I hesitated a lot before writing this article. I recently wrote another article here that was critical of Mr. Ballmer, and I really don't want to be seen as piling on.
Unfortunately, the magnitude of the Microsoft CEO's recent gaffe invites more scrutiny of his leadership at this very critical time for the company.
I wrote about how Microsoft (NASDAQ:MSFT) has been struggling to match supply and demand for its newest tablet offering - the Microsoft Surface Pro. There has been a lot of confusion about the supply chain and production of these devices.
Well, with his latest comments, Mr. Ballmer has just added to the confusion surrounding his company's flagship tablet devices.
Today, in an article on the MIT Technology Review site, Mr. Ballmer is the subject of an interview in which he speaks extensively about Microsoft, Windows 8 and the Surface tablets.
To be fair, for most of the interview, he comes across as very competent, capable and conversant with facts, numbers and figures.
He seems to be quick on his feet and well able to articulate his vision for Microsoft as a company going forward.
For instance, when prompted directly to define his vision for the company (in contrast to Apple (NASDAQ:AAPL) and Google's (NASDAQ:GOOG) visions for their respective companies), Mr. Ballmer's response is pretty good:
At that level of altitude, I'll give you the slogan, and then I'll sort of put just a little meat on it. We empower people and businesses to realize their potential. And to expand, I would simply say we're about defining the future of productivity, entertainment, and communication. In the new world, software is going to have to come in kind of an integrated form-or at least a well-designed form that includes cloud services and devices.
That's not a bad answer, and shows that Mr. Ballmer obviously is able to think on his feet.
So What Is My Issue?
In the same article, he basically blows up everything when questioned about his vision for the Surface and Microsoft's manufacturing capabilities going forward.
Does that mean that Surface is a real business, and that you intend to be a manufacturing company in a meaningful way?
Surface is a real business. In an environment in which there's 350 million PCs sold, I don't think Surface is going to dominate volume, but it's a real business.
"...I don't think Surface is going to dominate volume."
That sounds like something a CEO would say about a competitor's product. For a CEO to say that about his own product is sacrilegious, ill-advised and pretty irresponsible.
He basically flushed away all the marketing dollars for this product because based on his statement, he really doesn't expect it to dominate volume-wise.
This naturally opens the door for more scrutiny of the product, the company and the CEO. Now we have to wonder:
Does he really believe in the product?
Did he ever believe in it?
Is this why there have been shortages of the product?
What does he know about the quality of the product that made him say that?
Are preliminary demand numbers bad for the device?
Does he care how much of the product the company sells?
And on and on...
My question is, what's the point in building a flagship tablet if you aren't looking to sell as many units as the iPad or Android? Also, why would a CEO lower expectations for such a potentially pivotal product?
It makes no sense to me. It makes even less sense when you actually see and use a Microsoft Surface Pro device. They are beautifully made, well thought-through, cutting-edge devices. With the right messaging and marketing push behind them, there is no reason why these devices shouldn't sell in massive numbers.
I respectfully submit that the Surface and Surface Pro tablets may be the most important devices that Microsoft have ever made. The failure or perception of failure of these devices would surely be a bad omen for the company.
Low Surface sales would indicate that even with billions of dollars in R&D, Microsoft is simply unable to remain competitive in the mobile arena. Ceding this arena to Google and Apple should be unacceptable and unthinkable to the company's executives. Ceding the mobile future to competitors would take the company into uncharted waters, leading some to even speculate about the end of the company as we know it.
The bottom line is, it was a bad mistake, and he shouldn't have said it. It's troubling that he did say it, and it sends many bad signals about the company, the soundness of its strategy and its leadership.
What's even more troubling is that it's not entirely unexpected. Whether it's bad quotes about Windows Vista, walking around with a baseball bat in company meetings, making absurd statements about competitors or this, it's becoming increasingly clear - Mr. Ballmer may not be the right person for this job anymore.
If the statements of a CEO are a window into the strategic thinking of a company, there might be a significant level of disorganization at Microsoft. It also seems to indicate that the company may be making up its OEM/Device strategy as it goes along.
Some basic questions:
- Does Microsoft want OEMs to make better hardware than the Surface?
- Does Microsoft want the Surface line of devices to be a gentle guide for OEMs to show what is possible?
- Does Microsoft want to sell as many units of the Surface as it can?
- Is Microsoft making long-term strategic decisions about the Surface line based on sales numbers and adjusting its vision for the devices based on consumer and corporate demand?
These are important questions for investors, and I don't think we have answers to those questions right now. What we do know is that the CEO is sending out a mixed message, and that's not a good sign.
Based on all of the above, I continue to believe that it will take new leadership to make this company worth investing in any time soon.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: While I have no business relationship with Microsoft of any sort, I am the owner and editor of several Windows websites (Windows8update.com, Windows8enterprise.com, among others), and I write primarily about Microsoft for a living.