Microsoft CEO Steve Ballmer forced out after US$900M Surface RT debacle

Gregg Keizer
26 August, 2013
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Steve Ballmer was forced out of his CEO chair by Microsoft’s board of directors, who hit the roof when the company took a US$900 million write-off to account for an oversupply of the firm’s struggling Surface RT tablet, an analyst argued Friday.

“He was definitely pushed out by the board,” said Patrick Moorhead, principal analyst with Moor Insights & Strategy, in an interview Friday. “They either drove him out, or put him in a situation where he felt he had to leave to save face.”

The biggest clue that Ballmer was pushed and didn’t leave of his own free will was the 12-month timetable Microsoft said it would use to find a CEO successor. “Typically, a board will be working behind the scenes for a replacement, but they’ve given themselves 12 months,” said Moorhead. “I think this went down very quickly.”

Microsoft announced Ballmer’s retirement on Friday.

Ballmer, who has been CEO since 2000 and at Microsoft since 1980, will remain CEO until his successor is selected. In a statement, the board indicated that could take as long as 12 months. It has drafted a committee to oversee the selection process; co-founder, former CEO and current chairman Bill Gates will serve on the committee.

In his email to Microsoft workers, Ballmer seemed to hint that the retirement was not his idea, but that he was falling on his sword. “This is an emotional and difficult thing for me to do. I take this step in the best interests of the company I love,” he wrote.

Later Friday morning, Ballmer told Mary Jo Foley of ZDNet that he had been thinking of retirement for some time – true, as he’d informally named 2018 as the likely date five years ago – but that his thinking had “intensified really over the last couple, two, two and a half months.”

Moorhead had a different timeline.

“What could have precipitated the quick move?” Moorhead asked, then answered his own question. “It was the US$900 million write-down. That caught the attention of the board, and based on Ballmer’s over-enthusiastic public commentary on Windows RT and Surface RT, they lost a lot of credibility. So did Ballmer. How can you be that far off what consumers want? Was it that you’re not listening to your team? Was it because the team was afraid to give him advice? Was it because the team saw a different reality? Or was it that the team lacked the skill set to anticipate the failure?”

Whatever the reason, it ultimately led to Ballmer being blamed. “The buck stopped with Ballmer,” said Moorhead.

Microsoft announced the write-off in mid-July during its second-quarter earnings call with Wall Street. But the company would have known weeks before that it would have to declare the charge-against-earnings. And the board, too, would have known about the massive hit.

Other analysts saw a longer process, where Ballmer knew he was on his way out for months, and one in which he was not exactly ousted, but saw the logic of retirement, both for himself – and as Ballmer wrote in his email –for the good of the company.

“He has been looking for the right time to retire for a long time, the right person to hand the reins to,” said David Cearley of Gartner. “I think it’s very likely that Ballmer’s decision [to retire] is part of a broader strategy within Microsoft as expressed by the reorganisation in July that is geared toward shifting the corporate culture.”

The reorganisation Cearley referred to was one announced by Ballmer himself July 11 that eliminated the long-standing product-centric divisions and reshuffled executives and responsibilities along more horizontal lines and with more control shifted to the CEO.

To Cearley, Ballmer’s departure was a mutual decision, one based on the realisation that the reorganisation and the company’s earlier pronouncement that it would become a “devices-and-services” vendor required a new CEO near the beginning of the process, not in the middle of the transition.

“They came to the decision that this overall strategy required bringing in a new CEO who can execute from the beginning to put their own imprint on that strategy,” said Cearley.

Ballmer spoke of the timing in his email. “My original thoughts on timing would have had my retirement happen in the middle of our transformation to a devices and services company,” Ballmer wrote. “[But] we need a CEO who will be here longer term for this new direction.”

 

By Gregg Keizer

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