Is Steve Ballmer Really the Best Choice to Run Microsoft’s Consumer Business?

64 Comments

At a time when Microsoft (s msft) is facing challengers to its desktop operating system, productivity suite and handsets, you wouldn’t think the company would be changing up officers on its front lines, yet that’s exactly what’s happening. Robbie Bach and J. Allard, both of whom were instrumental in creating consumer products through Microsoft’s Entertainment & Devices Division, are leaving the company as part of a broader reorganization, reports TechFlash. As a result, Steve Ballmer, Microsoft’s CEO, will initially gain greater control over the division, which includes the Xbox, Zune and Windows Mobile products.

J. Allard

Details on what led to the shakeup are sketchy, but more concerning is what the restructure means going forward — the departure of Bach and Allard is a huge loss for Microsoft. Add in the fact that Ballmer is often out of touch with what consumers actually want and the loss is potentially magnified, depending on how much involvement he actually has in these product areas going forward. Perhaps the best example of Ballmer’s “perception risk” comes from a 2007 interview with USA Today, in which he’s quoted as saying:

“There’s no chance that the iPhone is going to get any significant market share. No chance. It’s a $500 subsidized item. They may make a lot of money. But if you actually take a look at the 1.3 billion phones that get sold, I’d prefer to have our software in 60% or 70% or 80% of them, than I would to have 2% or 3%, which is what Apple might get.”

Given Apple’s (s aapl) 10.8 percent share of the worldwide smartphone sales last quarter — and Microsoft’s declining presence in that same market — it’s safe to say that Ballmer’s prognostication skills are lacking. And Windows Mobile is only just this year morphing into a more competitive Windows Phone. It’s difficult to look forward when you’re two or three years behind your competitors.

Robbie Bach

While the Windows Mobile group has been slow to respond to the fast-changing mobile market, the Xbox area has been a beacon of success for Microsoft, largely due to Allard. Incidentally, it was a 25-year-old Allard who in 1994 penned a 16-page memo titled “Windows: The Next Killer Application on the Internet,” the main thesis of which was to integrate the web within Windows, as Allard already saw the web-connected future. Between the Xbox design, 40 million consoles sold, and foretelling of the web’s importance, how does a company like Microsoft let a person with talent like this go? TechFlash says that Allard will stay an adviser to the company, so it’s not a total loss, but perhaps he should be moved up in the chain of command — not out of it.

The plan instead is for Ballmer to take the reigns, with key current leaders Andy Lees and Don Mattrick reporting directly to him. Lees has his hands full as the senior VP of Microsoft’s Mobile Communication Business, the area responsible for Windows Phone and Kin devices. As senior VP of the Interactive Entertainment Business, Mattick can build off the the Xbox successes while trying to push Zune into the limelight — a tough challenge in a world filled with iPods. And maybe an even tougher challenge the longer Ballmer runs the show.

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64 Comments

Todd

I don’t think Balmer really understands what’s going on. From a consumer standpoint it seems as if he is busy trying to load a very big gun while the enemy advances with no promise of getting it loaded while the war is still on. Secondly he doesn’t seem to have the staying power to build momentum. Take a look at Zune, a promising platform but rather than continue to take it to the next level he goes off and creates Kin? He’s reactive and doesn’t know how to introduce disruptive technologies which change the playing field.

He has also lost the search engine war and Google has become synonymous with search and the entire Office platform is loosing to the cloud. Gates must return to the helm and align the company into manageable bits. He must also create a framework which defines how Microsoft thinks about technology and the market.

Microsoft needs to learn how to win in the information market. Gates understood it, Balmer doesn’t. Balmer wants to get rich at selling widgets. Google wants to get rich at selling information.

Msoftie

I wonder when major MSFT stockholders wake up and push Balmer out of the company? This guys is killing Microsoft. No vision, no consistent strategy, no engineering knowledge, nothing. Only missed opportunities over the last 10 years… MSFT stockholders probably don’t want any money anymore…

Egghead Ballmer

How many CEOs in this country get to keep their jobs after they diminish the value of their corporation by fifty percent (50%) under their so-called leadership ?

I can’t think of anyone. This humpty dumpty should have been kicked to the curb years ago. He went to Harvard and we all know how dumb those graduates are (can you say Grade Inflation and The Great Recession).

Apple has now become the top tech company in the world by surpassing Microsoft in value. Soon Apple will surpass M$ in actual revenue as well. This clown should go, the sooner the better for the stock holders.

Ballmer has shown repeatedly that he knows very little about technology and innovation. This guy is the poster boy for incompetent CEOs world-wide and continues to run Microsoft into the ground.

Lucian Armasu

Is Steve Ballmer the best choice to run Microsoft at all?

Wad

The ONLY reason Microsoft is getting into the cell phone business with their family of “Pink” phones is an attempt to save the sinking ship known as Windows Mobile 7. When Microsoft’s two largest customers that they should have the absolute most leverage and influence with (Dell & HP) won’t even use Windows Mobile for their own products, you know an spectacular ending is near. Dell chose Google O/S and HP will likely go with Palm’s WebOS for their mobile solutions. If I was sitting on the Microsoft board of directors, I’d be asking for Ballmer’s head on a platter. This is a vision problem first and foremost.

Frank McPherson

Has Microsoft’s problems with mobile phones been due to a lack of vision or lack of execution? Windows Phone 7 suggests to me that Microsoft has a vision for mobile phones, the reason why it has been so late is lack of execution. To put it bluntly, Ballmer is as responsible right as anyone in Microsoft for their current position in mobile phones because he simply did not put enough bodies on the job. Seems to me the people with the vision are leaving and the person responsible for execution is still there.

Wad

Frank – I think the issue is a lack of vision – not necessarily the execution. Ballmer doesn’t have the vision. Ballmer is cut from the same cloth as Michael Dell – they can execute when everything is laid out right in front of them and when little interpretation or creativity is is required. They’re good at working in a commodity world. But when it comes to developing or shaping a market, neither have a clue where to begin. In Dell’s case, he failed miserably with the PDA (Dell Axim) and portable music player (Dell Diddy). He got into both those markets when they were relatively new but didn’t know how to take either to the next level so just folded-up shop. He’ll flush more of the company’s profits on the low margin cell phone business he just got into if he doesn’t figure out a way to differentiate the Dell cell phone from others (which he won’t). Ballmer doesn’t know how to move the mobile platform to the next level. Nor his O/S and Office Suites. Sadly, Microsoft’s problem is a culture issue and Ballmer heads that problem. Until he is replaced and the culture is allowed to change, the vision will not be there. Ultimately, the Microsoft board is to blame for Microsoft’s woes – they are Ballmer’s boss and obviously approves the work he does, as supported by his tenure and pay. CEOs only do do what makes the board happy. Unfortunately, boards are seldom held accountable for the performance of their companies.

thenikjones

I don’t know why the Axim line failed, my x50v was the best PDA I had. It was one of the few VGA resolution screens, and there was a VGA-out cable too, which few [if any] other people offered.

Frank McPherson

Has Microsoft’s problems with mobile phones been due to a lack of vision or lack of execution? Windows Phone 7 suggests to me that Microsoft has a vision for mobile phones, the reason why it has been so late is lack of execution. To put it bluntly, Ballmer is as responsible right as anyone in Microsoft for their current position in mobile phones because he simply did not put enough bodies on the job.

bimmayute

Round 2 of disaster waiting to happen. The only reason steve ballmer is still around is because he is good friends of bill gates. Any other CEO would have been out the door donkey years before. Ballmer is in a perpetual state of saving his ass my reorganizing this, shuffling that etc. remember windows vista. Do you realize that Apple’s market share is higher than Microsoft. MSFT reminds me of GM. Just a slow and consistent decline to irrelevance and nothing. Ballmer, your time is up dude, and you know it.

Stephen

I think Ballmer’s days are numbered as CEO. He has made a career at saying stupid things and has a long track record of being wrong. Now Apple has surpassed Microsoft in Market Value, has more available cash in the bank and no debt.

Apple has beaten Microsoft handily in music, mobile devices and cellphones which is an important growth area. After spending BILLIONS the profit areas in Redmond is STILL mostly Windows and Office, two areas that have been marginalized. Despite claiming success, Xbox is still in the red and Zune is a total flop!

Microsoft had a ten year head start in mobile and totally blew it under monkey boys watch. In fact the only direction Microsoft when while Ballmer was in charge is down!

Bye bye, Ballmer, we may miss your monkey dances!

t-gunn

Did a professional write this? So many errors I still don’t know what the article is about.

The word “both” is in the second sentence three times. Good Lord.

Get a copy editor, please.

Wad

Microsoft will never, I repeat NEVER, regain ground as a pertinent high tech company until Ballmer leaves. Ballmer may have “industry knowledge” but is a total moron when it comes to innovation. With disasters on his resume such as Vista & Zune, and allowing what mobile leadership Microsoft had dwindle away to nothing, I hope the board of directors is considering a change at the helm. Ballmer needs to spend less time pretending to know what going on in the industry by bashing his competitors (keeping his mouth shut) and listening to what the consumer wants (listening).

stacyshelves

I don’t like Microsoft, but I feel that a technical guy rather than a glorified salesman who happened to be in the right place at the right time should get the job.

Microsoft is a technology company so why is a salesman running it?

raoul castro

A huge loss?

Well, huge losses is what J is all about.

“Hey buddy, what did you do in Redmond?”
“Xbox.”
“How did that do?”
“Lost billions.”
“What was your last project there ?”
“Zune.”
“Oh….”

Yes, J will be missed.

Then again, which project at Microsoft is doing and is not being closed? The OS with old code held together by duct tape and prayers and the Office machine which also is starting to feel dated.

Microsoft can still do their best work threathening, extorting, changing the rules of the games and the policies of govt worldwide but even the old ways arent going to work forever.
The smartphonebook convergence will be another technical milestone that Windows mobile 7 will miss as people access the internet from everywhere BUT a desktop.

This is where the rats leaving sinking ship analogy neatly goes.

RC

Sanjay Maharaj

Interesting assessment, does this mean his days as CEO is numbered?
Microsoft shares have not been a stellar performer as far as tech stocks are concerned and this is an indicator of his leadership. They really have not come up with any innovative ideas and products which has transformed the tech sector and how we use technology.

Seth

I feel sorry for all the manufacturing OEMs and ISVs who invested money in Windows Phone 7, who will only see it fail when it hits the market.

rd

You assume that Microsoft’s customers are consumers.
False.
Microsoft’s customers are OEM and Corporate Accounts.
If Microsoft has no backward compatibility then they don’t
have any advantage either.

Microsoft just lost the biggest OEM. HP.
Somebody had to pay the price. It wasn’t going
to be Windows 7 crew.

Mark

Sorry, are you implying that HP are going to completely abandon Windows 7 for WebOS? Because if you are that’s quite the leap of imagination you’ve taken there.

Oh yeah, and while we’re at it, Microsoft’s consumer sales are about ten times greater than anyone else’s. Just thought I’d point that out.

I’m not an MS fanboy but some of the nonsense posted here – and indeed any MS related topic – is just beyond the pale. Mind you, the same could be said of any tech related topic I suppose.

Wad

Actually Mark, it’s not much of a leap of faith. HP shelved their tablet called Slate even after Ballmer hyped it at CES 2010 because as they even admitted, a tablet running anything Microsoft was not a compelling product. Then they bought Palm. You could very easily see HP abandon Windows Mobile all together. Would HP abandon a Windows O/S altogether? Absolutely, in a heartbeat given the right alternative. That alternative may not be for another 10 years but at the pace Microsoft is going it could happen. With Cloud Computing on the way and Microsoft again no where to be seen, its only a matter of time.

Brian S Hall

Kevin? Are you f-ing kidding me?
Zune: shit.
WebTV: history.
Windows Media Player: shite.
Windows Mobile: garbage.
Xbox: as long as you don’t count the incredible amounts of money Microsoft poured into this, then it’s a success. But since we’re talking business, you kinda have to include things like money.
Tablet computer: dead.

What consumer/product/entertainment/device did this guy create? What was successful? Has anything these two guys done made dollar one?

gabriele

Xbox hasn’t been a success. Xbox 360 had some success, but despite the incredible errors of Sony it hasn’t gained dominance in any market except in the US. And if you consider that Xbox 360 has come out an year before the PS3, even in the US the future doesn’t look good.
Furthermore their strategy of paying large amount of money in exchange for exclusives has eaten much of their profits. Xbox 360 has also hidden costs, like the need to pay for a subscription or a wireless adapter and that’s the reason because outside of US it hasn’t many chances to beat the PS3.

Mark

Xbox not a success? Really?

I must tell that to the millions of people who have one and pay subscriptions to be on-line then.

Justin

Didn’t they leave on their own accord, how is that Ballmer’s fault? Plus isn’t Allard staying on to “advise” Ballmer.

Wad

Justin – If Ballmer doesn’t provide an environment in which his Captains can be successful, then their leaving under any circumstance is his fault. As for Allard staying on to be an “advisor” that is just satisfying something in his pay contract. It’s a meaningly position. It’s just a way for Microsoft to save a little face and an attempt to lessen the worries of investors.

Don

XBox a “beacon of success?” Only if you’re looking at number of units sold. If you look at the financial situation it has been an utter disaster.

By 2005 it had lost an astounding $4 billion.
http://www.joystiq.com/2005/09/26/forbes-xbox-lost-microsoft-4-billion-and-counting/

Only the massive sales of Windows and Office due to their illegal monopoly covers up the financial disaster that is the XBox.

Microsoft may have made up the massive losses via lowering quality (worse than 50% failure rate http://www.joystiq.com/2009/08/17/game-informer-xbox-360-at-54-2-percent-failure-rate/ ) and sales of games and peripherals.

However, with the added cost of R&D for “Project Natal” I seriously doubt that the XBox has added one cent of profit to Microsoft’s bottom line.

Allard’s work and Bach’s work has give some prestige with XBox, but an embarrassment with the Zune, Courier, and Smartphone. They have been a financial disaster costing Microsoft billions. No wonder their butt’s were fired. The real question (pointing out Ballmer’s incompetence) is why they weren’t kicked out years ago.

Kevin C. Tofel

Don, it takes a while to ramp up a profitable console line since the real money is made on titles sold. In the first quarter of this year, Xbox earned $165 million profit on revenues of $1.67 billion for the quarter, as all of the consoles are generating game sales, not to mention Xbox Live subscriptions.

Don

Kevin, I did write that some of the massive loses from the XBox may have been made up by the sales of games and peripherals. To that you’re correct in adding subscriptions. However I would respectfully point out that Sony turned profits far more quickly with the PS3 and Nintendo has made a fortune with the Wii. Further, Microsoft doesn’t break out their R&D expenses, and with the years spent just on “Project Natal,” I doubt that they’ve actually made a profit at all. Finally, that $165 million on paper is a pittance compared to the billions they’ve lost. The only reason XBox can be seen as a success is because of the numbers distributed. If you look at the finances, a company without the illegal monopoly profits of a Microsoft would have cancelled the XBox years ago.

Don

Oh, and the $1.67 billion income was NOT for just the XBox. It was for the entire division which includes the Zune and phones.

Mark

@Lucian

Very true. And what do you think happens to Apple’s stock when they reach saturation point?

Of course Apple could come out with another range of products to exploit new markets. On the other hand they might not. Would that make Steve Jobs a failure?

Josh

Soon, all Microsoft products will be four words long and have the Windows name in them.

G-Systems

Everyone needs a signature /sarcasm…

Look at Apple’s i[insert something having to do with device in one word] marketing genius…

I’m thinking Microsoft may go the simple route and just use [insert legacy name] [insert first digit of version number]

Whaddaya think?

Alan

Ballmer said Apple might get 2-3% of the global phone market, not the smartphone market. Gartner’s latest numbers show that Apple has a 2.7% share of the global phone market.

Kevin C. Tofel

Fair point Alan. Semantics aside, Apple continues to grow share in a market that Microsoft could have owned. Instead, they failed to invest in the platform, which even Ballmer has admitted recently. That doesn’t instill confidence, in my opinion.

Mark

And considering Apple don’t actually own that market – they’re currently third – what’s to stop Microsoft getting a slice of the pie?

Kevin C. Tofel

“What’s to stop Microsoft getting a slice of the pie?”

Mark, I’m expecting you to think I’d say Apple or Google (maybe even Nokia!) but the answer to your question is Microsoft. The company has an opportunity reinvent itself and stop the declining smartphone market share with Windows Phone 7. Let’s see if they execute.

Mark

Yep. Fair enough. It depends how they execute Windows Mobile 7 I suppose.

Paul

Exactly right, and it’s more than semantics to point out Apple’s global market share. They’re on their way to repeating their PC market experience. It looks great when they’re pioneering the space with creative product and high margins, but it may not last. Their PC business was mediocre until iPod came along, wasn’t it?

MB

“Their PC business was mediocre until iPod came along, wasn’t it?”

It was mediocre until OS X and switching to intel from PowerPC.

Jacobian

windows phone 7 is still not out yet so I don’t think microsoft are winning now.they are losing slowly.

aquietamerican

Not sure this is the best move for Microsoft either, but your analysis is lacking to say the least. Judging Ballmer’s foresight and prognostication skills on his public remarks as CEO is silly.

Rightly or wrongly, Ballmer seems to believe his public role is to tell everyone that the competitors products are crap and Microsoft’s are bees-f’ing-knees. Assuming that his public comments about competitor’s products represent what he believes privately or says in strategic meetings is incredibly naive.

In the end, this probably represents the growing importance of the consumer market to Microsoft and its future. Therefore, the CEO wants more day2day control. Bach and Allard had some big wins, but also some big failures. It’s not really that surprising that Microsoft made a change here.

Kevin C. Tofel

“Judging Ballmer’s foresight and prognostication skills on his public remarks as CEO is silly.” True, but it’s simply an example, not the entire sole basis of an opinion. ;)

More important is Microsoft’s declining relevance to the consumer market. It seems like only now are they just fighting back with Bing, Windows Phone 7, etc… They’re by no means out of the game, but they’re slow to react in a world where technology is changing fast.

Mark

“More important is Microsoft’s declining relevance to the consumer market.”

So Windows 7 has been a massive failure and no-one outside corporations buys Office 2007?

Think you might be off a bit there.

John

Your last point is your best point.

This strikes me as a very important time for Microsoft’s consumer business(es) and it seems wise to consolidate the leadership.

Is Ballmer the right guy? I’ll guess we’ll see but this is minimally an indication that Microsoft is taking this challenge seriously.

Aaron Johnson (CyKiller)

We usually don’t agree on most of your topics Kevin – but I have to say you are on point with this article and the comments. Keep it up – later bud.

G-Systems

I think that you’re right on in this reply. The author’s example is a poor one, but what other examples do we have? I mean, anything we get from Mr. Ballmer is going to be at a public event…they don’t particularly freely share the notes of their meetings…

As a Microsoft lover–yeah, I admit it–I’ve been underwhelmed over the last ten years. I feel that Microsoft could’ve advanced technology a lot more than they have.

XBox came out? Bought it…
My Phone? Windows Mobile 6.1…
Present Operating System? Windows 7… (loving it too! lol)

One area where Microsoft needs something serious is their mobile division…and having their products work better together. This is why people have bought into the senselessness that Apples always work.

No…they don’t…

The lack of extensive gaming options aside, Apple Inc doesn’t allow much room for venturing outside of their products. There is no reason I should have to get iTunes to enjoy my iPod (of which I do not own BTW…)?

I hope that Microsoft doesn’t start taking pages from Apple in how to lock their customers in. They’ve kind of done that with their Office products, but at least there’s an open software alternative (kind of)…

I hope the next ten years show the true power that comes from having a lot of capital and a lot of innovation… Google is showing itself off…hopefully Microsoft will get that hint.

The whole idea of using Hotmail (MS) Activesync (MS) and WM (MS), yet not being able to sync simple things like a calendar, tasks, and contacts (really) was very frustrating for me earlier this year. Thus, Android may take my mobile dollars… WP7, although it seems pretty cool, is a secondary option to me at this point because of my previous experiences…

Either way, I’m rooting for you MS!!

TerriBlach

article seems a bit misleading, Jobs has made more incorrect prediction than SteveB or Gates combined.

Martin Suter

Unfortunately, the article is bang on in framing the question. The examples cited are real, and there are many more. Some of them are listed in my blog of 4/21 (“SteveB or Not SteveB”) at http://www.martinsuter.net/blog/2010/04/microsoft-steveb-or-not-steveb.html

The real measure, however, is reflected in the stock price. Since assuming the reins as CEO, Microsoft’s stock has dropped ~45%, despite being a cash flow machine the likes of which has never before been seen, and a Balance Sheet, which (until recently) was second to none.

That’s my .02!

Mark

“Since assuming the reins as CEO, Microsoft’s stock has dropped ~45%”

Yes. That would be the point where Windows and Office maxed out growth opportunities by finally dominating the desktop OS and productivity suite space.

It’s what happens when you fill a market and exponential growth stops.

Or, in other words, it had nothing to do with Ballmer.

Martin Suter

“Or, in other words, it had nothing to do with Ballmer.”

Really? Did you honestly write that??

So CEO’s are not responsible to shareholders for a company’s performance?

Using the same logic Steve Jobs, Eric Schmidt, Marc Benioff, John Chambers and Larry Ellison deserve no credit for the returns they’ve generated during the same period for their shareholders – is that what you’re saying?

What other company has had the capacity to spend >$1m/hour in R&D, 24x7x365 or to use their war chest to grow via acquisition at the same levels as MSFT with such meager returns?

Sorry, but you’re wrong. The only way to measure a CEO’s performance is stock price, and SteveB’s tenure comes up wanting.

Mark

No, I’m saying you don’t understand what market saturation is.

Incidentally profits are also a measure of a CEO’s performance. I hear MS do rather well there.

Lucian Armasu

The stock price of Microsoft has plummeted because they haven’t excited the market with new high growth opportunities. They’ve just been growing revenue wise from inertia on the back of Windows and Office.

Apple has launched 2 (iphone and ipad) high growth products that made the stock rise 500% in last few years.

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