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Tags: Ballmer | Microsoft | PC | slump

Ballmer's Exit Leaves Microsoft Searching for Hero in PC Slump

Friday, 23 August 2013 01:14 PM EDT

Microsoft Corp. Chief Executive Officer Steve Ballmer’s retirement leaves the world’s largest software company in a succession crisis amid the worst slump in history for the industry it helped create.

Ballmer’s planned departure follows a management reshuffle, the company’s biggest earnings disappointment in a decade and the fifth consecutive quarterly drop in personal-computer shipments. Meanwhile, Microsoft remains an outsider in a burgeoning mobile-computing market led by Apple Inc. and Google Inc.

“It would be a difficult job, but if you could turn around Microsoft you’d be seen as a hero,” said Brendan Barnicle, an analyst with Pacific Crest Securities LLC, in Portland, Oregon. He has the equivalent of a hold rating on the stock. “He’s not really leaving the company in the best financial position.”

Ballmer, who took the helm from co-founder Bill Gates in 2000, said he will leave within the next 12 months. Microsoft is looking at both internal and external candidates in a search led by independent director John Thompson and including input from Gates, the Redmond, Washington-based company said in a statement.

There are no obvious choices. Last month, Microsoft reduced the number of business units to four and said Windows chief Julie Larson-Green would oversee all hardware, including the Surface tablet and Xbox console and related games. Windows Phone software head Terry Myerson gained added responsibility for the Windows and Xbox operating systems.

Outside Options

If Microsoft decides to bring in a leader from the outside, it might consider EBay Inc. CEO John Donahoe or try to recruit Facebook Inc. Chief Operating Officer Sheryl Sandberg, Pacific Crest’s Barnicle said.

“There’s not a clear internal successor, as some of the potential successors have left in recent years,” said David Cearley, an analyst at Gartner Inc. in Stamford, Connecticut. “It’ll be difficult for an outsider to come in and change a very strong culture that exists at Microsoft.”

Steven Sinofsky, former head of the Windows division, left the company last year after clashes with executives including Ballmer, people familiar with the situation said at the time. Gates is not being considered, according to people with knowledge of the matter.

Also among contenders may be Tony Bates, who leads the company’s business development organization. Bates, a former Cisco Systems Inc. executive, joined Microsoft when the company bought Skype Technologies SA in 2011.

Many Challenges

Whoever gets the job will face a list of challenges that recently has grown longer. Last month the company reported profit that missed analysts’ estimates by the biggest margin in at least a decade amid weakening demand for PCs running its Windows software.

Microsoft’s attempt to crack the growing market for tablet computers with the Surface device led to a $900 million writedown of inventory as consumers continued to buy rival products like Apple’s iPad. Surface, Microsoft’s first-ever homegrown computer, shipped just 900,000 units in each of the December and March quarters, according to IDC.

At the same time, Microsoft’s flagship business is struggling. PC shipments fell 11 percent last quarter, according to Framingham, Massachusetts-based IDC.

For some investors, the most important thing is replacing Ballmer with a leader who will help the company reemerge as a technology pioneer rather than just a follower.

“You need someone who doesn’t need to be as much of an operations person as Steve Ballmer, who can say where Microsoft needs to be five years from now,” said Microsoft investor Michael Obuchowski, a fund manager at North Shore Asset Management LLC in Cold Spring Harbor, New York.

Microsoft shares rose 6.6 percent to $34.53 at 12:42 p.m. in New York after earlier climbing as high as $35.20. The stock had gained 21 percent this year before today.

© Copyright 2022 Bloomberg News. All rights reserved.

Microsoft Corp. Chief Executive Officer Steve Ballmer's retirement leaves the world's largest software company in a succession crisis amid the worst slump in history for the industry it helped create.
Friday, 23 August 2013 01:14 PM
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