I bring this up because my eWeek colleague, Don Reisinger, just published an article titled, "Steve Ballmer's CES Performance Proves He Needs to Go." Among the reasons: Microsoft's failure to craft a sizable tablet response to the Apple iPad, Ballmer's supposedly misplaced faith in Windows Phone 7's market prospects and little progress in reversing Google's search-engine dominance.
The thing is, Don's mostly right about Ballmer's missteps. Despite earning massive revenues from its flagship software, including Windows and Office, Microsoft managed to miss the proverbial boat on tablets, search and smartphones. And given how those three categories are basically defining the tech industry in 2011, that's very nearly an unconscionable mistake.
Insult to injury, Microsoft's stock hasn't moved very much in recent years, even as its rivals' market value skyrocketed. That's partially the consequence of being a mature company (once you're a multibillion-dollar conglomerate, finding new avenues for explosive growth becomes that much more difficult), but it's also a reflection of the aforementioned failure to capitalize on new tech trends.
But does that mean it's time to give Ballmer the boot?
Ordinarily, I'd say "yes." Ordinarily, a stagnant stock price and failure to maintain market share in key product segments is more than enough justification to send a CEO to retirement on some tropical island. However, Ballmer seems to realize mistakes were made. More to the point, he seems intent on rectifying those errors.
Earlier this week, Ballmer announced that Bob Muglia, president of Microsoft's Server and Tools Business, would depart the company this summer. "While Windows and Office are household words, our Server and Tools Business has quietly and steadily grown to be the unquestioned leader in server computing," he wrote in a Jan. 10 e-mail to company employees. "We are now ready to build on our success and move forward into the era of cloud computing."
Ballmer had apparently talked with Muglia "about the overall business and what is needed to accelerate our growth" and came to the decision that "now is the time to put new leadership in place for STB."
As I mentioned in an earlier Microsoft Watch posting, I thought Ballmer's word choice and tactics in dismissing Muglia were unnecessarily brutal, considering his two decades of saddle time with Microsoft.
That being said, it seems like Ballmer has some sort of larger plan here, one that involves bringing STB more in-line with Microsoft's broader cloud strategy. His e-mail suggests that, at least in his estimation, Muglia wasn't suited for guiding that integration, and he eliminated him. That's what CEOs do. It's not a particularly warm-and-fuzzy job.
Mulgia was just the latest in Ballmer's top-to-bottom house cleaning. In October 2010, the company named three new presidents to key divisions within the company, replacing those departed in a series of executive shakeups throughout the year. Chief Software Architect Ray Ozzie and Business Division President Stephen Elop both headed for the door--the latter to take over the CEO reins at Nokia, the former for reasons still officially unexplained. With regard to the executive suite, Microsoft looks very different than a year ago.
Microsoft is also spending hundreds of millions to get back into the smartphone game. Its Kinect hands-free controller continues to sell well, as does Windows 7 and Office. And while its cloud initiatives have yet to generate substantial revenue, Microsoft is clearly trying to position itself at the forefront of that segment, instead of taking its usual "fast follower" role. These are the seeds of potential innovation and profit.
I feel that Ballmer needs to stay in place, at least for the short term, to give those seeds a chance to grow. Switching CEOs is a disruptive event; suddenly, the boardrooms fill with executives pressing their own agendas and sharpening their knives with an eye on each other's backs. Ballmer's departure could wipe out whatever nascent momentum the company has managed to accumulate in areas like smartphones and cloud. For that reason alone (and maybe that reason alone), he should probably remain Microsoft's CEO.
But just as long as he develops something resembling a decent tablet PC strategy.
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