Steve Ballmer announced his retirement as CEO of Microsoft. While he grew revenues significantly in his 15 years as CEO, critics argue he missed opportunities in key trends dominated by Apple and Google. Microsoft now faces challenges in mobile, search, and adapting its business model for a world where software is increasingly free. The new CEO will need to make important decisions to remain relevant and compete more effectively against rivals.

1. Steve Ballmer
Leaves
Microsoft
Ciaran Norris
August 30th
2013
Background
Steve Ballmer, the CEO of Microsoft since Bill Gates retired in 2000, surprised the industry by
announcing that he was going to follow Gates into retirement. Whilst Microsoft has continued to
turn over vast amounts of profits in the 15 years that he was at the helm, many commentators have
suggested that he missed out on a number of key trends, enabling the likes of Apple and Google to
set the pace of change.
Implications & details
There can be no denying that Ballmer was a phenomenally successful CEO, or that he will be hard to
replace. Revenues tripled under his leadership but he also launched a bid to buy Yahoo (which he’s
probably glad failed), mocked the launch of the iPhone (iPhone sales now outstrip Microsoft’s entire
revenues) and has poured billions of dollars into Bing in an effort to compete with Google, but still
has minimal share in most markets outside the US; interestingly, Microsoft’s share price rose 7%
after he announced his departure.
Whoever replaces Ballmer will have a number of urgent tasks on his or her plate. Ballmer had
recently reorganized the company to focus on ‘devices and services’ and there is a lot of work still
to be done in that space. The new Xbox One launches at the end of the year, and it has a real
opportunity to shape the living room of the next few years, though it will face fierce competition
from a new Playstation.
Windows for Mobile is still better in theory than in practice; the most recent attempt to disrupt the
Apple/Android duopoly, the Surface tablet, hasn’t had much of an impact and has now seen its
price slashed; the recent demise of Blackberry, and the slow decline of Nokia, the company
Microsoft chose to align with, shows that the smartphone business is becoming an increasingly
difficult one to survive in, though one that Microsoft has to get some traction in if it wishes to
remain relevant.
In advertising Microsoft has to decide whether it is part of the industry or against it; the decision to
set its own version of Do Not Track as standard on Internet Explorer didn’t make it many friends on
Madison Avenue whilst its ads lambasting Google’s privacy policy, when its own isn’t that much
different, are disingenuous at best, and probably don’t help with industry wide initiatives to educate
consumers. It also has to find a way to make Bing matter, and decide whether or not to continue
with the Search Alliance with Yahoo.
Most importantly, the new CEO will need to decide how a business that still makes the vast majority
of its money from paid software in a world where software is increasingly free, and where people
simply don’t use ‘traditional’ PCs and laptops other than at work, can remain relevant. Microsoft’s
fortunes were built on a product called Office, and increasingly offices are the only places it still
makes money.
Summary
There are already a number of people in the frame to replace Steve Ballmer, including the Nokia
CEO and a number of high-profile Google execs. What will be important is that they find someone
who is not only capable of running a multi-billion dollar business but also of changing one.
One analyst recently observed that Apple would probably be even more profitable if Ballmer had
been running it, but they also probably wouldn’t have invented the iPad or iPhone. As they thank
Ballmer for his long years of service, Microsoft should probably be looking for someone who is a bit
more Apple-y than their past two leaders.