There are many ways to define irony, but nothing is as ironic as what I am doing this very moment. I have just signed on to my Windows 7 laptop and launched Microsoft (MSFT) Word as part of my Office 2010 suite, only to compose this article demanding the removal of CEO Steve Ballmer. Let me be very clear: Microsoft needs new leadership, and it needs to either realize or admit what it already knows -- that Ballmer’s reign has lasted too long.
I’m going to take the fanatical investor hat off for a second and put on my realist cap. I know deep down inside, Microsoft canning Ballmer is as likely as Apple (AAPL) firing Steve Jobs (again); it’s just not likely to happen as long as Ballmer has the full support of Bill Gates, which by all accounts happens to be the case. This reality is the source of great despair suffered by many Microsoft longs.
We have all seen the "death of the PC" ads on nearly every investment website and financial blog, warning us of the impending demise of our beloved personal computer and effectively the death of the computer operating system. According to a forecast from the International Data Corporation (IDC), 2011 will be the year of the tablets and smart phones. Smart phone sales are expected to rise 22% to 330 million sold next year, as more people make the transition away from feature phones. Tablets will also hit 42 million sales in 2011, with the market being flooded by Apple’s competitors looking to outsell the iPad. But Apple will remain in the lead, whereas low-cost tablets could do well in emerging markets.
The report ends with a remarkable statement- “The PC-centric era is over.” In fact, the IDC predicts that within the next 18 months, non-PC devices running software will outsell PCs. It’s unimaginable living these days without having a dependency of a desktop computer, yet we can see evidence that it is already happening. It doesn’t appear as if Microsoft is doing anything to mitigate what essentially is happening right in front of its eyes. The timeline for the languish nature of the stock is quite remarkable, all of which points to the very moment that Ballmer assumed the position as chief executive.
Since reaching the high point of the stock, the company appeared to have lost its competitive spirit, or whatever it once had that helped create its empire.
- Microsoft poorly underestimated the vitality of the search market. The company allowed Google (GOOG) to dominate the industry and now has introduced Bing to supposedly compete in the search space.
- Microsoft was outsmarted in previously strong areas of its business such as browsers, where Mozilla seemingly came out of nowhere. I suppose you can say MSFT was “outfoxed.”
- Worst of all, though, has been the company's approach to both its core business and its biggest future opportunity.
- The Vista launch was less than stellar. Some have said it was a complete disaster.
- The company has been heavily criticized for choosing to focus its low-growth legacy businesses.
- Microsoft’s mobile strategy has been a complete mystery. Once a competent rival to Palm, it has -- for the most part -- gone nowhere in terms of the most dynamic segment of the consumer technology market.
- During the course of Ballmer’s leadership, it aborted various projects that could have generated the creativity and produced "must-have" items.
In spite of all of these failures, I remain puzzled at the fact that Ballmer and the Microsoft board of directors haven’t come under greater fire for this lack of product focus; underestimating the competition; and for several misguided strategies that have led to Microsoft falling so far behind in the mobile computing race. This failure is a direct consequence of Microsoft inserting Ballmer, who many consider a great manager but just not the sort of visionary that the company needs as CEO. In many circles, he has been labeled the “accountant that Bill Gates appointed CEO.”
Ballmer has done an excellent job of maximizing Microsoft’s profits and milking as much money as possible out of consumers and businesses for Microsoft products, primarily Windows and Office. But Ballmer has done little to propel the company forward technologically or strategically. The sad part of all of this is that Ballmer by all accounts is a great guy and a wonderful ambassador for Microsoft. Unfortunately, at such a critical point in the company’s history, that is no longer what Microsoft needs at the moment -- not as its two flagship products (Windows and Office) continue to be attacked by both Apple and Google. Microsoft is in dire need of someone who can methodically identify these threats and ways to mitigate their impact.
In a recent article, I talked about the rise and fall of empires. I mentioned how history class taught me that not only do empires seldom last, but they are un-restorable once they have fallen. In the corporate world, however, I left the question pretty much open-ended and wondered if it was possible. I thought the answer was revealed when I learned that Microsoft had acquired Skype; I then said to myself, “Microsoft has once again gone on the offensive to acquire possibly the biggest 'game-changing' product to not only revolutionize its future but also position the company for prominence. This might be its biggest acquisition since MS-DOS."
But since then, the excitement has fizzled because I realized that Ballmer will be the one to make it work.