Microsoft has seen Apple and Google pass it during the past decade. What mistakes has led Microsoft to the third place position among global tech giants? We're running down Steve Ballmer's 5 biggest blunders while Microsoft CEO.
Steve Ballmer At A Glance
• Joined Microsoft in 1980, becoming the 30th employee at the company. • Over the next 20 years he served a variety of roles at the company before finally becoming CEO in January 2000.
Microsoft Stock During His Tenure
• Since taking over as CEO in January 2000, Microsoft’s stock has trailed the S&P 500 and Nasdaq averages. (S&P 500 in yellow, Nasdaq in red, Microsoft in Blue)
A Fair Glance at Ballmer?
• However, Steve Ballmer took over at the peak of the Nasdaq bubble. Stock performance may be an unfair way to judge his legacy. • Overall, Microsoft saw profits increase 180% during his tenure from $7.9 billion the fiscal year before he took over as CEO to $21.8 billion last year.
Then Again… Microsoft Relative to
PC Sales • Yet, during Ballmer’s tenure as CEO worldwide PC sales increased 210%. With Microsoft having a near monopoly in operating systems, the company’s performance tracked its end market.
The Bottom Line… • The
bottom line is that when Microsoft announced Steve Ballmer would be retiring within 12 months on Friday, the company’s share price surged 7.3%. Investors clearly feel a leadership change will be positive for the company.
5.) Letting Internet Explorer Languish
• In 2004, Internet Explorer was at roughly 90% of browser usage. In early 2009, Internet Explorer was still at a dominant 70% of web browser usage. • However, in recent years competition from Google’s Chrome and mobile browsers has eroded Microsoft’s lead. • Overall, browsers have become more strategic in recent years. Chrome has not only become an OS, but can also synch between devices. In addition, the growth of cloud computing has increased the use of browsers for accessing applications. • The map on the next page shows most used web browsers by country. Microsoft’s lead has slipped away in most countries.
4.) Bad Acquisitions • Microsoft
has made over 100 acquisitions during Ballmer’s tenure. The second largest was aQuantive, which was purchased for over $6 billion. Last year Microsoft wrote off nearly the entire value of the deal. • Ballmer’s largest deal, the $8.5 billion acquisition of Skype was completed in 2011, so final judgment will be likely be years away.
3.) Windows Vista • Vista
was released in 2007, more than five years after the release of its predecessor Windows XP. • The operating system was quickly panned as bloated. While initial adoption was strong, users began migrating from Vista back to Windows XP. • Today, 20.5% of PCs run 12-year old Windows XP while just 5.2% run Vista. The delays behind Vista and widely-panned final product were a stark contrast to mobile operating systems like iOS, which emerged near the time of Vista’s release.
2.) Online Services – From
MSN to Bing • Over the past five years, Microsoft’s online division has lost an astounding $16 billion. • A search partnership with Yahoo! and a revamped Bing search engine have helped Microsoft regain some search market share and stem losses across the past year. • However, Microsoft remains a distant second in most countries. In Australia, Bing stands at 3% market share. In the UK its market share is 5%. • Bing is now a good product – Microsoft’s critical mistake was taking so long to respond with a search engine that was competitive with Google. Bing wasn’t unveiled until 2009, a point in which Google had already gained near monopoly levels of search market share in most countries.
1.) Mobile Strategy • The
one unforgiveable sin for a big tech company is missing a revolution which reshapes the industry. In Microsoft’s case, this has been overall mobile strategy. • While Windows Phone is now a competitive product with Android and iOS, Microsoft’s slow response to the growing mobile space allowed the two rival operating systems to build large leads. • Today, Windows Phone has less than 4% market share in smartphones. That’s about the same level Macs historically had against Windows PCs.
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