Sunday, August 25, 2013

Ballmer Exit Brings Microsoft a Chance for Reinvention

Ballmer Through the Years: Moments of Steven A. Ballmer from conferences, commercials and interviews over the years that he was Microsoft’s chief executive.

SEATTLE — Steven A. Ballmer announced on Friday that he was leaving the top job at Microsoft, paving the way for a generational change at the once-dominant technology company and giving it an opportunity to reinvent itself for a world dominated by mobile devices, social media and other technologies that have eluded its influence.

A number of powerful executives have departed Microsoft over the years. While some current executives have recently risen to prominence, here is a look at some who had been mentioned previously as possible choices to take over the company.

Mr. Elop was the head of Microsoft's business division from 2008 until 2010, when he left to take the chief executive job at Nokia. In 2011, Nokia announced a smartphone alliance with Microsoft.

Mr. Johnson worked at Microsoft for 16 years, running the company's online services group and its Windows division. He left to become the chief executive of Juniper Networks in 2008. In July, Mr. Johnson announced his retirement from Juniper.

Mr. Maritz was effectively the No. 3 executive at the company when he left in 2000. He later became the chief executive of VMWare, but he stepped aside last year. Mr. Maritz is now the chief executive of Pivotal, a cloud-based start-up.

Mr. Raikes spent 27 years at Microsoft, the last eight running the company's business division. He left in 2008 to become the chief executive of the Bill & Melinda Gates Foundation.

Mr. Sinofsky was both widely admired and considered abrasive as the head of Windows, and his exit from the company last year is said to have come after a string of run-ins with Microsoft’s leaders. On Thursday, he announced that he had joined Andreessen Horowitz, the venture capital firm, as a board partner.

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But with no clear successor to Mr. Ballmer lined up and a jumble of businesses that will require the skills of a polymath to run, the company still faces huge obstacles to reclaiming its former glory.

While Microsoft in Mr. Ballmer’s reign as chief executive has yielded the spotlight to more glamorous companies like Apple, Google and Facebook, it still makes some of the biggest money-gushers in the technology business, including its Windows operating system for personal computers and Office applications like Word. Its profit last quarter was nearly $5 billion, compared with $3.2 billion for Google and $6.9 billion for Apple. Anyone who uses a PC to create a résumé or a term paper or to do online banking is more often than not doing so on a machine running Windows.

But the PC business, which Microsoft has ruled for decades, is under siege by mobile devices like tablets, an area that Microsoft has stumbled in, and that Mr. Ballmer famously underestimated. Analysts say the company needs to act quickly to right itself.

“The walls are falling now,” said George Colony, chief executive of Forrester Research, a research and advisory firm. “They may fall very quickly. There’s not much time for the board.”

Nonetheless, it has given itself a year to choose a successor, and Mr. Ballmer, 57, will stay on until then. The company declined requests for an interview with him.

Some analysts have suggested that Microsoft could use a seasoned turnaround artist in the mold of Lou Gerstner, who rescued I.B.M. from irrelevance in the 1990s. Current and former Microsoft executives said the company would more likely turn to someone with a technology pedigree. Some pundits have called for Bill Gates, Microsoft’s co-founder and chairman, to return to the company, in a nod to how Steven P. Jobs revitalized Apple.

But people who know him said Mr. Gates has no intention of doing that because of his full-time focus on philanthropy.

Others believe Microsoft is not governable in its current form. Ben Slivka, a 14-year employee of Microsoft who left in 1999, said the company should split up into five independent companies he calls “Baby Bills” devoted to Windows client software, Office applications, servers, Xbox and the Web.

“Give each of them (say) $5B for a rainy day, but not much more,” Mr. Slivka wrote in a post on Facebook after the news of Mr. Ballmer’s retirement. “You want them to be hungry. Return most of the cash hoard to shareholders.”

That Mr. Ballmer announced his plans without a successor in place is puzzling and led to speculation among current and former Microsoft executives that Mr. Gates might have been losing patience with his longtime friend, whom he first met when they were students at Harvard University in the 1970s. A spokesman for Mr. Gates said he was not available for interviews.

While the board, Mr. Ballmer and Microsoft gave no public indication that he was pushed out, the disappointing stock price may have been a factor in his departure. Over Mr. Ballmer’s 13-year tenure at Microsoft, the stock has lost 36 percent of its value, if the dividends that Microsoft pays out are excluded. Apple, meanwhile, was up nearly 2,000 percent over the same period. With the announcement of Mr. Ballmer’s departure on Friday, Microsoft’s stock rose more than 7 percent, closing at $34.75.

“Microsoft will have to go through a very hard and painful transition,” said Joachim Kempin, a former senior Microsoft executive, who has written a book critical of the company under Mr. Ballmer. “I’m not very confident the next guy will be able to immediately turn the ship around.”

This year, ValueAct, a hedge fund known for behind-the-scenes shareholder activism, began acquiring a small stake in Microsoft. Some analysts say they believe other shareholders might have been willing to join with the fund in efforts to lobby for management changes at the company. Two years ago, the investor David Einhorn said Mr. Ballmer was “stuck in the past” and called for him to go.

Mr. Ballmer provided plenty of fodder for such critics over the years with his dismissals of technologies that turned out to be game-changers. At a forum in Seattle in 2007, shortly after Mr. Jobs introduced the iPhone, Mr. Ballmer said there was “no chance that the iPhone is going to get any significant market share.”

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