Microsoft: Mulally Is A Piece Of The Puzzle, Not The Solution

Nov.19.13 | About: Microsoft Corporation (MSFT)

Rumors continue to swirl that Ford (NYSE:F) CEO Alan Mulally is on the short list of candidates to be named CEO of Microsoft (NASDAQ:MSFT), stepping in for the polarizing Steve Ballmer. While I think Mulally is a fantastic executive, perhaps one of the best operational minds in the world, Mulally isn't the be-all end-all for Microsoft.

Mulally Is a Veteran

The importance of replacing Ballmer at Microsoft is such an important task that the media has covered the search with the same zeal usually seen on ESPN during the NBA offseason. In this case, it reminds me of the strategy the Brooklyn Nets employed, trading several young assets for a few years of Paul Pierce, Kevin Garnett, and Jason Terry. Now, luckily Microsoft doesn't have to give up any claims on future talent in order to acquire Mulally (Ford won't demand any first-round draft picks). However, the greater point is that Garnett, Pierce, and Terry aren't long-term solutions for the Nets, and I'm not sure Mulally is for Microsoft either.

Mulally is already 68 years old, and although I do not believe his talent is declining, his motivation may wane in the next few years. Mulally has a legendary work ethic, and I simply cannot see him sustaining that same lifestyle into his mid-70s. It is doubtful that Mulally would work for Microsoft for more than three to five years. A replacement search could commence in just a few years.

Mulally's Imprint Is Already Running Through Microsoft…

As he departs Microsoft, Ballmer opened up in an interview with The Wall Street Journal about why he was leaving Microsoft and the changes he has implanted in his final year atop the tech giant. Ballmer mentioned a four-hour Christmas Eve chat with Mulally about the importance of teamwork and brand simplification. Ballmer responded by announcing a One Microsoft reorg plan that sounds oddly similar to the One Ford plan introduced by Mulally and Mark Fields in 2006. Ballmer then removed a Jack Welsh-esque employee ranking system that will be replaced with an evaluation that places an emphasis on teamwork and collaboration.

…Then What Can Mulally Do for Microsoft?

Mulally is already a corporate legend-he saved one of the most important American companies and made it into a thriving automotive company. I have no doubt that Mulally is an excellent leader, and perhaps his strongest ability is to empower employees and make everyone feel like a valuable team member. A lack of teamwork and inclusion appears to be at the heart of many of Microsoft's problems. Employees fought over everything from compensation to a share of the budget, leading to many executive departures and clear favoritism towards the cash cows like Windows and Office while ignoring categories that others like Apple (NASDAQ:AAPL) have come to dominate like tablets, music, and smartphones.

This is precisely why I think Microsoft wants him. Mulally will make teamwork a top priority. But the bigger question is whether or not Mulally can make that change permanent. Altering decades of behavior might prove to be a difficult task. Anyone could come into Microsoft and engage in "asset rationalization," but selling off underperforming assets or simplifying the business won't change the underlying culture that is responsible for Microsoft's problem.

A Minor Concern: Will Mulally Understand the Business?

Perhaps the most obvious concern about Mulally aside from his age is whether he understands tech. I really don't know, but I'm confident that he could grasp a sophisticated understanding in a short amount of time. However, I'm not sure he'll be able to see what lies ahead like Steve Jobs so clearly saw.

Mulally Isn't the Only Piece of the Puzzle

Steve Jobs garners a mythical reputation in the world of technology, serving as the model of the ideal CEO. People often forget that Jobs has had a team of wonderful employees and associates like Steve Wozniak, Jony Ive, Scott Forstall, and countless others who all contributed to the creation of the world's most valuable tech company. Steve Jobs didn't sit in alone in a walled-off room; rather, he pushed his employees to improve upon their work and inspired them to create products.

That said, Mulally is not a singular solution to repairing Microsoft. The Lumia won't immediately outsell the iPhone, and the Surface won't replace the iPad overnight. The hope is that Mulally instills a sense of teamwork and pride that resonates throughout the entire company and leads to great products. This is why I don't think Mulally needs a Jobs-like intuition for technology -- it might be enough for him to be a consensus builder who empowers his employees like Tim Cook.

Odds are that Mulally and Ballmer, who is set to become the largest shareholder if Bill Gates continues to aggressively sell his shares, will be crucial figures in finding a replacement for Mulally if he becomes CEO and if he is only around for a few years. It will be incredibly important for the replacement to continue the plans Mulally sets in motion.

While other Seeking Alpha contributors like Don Dion are understandably bullish on the prospects of Mulally's arrival, let's remember that Microsoft has nearly 100,000 employees across the globe and it will take more than just one employee to transform the company.

Disclosure: I am long F. 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.

Disclaimer: Please perform your own due diligence before making any investment decision.