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Summary:

Now that Steve Ballmer has direct control over Microsoft’s mobile efforts, is his neck on the line? With the shift to mobile, this market is more important than ever to Microsoft — if it doesn’t deliver, it could be the beginning of the end for Ballmer.

When you’ve gone from leading the pack to a fifth-place finisher, it might be time for a change — and that’s exactly what’s going on in the mobile phone space for Microsoft right now. Two weeks ago, Robbie Bach retired from his role as President of Microsoft’s Entertainment and Devices division, which among other products is responsible for Microsoft’s presence in the smartphone market. At that time, no plans were announced to replace Bach, leaving Steve Ballmer, the company’s CEO and biggest cheerleader with greater control. It now looks like he’s in direct control. This means that win or lose, Ballmer’s neck might be on the line.

While the Windows and Office products are perennial money-makers for Microsoft, the shift is on from desktop to mobile. Perhaps the most evident sign of that shift is exemplified by Apple’s market capitalization recent surpassing that of Microsoft’s. Yes, both companies make products for servers, laptops and desktops — Apple sells computers while Microsoft doesn’t — but the higher growth rates are in handsets and mobile software, two areas where Microsoft is clearly lacking. In just three years, Research In Motion and Apple have leapfrogged Microsoft in the sales of phones that use their respective operating systems — and in half that time, Android is already nipping at Microsoft’s heels.

At least Ballmer is accepting reality for one of the first times that I can remember — this week at the AllThingsD conference , he admitted that Microsoft is the number five player and that Microsoft “missed a cycle” of smartphone developments as compared to competitors. People say the first step to recovery is admitting to the problem, so at least that’s out of the way. But it also signals the subtle setting of expectations, possibly for Ballmer to avoid shareholder or board backlash if Microsoft can only move up one or two spots with its new Windows Phone 7 platform — which incorporates much of Apple’s iPhone approach — due out in the third quarter of this year. Microsoft can’t afford any more smartphone stumbles if it wants to remain relevant in the future, so if Windows Phone 7 trips up, the first person asked for a reason why is sure to be Steve Ballmer.

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  1. I’ve long thought WiMo was just a distraction for Microsoft anyway. They’d best be served by focusing on their core competencies of Office and Windows and attempt to make them relevant in a world increasingly dominated by vertically integrated solutions from the likes of Apple, F/OSS software and the cloud.

    I dunno, perhaps they thought they could do that with their mobile platform, but certainly their current performance suggests it was an ill informed strategy. Which is a shame, because more competition is good for consumers, even though I personally wouldn’t buy a WiMo device.

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  2. “While the Windows and Office products are perennial money-makers for Microsoft, the shift is on from desktop to mobile…”

    No, its worse than that. It’s the pervasive use of mobile phones by Enterprise employees connecting to the Windows servers at their offices with…

    iPhones and Android ( and Blackberry too )!

    That disconnect will only get wider and wider as inferior Windows 7 Mobile languishes.

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    1. +1 Todd. By licensing out Exchange ActiveSync, Microsoft has opened the door for non-Windows Mobile devices to offer some of the primary advantages of the platform.

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    2. GoodThings2Life Friday, June 4, 2010

      You’re both missing the point of licensing ActiveSync… the point of that is to compete with Blackberry RIM Services via Exchange Server, and it’s a good strategy because ultimately more money is being spent on a much more profitable venture in Exchange. So say what you will about what it does to WinMo, but Exchange is a much bigger profit item for them.

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      1. That’s true, but I’m not sure that revenues from Exchange are increasing – something I’ll try to dig up. From a consumer standpoint, are people going with Exchange on smart phones or are they using Gmail or other IMAP solutions? The corporate world is another situation entirely, of course, but again, there are other options besides Exchange.

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  3. microsoft is a big company that had no innovation anymore.

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  4. Genetics is going to get Steve Ballmer. Not Apple.

    The fate of Steve Ballmer is in the hands of his cardiologist. Judging from his hair loss and his video tirades, Steve’s blood pressure is probably already maintained with medication to counteract the levels of bad cholesterol already occluding his blood vessels.

    Steve should stop worrying about cloned software licenses and begin worrying about cloning a new heart. Or, Steve could use the Microsoft license registry to cross-reference against DMV license records to find Windows-friendly organ donor candidates.

    Microsoft’s board has probably already reviewed the risk – so their succession plan for Steve Ballmer is probably in good order. On the other hand, he really needs to watch his temper – now that the press knows that there is a button to push – and it isn’t Microsoft’s.

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  5. There is a fundamental shift in computing going on, no I don’t mean cloud/web whatever. I mean shifting from feature driven (enterprise) to functional presentation driven (consumer).

    Functional presentation is about somebody stands back and takes a look at the broad picture to create a device or Software which has a smooth functional flow like a good presentation. [Apple, early Facebook]

    Feature driven design looks at numbers, focus groups and creates something based on statistics. Creating something which always has the feeling of getting the job done more or less, or designed by committee. [Microsoft, Google]

    Consumers want functional presentation, enterprises want features.

    Now we have a flow of news in the past we had point solutions to get the news (papers, featured selected news) and we all know how that turned out. That’s why Steve J. doesn’t want “his” devices cramped full with apps which create their own “desktop”.

    I don’t know if Steve B. realizes the problem he has on his hands. Seems to me like he still thinks in features instead of the overall design.

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    1. GoodThings2Life Friday, June 4, 2010

      Last I checked feature/function doesn’t really have a different meaning. As an end-user AND as an IT System Administrator, I am constantly looking for solutions that give me good “bang for my buck”… not just in terms of what it can do, but how it gets done, because productivity is critical. If it can be done but takes 3 hours, it’s not a good “feature” and certainly has bad “function”.

      I think what you mean to say is that consumers care more about the form over features. They want it to be “pretty/shiny/look good” and they want it to be stupid-simple the way turning a TV on is… and NOT the way hooking a TV up is. They don’t care if their TV can tune in the Internet, Play DVD’s, start their car, or fly a plane, as long as it works and is easy to do.

      Frankly, I’m OK with that mentality to a point, I don’t want something great that looks like a piece of crap, but I want to be able to do something with it that’s meaningful….

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      1. Dis-organized features provide none to limited functionality.

        capable of serving a purpose well; “software with greater functionality”
        wordnetweb.princeton.edu/perl/webwn

        Hacker Slang: feature
        A property or behavior that was put in to help someone else but that happens to be in your way.

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  6. The issue at MSFT goes deeper. They are not organized correctly to innovate and execute. Their “mantra” of forcing platform dependencies is hurting innovation ie Building their Mobile app to look/feel/behave like Windows desktop. Ballmer needs to let his product groups “Free their minds”!!!

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    1. GoodThings2Life Friday, June 4, 2010

      That’s absurd… have you even looked at Windows Phone 7? Since when does it look like Windows? In fact, the whole point of going Silverlight for a development platform is to reduce the platform dependency since they are ever-increasing their availability of Silverlight on different platforms.

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  7. [...] What’s more, mobile has emerged as a key battleground for software and hardware makers, alike. “Perhaps the most evident sign of that shift is exemplified by Apple’s market capitalization recent surpassing that of Microsoft’s,” GigOm notes. [...]

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  8. GoodThings2Life Friday, June 4, 2010

    I definitely agree that Ballmer needs to go. I’ve been saying that for the past 5 years, actually. I definitely think that he lacks an innovation and quality that makes a great leader… he’s a rough-edged business man which is no doubt why Exchange SharePoint and Office Communication Server have done so incredibly well.

    I’d be surprised if he has ever played a video game in his life let alone something recent like Halo, which is fine if you have innovative people in those positions that you trust well enough to lead the way, but Bach wasn’t very effective either, so it’s definitely best he’s out of the picture. The real question isn’t can they turn it around… just look at the Xbox 360– of course they CAN… the question is really will they actually get someone in charge who WILL do it?

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  9. Wang Hung Lo Friday, June 4, 2010

    I personally would like this egghead to remove his humpty dumpty self from Microsoft and retire. He has been a liability (not an asset) to the Redmond company for many years. How many CEOs get to remain in their job after reducing their company’s value more than 50 percent during their tenure. I suspect very few. He has put his foot in his mouth so many times with idiotic public statements about technology that it is obvious he is so out of touch with today’s technology he must go and the sooner the better.
    Sorry but I just don’t like this guy and never have. He is the classic example of getting ahead by WHO you know and not WHAT you know, having went to school with his friend William Gates at Harvard. I think I am going to puke if I have to keep talking about this guy so let me end it here.

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  10. The answer to the question is “no”. There would be a different answer to the question “Should he go?”

    This is simply a refection of the modern American corporation: boards rubber stamp decisions of the corporate brass and shareholders hold little sway. If WP7 is a complete fiasco, it may tarnish Ballmer’s legacy but in no way will it jeopardize his job. Ballmer, like Gates before him, will leave when he decides to. Fortunately for Microsoft, they probably have enough cash to ride Ballmer out.

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