New Microsoft CEO faces big choices post-Steve Ballmer

Aug 26 2013, 13:26 IST
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Steve Ballmer, who announced his retirement from the head of Microsoft Corp on Friday, had the misfortune to follow Bill Gates at the helm just as the company hit the end of its explosive growth period. Steve Ballmer, who announced his retirement from the head of Microsoft Corp on Friday, had the misfortune to follow Bill Gates at the helm just as the company hit the end of its explosive growth period.
SummaryBallmer's grand design calls for 'One Microsoft' and forge a future based on hardware, cloud-based services.

The next CEO of Microsoft Corp has one big decision to make: press on with retiring chief executive Steve BallmerSteve Ballmer

's ambitious plan to transform the software giant into a broad-based devices and services company, or jettison that idea and rally resources around its proven strength in business software.

Ballmer's grand design - unveiled just six weeks before Friday's surprise announcement that he would retire within a year - calls for 'One Microsoft' to pull together and forge a future based on hardware and cloud-based services.

Related: India-born Satya Nadella in running for Microsoft's top post after Steve Ballmer

But poor sales of the new Surface tablet, on top of Microsoft's years-long failure to make money out of online search or smartphones, have cast doubt on that approach.

For years, investors have called on Microsoft to redirect cash spent on money-losing or peripheral projects to shareholders, while limiting its focus to the vastly profitable Windows, Office and server franchises.

Activist investor ValueAct Capital Management LP, whose recent lobbying of the company may have played a role in Ballmer's decision to retire earlier than he planned, is thought to favor such an approach.

In the last two years alone, Microsoft has lost almost $3 billion on its Bing search engine and other Internet projects, not counting a $6 billion write-off for its failed purchase of online advertising agency aQuantive. It took a $900 million charge for its poor-selling Surface tablet last quarter.

For now at least, Microsoft seems intent on pursuing Ballmer's vision. John Thompson, Microsoft's lead independent director who is also heading the committee to appoint a new CEO, said on Friday the board is "committed" to Ballmer's transformation plan.

The eventual choice of that committee - which has given itself a year to do its work - should provide a clue to how committed the board really is, and how open to outside advice.

"Taking an internal candidate like Satya Nadella - the guy nurturing servers - or some of the other people on the Windows team, that makes sense to keep a steady hand through this reorganization and strategic shift," said Norman Young, an analyst at Morningstar.

"But a strong case could be made that the company needs a breath of fresh air, someone who can execute on the strategy but also bring an outsider perspective," he added.

That could mean selling the Xbox and abandoning Bing, or cutting short efforts to make

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