned to have lost more than $16 billion in recent years.

Ballmer's reaction to all this and more was to set in motion a massive corporate restructuring, breaking its eight product divisions into four arranged around more specific themes.

Where to now?

Nomura Group analyst Rick Sherlund, a long-time Microsoft watcher, last month predicted a shake-up was imminent following the reorganisation:

“The recent reorganization does not fix the tablet or smartphone problem, it may help focus better on new opportunities and on transitioning to the services and devices market, but yikes, the devices opportunity just received a $900 million hardware write-off for Surface RT and investors may not even like the idea of wading deeper into this territory and the services business just put a damper on near-term growth in an already sluggish market.”

Changing CEOs is always a high risk venture. Microsoft managed the transition from Bill Gates to Ballmer with relative ease. But as Tim Cook is finding over at Apple, it's not always easy living in your predecessor's shadow.

Forrester Research analyst Andrew Bartels reckons that the succession committee will have some clear objectives in mind when choosing the new CEO, telling Reuters:

"There are two aspects to this, the stock price and how the company has actually done. The stock price has been more or less flat since Ballmer's tenure. The board's going to look at that and say we need someone to change that.

"You obviously want someone who knows the business well and understands both divisions of business and consumer. You also want someone who would be bold enough to split the company, split off Qindows, run that as one business and keep the other part as a separate business.

"That's one way a bold CEO could come in and say we are being penalized by being compared to Apple. That's going to be a tough sale especially with Bill Gates as overhead."

But Ballmer's announcement had one immediately positive effect: the stock price shot up 7% on the news.

To put that in context, Microsoft stock has lost around 40% of its value since Ballmer became CEO in January 2000.


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