Young Tech Sees Itself in Microsoft’s Ballmer

These days, it is Microsoft’s turn to fend off the upstarts as it struggles to compete in a computing world that is increasingly mobile and based in a “cloud” of Internet-connected computers to which many customers gain access at the same time. It’s all part of the inevitable life cycle for technology companies.

“Getting disrupted is the defining characteristic of this industry,” said Aaron Levie, the chief executive of Box, an online data storage company. “You can even have a near monopoly like Microsoft did, and then everything gets redefined.”

Mr. Ballmer will not have to take Microsoft into the future; last Friday, he announced that he would retire within a year. But young executives like Mr. Levie are not gloating over Mr. Ballmer’s exit. They know well that one day — if they are lucky to be as successful as Mr. Ballmer — they could face the same problem.

“It just feeds my already-healthy sense of paranoia,” Mr. Levie said.

The rare tech company manages to thrive from one generation of technology to the next. Only a few of the big ones — I.B.M., Intel and Apple — have done it. And it is not yet clear if Microsoft has a clear path to joining that list of multigeneration kingpins.

Mr. Ballmer was closely identified with the personal computer revolution, and later with corporate software running on computer servers. Those innovations brought Microsoft the cash and talent to adapt to the early Internet with the Explorer browser, and diversify into online gaming.

What it could not buy Mr. Ballmer, the younger generation in tech says, was a clear vision of the future. Apple and Google have led development of smartphones and a long list of companies like Amazon.com have led the development of cloud computing. Microsoft, meanwhile, has often had to play catch-up.

“All technology aspires to be legacy,” said Scott Dietzen, chief executive of Pure Storage, a data storage start-up. “It’s that or obsolescence.”

“The most powerful factor,” he added, “is that the very best talent is drawn to doing something disruptive to the legacy, something new and fresh. And in this business the best are so much more productive than anyone else.”

During Mr. Ballmer’s tenure as chief executive at Microsoft, the company had considerable growth. Mr. Ballmer led the creation of the Windows Phone operating system, which received good reviews but has struggled to gain traction in the market, and Microsoft’s efforts in cloud computing. Also under his leadership, the company acquired Skype, an Internet communications service, for $8.5 billion, and paid $1.2 billion for Yammer, a social network for business.

But the breakthroughs, whether they were in Internet search, smartphones or Internet-based software, have usually happened somewhere other than Microsoft.

Mr. Levie, 28, grew up near Microsoft’s headquarters in Redmond, Wash. Several of his schoolmates’ parents worked for Microsoft. Few of his generation, he said, followed their parents there. Among those who did, he said, few stayed.

“I think about being 40 or 50 and being disrupted,” said Mr. Levie, whose company was founded in 2005. “You can be a visionary, and have a great business model, but no tech company can avoid it. There is no quick way to transition into the next thing.”

The closest to a safeguard, he said, is to be “like Amazon: race to the bottom on prices ahead of your competition, keep profit margins low and make things tough for them.”

Mr. Ballmer joined Microsoft in 1980, and its breakthrough software, Windows 3.0, was released in 1990. Its stock peaked in December 1999, shortly before Mr. Ballmer replaced Bill Gates, Microsoft’s co-founder and his close friend, as chief executive. Since then, Microsoft’s shares have fallen about 33 percent.

This article has been revised to reflect the following correction:

Correction: August 26, 2013

An earlier version of this article misspelled the name of the start-up for which Mr. Ozzie recently raised $4 million. It is Talko, not Taiko.

Bits Blog: The Rise and Fall of Windows Mobile, Under Ballmer

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Bits Blog: Missteps Curb Microsoft Bonuses for Ballmer and Sinofsky

A slide in the sales of Microsoft’s flagship Windows product and a tangle with European regulators have cut into the bonuses for Steve Ballmer, Microsoft’s chief executive, and Steven Sinofsky, president of the company’s Windows division.

Erik S. Lesser/Microsoft, via Associated Press Steve Ballmer, Microsoft’s chief executive, right, and Steven Sinofsky, president of the company’s Windows division, in 2009.

According to an annual proxy filing with securities regulators on Tuesday, Microsoft’s board decided to award Mr. Ballmer less than half the total bonus he was eligible for during the company’s most recent fiscal year, which ended June 30. The board awarded Mr. Sinofsky 60 percent of the bonus for which he was eligible.

Although other senior Microsoft executives also fell short of the total bonuses they could have received, the board penalized Mr. Ballmer and Mr. Sinofsky the most, and for similar reasons. Among the negative factors that weighed on the calculation of Mr. Ballmer’s bonus, according to the company’s filing, was “modest growth” in the market share of the Windows Phone operating system; a 3 percent decline in revenue for the company’s Windows division; “slower than planned progress” in its Internet unit; and the failure of the Windows division to live up to a 2009 commitment with the European Commission to offer a screen on its operating system that allows users to install an alternative Web browser.

The board similarly penalized Mr. Sinofsky for the decline in Windows revenue and the browser snafu in Europe.

Under the company’s compensation rules, Mr. Ballmer is eligible for a cash bonus equivalent to 200 percent of his base salary, which was $685,000. Instead, he received roughly 91 percent, or $620,000. Like other senior Microsoft executives, Mr. Sinofsky was eligible to receive 150 percent of his target bonus. Instead, he received 90 percent, or $7.65 million.

Mr. Ballmer’s total compensation is far lower than that of other senior Microsoft executives, at his request. He is a significant holder of Microsoft’s stock, with more than 333 million shares worth more than $10 billion. He receives only cash as a bonus, while other executives receive a mix of cash and stock.

This is not the first time the two men have fallen short of the total bonuses for which they were eligible. In the previous year, Mr. Sinofsky received 90 percent, rather than the 150 percent the board could have awarded him. Mr. Ballmer, meanwhile, received 100 percent of his target bonus, or exactly half the amount he could have received, a slightly better performance than in the most recent fiscal year.

Separately, Microsoft announced that one prominent member of its board, Reed Hastings, the chief executive of Netflix, would not stand for re-election at the company’s coming shareholder meeting. Mr. Hastings, who joined the Microsoft board in 2007, said he had decided to reduce the number of boards he serves on so he can concentrate on Netflix and various education initiatives. He serves on the boards of Facebook and the California Charter Schools Association, among others.