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Microsoft CEO Ballmer to Step Down - What Awaits on the Road Ahead?

TMCnet Feature

August 23, 2013

Microsoft CEO Ballmer to Step Down - What Awaits on the Road Ahead?

By Peter Bernstein
Senior Editor

The sun was yet to rise in Redmond, Wash., but that did not stop an intense light from being blasted from Microsoft (News - Alert) with the release of a statement that long-time and highly scrutinized CEO Steve Ballmer (News - Alert) will retire within the year. And, while the stock will be worth watching all day, assuming NASDAQ after yesterday’s hiccup stays up all day, early reaction from investors of Ballmer’s departure is very positive with shares up over 7 percent in early trading and momentum is heading north.

As Microsoft’s dominance of the desktop and browser markets has shrunk in recent years, and as it took the role of being a not-so-fast follower in critical growth areas like cloud, mobility and search, Ballmer has become a lightening rod of criticism.

This is not new. However, the interest is seeing Ballmer depart has been growing very loud in the past few days. In fact, it seemed to be reaching a crescendo, as evidenced by the visibility a report by Nomura Securities Analyst Rick Sherlund received pointing to the impact activist shareholder like ValueAct’s aggressive desire to see a board shakeup at Microsoft.

Microsoft said Ballmer will help guide the search, along with a special committee chaired by Microsoft independent director and former Symantec (News - Alert) CEO John Thompson, Microsoft co-founder and chairman Bill Gates, chairman of the Audit Committee Chuck Noski and chairman of the Compensation Committee Steve Luczo (News - Alert). The special committee will work with executive search firm Heidrick & Struggles International will consider both external and internal candidates.

In the statement, Ballmer is quoted as saying:

There is never a perfect time for this type of transition, but now is the right time. 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.

Bill Gates says in the statement, “As a member of the succession planning committee, I’ll work closely with the other members of the board to identify a great new CEO...We’re fortunate to have Steve in his role until the new CEO assumes these duties.”

It will be interesting to see in the coming days how effusive Mr. Bill is in his view of the Ballmer years.

The road ahead?

Speaking of Mr. Bill, one can only speculate on what he would like to see in a Ballmer replacement.

In his popular 1995 book, he looked at what he thought the future would look like, and to be objective he got quite a bit right although surprising the execution of the visions against Microsoft’s performance are why the Ballmer years have been disappointing in so many eyes.

The fact of the matter is that most companies, even the biggest, have a corporate life-cycle of 50 years or less. If you want to have some fun, go back and look at the Fortune 500 list from last year and 20 years ago. Microsoft was founded in 1975. It is a mature company to say the least, and faces really interesting challenges as a premiere part of an industry that lives according to the rules of innovate or die. This is only exacerbated by the fact that as I have mentioned many times we live in “The Age of Acceleration” where the only constants are change and the speed at which it is increasing. 

What this means for Ballmer’s successor and the fortunes of the company are that the next leader is going to have some skills that are going to make it a real challenge for the board to find the right person. They are going to have to:

  • Know the nuts and bolts of how to run a major multi-national
  • Need to be a recognized industry visionary/thought leader
  • Have the ability to inspire a corporate culture that many believe has become overly bureaucratic, slow and out of touch with market trends
  • Gain the trust of major customers
  • Rework ecosystems, business models and partner/channel relationships
  • Refresh their go-to-market and marketing campaigns, i.e., in essence rebrand the brand to seem more current
  • Navigate the mine fields of competitive pressures, regulatory scrutiny, changing global demographics and psychographics
  • Make hard choices about businesses to exit and invest in

That is just the short list.  The luster that has been lost in the Ballmer years has been the loss of Bill Gates former favorite word when he was pitching, “COOL!” We are watching the similar corrosion of brand coolness with Apple (News - Alert) with the passing of Steve Jobs.  

Who is the person that has the attributes above? We are going to hear a lot of names tossed about in the next few weeks because that is what the press and pundits thrive on. What will be fascinating is whether they go for a big name “seasoned” outsider, promote from within, or look to a young renegade from outside (not inside since investors would be suspicious of this being more of the same) to shake things up? 

If I had a vote, or was wealthy enough to have influence over a lot of them, I would pick option number three.  I happen to believe that the Microsoft has great people who are capable of doing great things but they need to be shaken up. I also would make the process of finding a successor short. After all the speed of change is increasing and it will not wait on Microsoft to find a new CEO.

Edited by Alisen Downey

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