Ballmer to Retire - Strictly on the 'Surface,' It's Been Long Overdue


Microsoft sent out a press release this morning. It is perhaps the best release it has sent out in quite some time. The bottom line is that the last of the truly old guard is finally being retired. This is good news - at least on the surface (take "surface" any which way you want, but…). Here are the relevant paragraphs from the press release:

Microsoft Corp. today announced that Chief Executive Officer Steve Ballmer has decided to retire as CEO within the next 12 months, 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.

“There is never a perfect time for this type of transition, but now is the right time,” Ballmer said. “We have embarked on a new strategy with a new organization and we have an amazing Senior Leadership Team. 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. We need a CEO who will be here longer term for this new direction.”

The Microsoft board has already pulled together a special CEO committee to direct the process. The process will be driven by the board’s lead independent director John Thompson and will include Bill Gates. That's all we need to know.

The stock is already up just over 7 percent this morning, and truly, it is time to begin thinking again about MSFT as a viable growth stock investment. Now is the time to buy, while it is still dirt cheap to its enormous potential. Of course a lot depends on who ultimately takes over, but we believe that as long as the end result is a dynamic new CEO who will emerge with a mandate to drive mobile-age change the stock will finally overcome its years of lethargy.

Over the last 14 months or so we've written a good deal about Microsoft's directions, which inevitably conclude with the need for Steve Ballmer to retire. Ballmer has been a great CEO for the old core of Microsoft, but he has failed to lead the company in the new mobile directions he needed to drive it. It wasn't for lack of trying; the real problem is that we live in a different age than the one Ballmer so keenly understands and has long understood.

We Knew Ballmer When He Was Exciting

Let me switch here for a bit to a personal note.

I've covered Microsoft in some form or fashion since 1983, and in early 1987 I joined the company as a founding editor of Microsoft Systems Journal. Back in late-1989, following a successful ramp up of Microsoft Systems Journal, I made a decision to leave Microsoft to join PC Magazine. Financially that has been without a doubt one of the worst financial decisions ever made by any human being ever. Steve got wind of my decision to leave and insisted on speaking to me personally about reconsidering - we connected by phone as he was about to head off on a much needed ski trip.

He didn't persuade me enough - I could say I've been mad at him ever since, but that would not be true. His excitement for Microsoft's future was entirely over the top and infectious, but I was convinced my future was in technology publishing and, well, at the time PC Magazine was at the top of the tech publishing food chain.

Back then, Microsoft was still a small company and I had opportunities to interact not only with Steve but with Bill Gates as well on occasion. What I remember most is that they both had so much passion and aggression to succeed and they were both truly cutting edge. They were also ruthless in their ways, not only in driving Microsoft forward from a business perspective, but in driving what they knew at the time to be the right ways to build technology based on personal computers.

I once watched Ballmer give an hour long presentation where he began by announcing he was "so excited and energized by what we are announcing today that I'm going to deliver my entire presentation while running in place…" And he did!

Let's just say I've been following Microsoft intimately for a very long time.

Value CEOs are NOT Visionaries

Those exciting days disappeared a long time ago. Once Ballmer evolved into a "value company" CEO - where the primary directive became one of protecting the company's existing assets (which of course were all the cutting edge assets Gates and Ballmer used to drive when Microsoft was a growth company) - Microsoft's stock became fossilized, so to speak. It hasn't moved in over ten years, and it wasn't for lack of revenue and earnings growth. Ballmer did a fabulous job of building Microsoft's empire, but he did so with the established assets. But really, does he look happy?

He utterly failed to move the company forward into the new world of mobility and he was entirely lacking in both vision and passion for doing so. That guy who once did a press conference running in place was no longer the guy running Microsoft. He could run in place today but it would not exude passion and excitement - it would come across as nothing more than a gimmick. You can't fake vision and passion.

We need to note here that he lacked what Steve Jobs legitimately put on the table every day when he returned to Apple. It has been amazing to watch the different trajectories of the two since roughly 1999 - the one soared with vision and leadership while the other grew a huge empire of revenue and profit from old assets. The former became the CEO of the world's most expensive company; the latter kept Microsoft in the money but kept the stock at $27 per share the entire time.

We hardly believe we need to rehash everything Ballmer has done wrong over the last 12 years. Nor can we really deliver advice on where Microsoft needs to go. Sure, we can offer the same bromides for future success and growth that every other pundit on the planet will offer…but it isn't necessary. It has all already been said. Here are just some of our previous articles that underscore all of this and note as well the comings and goings of various internal Microsoft players:

This select collection of articles provides plenty of detail on all the things that have gone wrong with Microsoft. Every one of them comes around to noting that the buck stops with the CEO. There is no other way to underscore Ballmer's lack of 21st century success.

Of course we will again point out that success is relative. As a revenue and profit-driven value company, Microsoft has done extraordinarily well! From that perspective Ballmer has been a superstar CEO. The problem now is that the old assets are aging and they are no longer really worth protecting.

The company has to move successfully in new directions, and we are absolutely sure that even Bill Gates intimately understands this and that Steve isn't the one who will take them there. We can sort of picture Bill sitting Steve down and finally having to have "the talk" with him.

A Brief History of Tomorrow's Microsoft

OK, so our take on "A Brief History of Time" is a real stretch with that subhead, but let's look ahead by keeping yesterday also in hand.

Our initial guess is that the Microsoft board is going to try and find itself another Marissa Mayer. Can anyone blame them if they take this approach? No. Mayer, who in our humble opinion is going to fail spectacularly in 18 to 24 months when the smoke and mirrors give way to the need to show true and enormous revenue and profit growth, has nevertheless hugely re-energized the public's perception of Yahoo.

Let's leave aside what a lot of Yahoo employees often have to say (we can sum it up as follows: All pretty on the outside, all ugly on the inside). The truth of the matter is that Yahoo has, from a public perspective, turned things around. The fact that they managed to regain the number one website on the planet ranking over the last month underscores this. People aren't going to Yahoo again simply because it has improved its services.

People are going back to Yahoo because it has recovered its "public likeability." Mayer gets a lot of credit for the show and tell and smoke and mirrors. She needs to succeed, but here is the hugely ironic twist - to do so she has to emerge as the very same value CEO Ballmer was a superstar at being! It won't happen. Sell your Yahoo shares and buy Microsoft today.

We'll leave the speculation for who Microsoft should hire for another day. It will need to be someone outside of the company but also someone who can not only bring tomorrow's vision to the game but who can also command the respect necessary to truly rule an otherwise hugely unruly company that still has enormous assets generating enormous revenue.

Will Ballmer fade into the sunset? Will he found a foundation similar to Bill's to save the world? Maybe he'll just join Bill again. Hmm, we're not sure that is his path. Technically speaking he is still relatively young for a CEO - but perhaps it is simply time to take the yacht out for a two year ride. Yeah, that’s the ticket. Find yourself, Steve - go on whatever might pass today for that same ski trip you were headed to when I failed to listen to you and didn't stick with Microsoft.

Then come back and give us another press conference while running in place for real, because you truly have found real excitement again.

Edited by Alisen Downey
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TechZone360 Senior Editor

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