TH-TH-TH-THAT’S ALL FOLKS!

AUG. 23, 2013 • Microsoft Corp. chief executive Steve Ballmer has announced he will retire within the next 12 months after a successor for the position is chosen. The company’s board of directors has appointed a special committee to oversee the succession process that includes lead independent director John Thompson, chairman of the board Bill Gates, chairman of the audit committee Chuck Noski, and compensation committee chairman Steve Luczo. The only clue as to qualifications for Ballmer’s replacement is the committee’s statement that they wish to fulfill Microsoft’s transition into a successful devices and services company. Ballmer set his departure after a year of criticism regarding the tepid market response to the latest Windows 8 operating system, and poor sales of the recently introduced Surface line of tablets.

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Impact: Ballmer has no shortage of detractors within the technology industry. For a company with as much reach as Microsoft, servicing dozens of major market segments, it would be impossible to please everyone all of the time. The bottom line, however, is that the conglomerate is often restrained by the inertia nurtured by its own historical success. Not only must Microsoft look forward, it most also support the legacy of its past products, especially with enterprise customers. Windows 8 rankles existing Windows users because it forced a tablet interface onto the desktop and removed well-used interface controls. The cloud-based Office 365 is launched with a strong effort to move client-side users off of their physical installations and onto a yearly subscription model. The Xbox One is introduced with an always-on, cloud-preferred distribution model that substantially diverges from the expectations of many console gamers. In each case the company sought to jump forward to cutting edge models, only to see substantial client resistance. Perhaps Ballmer can be blamed for not executing on these efforts well enough, but such efforts are extremely difficult to pull off. The jury is still out on Ballmer’s most recent initiative: a major reorganization that seeks to realign divisions in an effort to unify product design and services under the One Microsoft banner. Under this refocus Microsoft is now actively pushing the Xbox One as an affordable video conferencing option to its business customers – something we doubt would have been seen prior to the big restructuring. Who will end up in the CEO’s chair is impossible for us to divine at this early stage. What we would bet on is that it will be someone well immersed in cloud distribution and online content services that will be expected to execute on new technology models with more success than Ballmer was able to achieve.