Editorial: Making Microsoft nimble

Aug 26 2013, 01:31 IST
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SummaryBallmer’s exit should herald a more dynamic company

Microsoft has just encountered a crossroads—in one direction lies an ignominious decline into irrelevance, but the other road could see it emerge resurgent. Which road it will end up on will depend on CEO Steve Ballmer’s successor; Ballmer announced on Friday that he will retire in 12 months. The fact that Microsoft’s stock gained around 9% following the announcement can be seen as the market’s judgement onwhat has been, on the face of it, a disappointing tenure from the shareholders’ points of view. But this is harsh. Yes, Ballmer was CEO when the company saw rivals like Apple and Google streak off into the distance in a market Microsoft was woefully unprepared for, and yes he was at the helm during the Surface tablet’s embarrassing $900 million write-off—all of this meant that the company’s stock lost 44% during his tenure. But Ballmer was also CEO when the X Box gaming console line was released. Since its launch in 2001, the X Box and its successor, the X Box 360, have sold a combined total of more than 100 million units worldwide. And, according to Microsoft’s own financial statements, the gaming division has become a significant pillar of the company’s revenues—bringing in $10.1 billion in FY13. Also, Windows XP, the most popular PC operating system by far, more than makes up for subsequent OS failures like Vista. In addition, Ballmer was instrumental to other long-term decisions—such as the 10-year search agreement signed with Yahoo in 2009—that have stood the company in good stead. It is perhaps a little unfair to judge a man on his high-profile failures rather than his more numerous understated successes.

It is clear that Ballmer’s successor—to be decided by a small committee including Bill Gates—will need to be more radical than either Ballmer or Gates ever were. Some analysts say he might evenface the question of breaking up the company à la IBM a few years ago.Whatever he chooses, it is essential that the company becomes morenimble, leaving behind its heavy-footed past.

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