Sunday, 25 August 2013

Ballmer to leave Microsoft within a year - Financial Times

Steve Ballmer is stepping down as chief executive of Microsoft after 13 years at the helm in an admission by the PC pioneer that it lacks the leadership needed to steer it into the mobile era.

Shareholders, who have objected to Mr Ballmer's performance for years, sent shares in the world's largest software company by market capitalisation up as much as 8.7 per cent on Friday.

The Ballmer years

The Ballmer years

Microsoft share price since 2000

Mr Ballmer, 57, styled his decision to retire within 12 months as an emotional but necessary step in the "best interests of the company I love". But coming just a month after heading a reorganisation that consolidated power in the chief executive's role, his resignation hints at strains in his 33-year relationship with Bill Gates, Microsoft's founder and chairman. 

His departure will mark the highest-profile casualty yet in the post-PC era led by Apple and Google's mobile devices, after Intel chief Paul Otellini stepped down last November, sooner than had been expected.

Mr Gates, who will take a hands-on role in the search for a new chief executive after years of focusing on philanthropy, issued a terse statement saying that Microsoft was "fortunate" to retain Mr Ballmer during that search but did not thank him for his 13 years of leadership. 

Mr Ballmer did not acknowledge Mr Gates, whom he replaced as chief executive in 2000, in a memo to staff where he said the company needed a chief executive who "will be here longer term for this new direction". He added: "There is never a perfect time for this type of transition, but now is the right time."

Two years after shareholders such as David Einhorn called for his dismissal, Mr Ballmer had come under renewed pressure in recent months after a faltering start for Windows 8, Microsoft's attempt to make an operating system that spans both PCs and tablet devices. ValueAct, an activist investment firm, took a stake in the company and has pushed for board representation, often the first step in a leadership change.  

While Mr Ballmer did a good job defending Microsoft's lucrative PC business, analysts say, the former sales manager lacked the vision to capitalise on consumer enthusiasm for lightweight, touchscreen devices – a market that was there for its taking.  

Microsoft stock has lost about 40 per cent of its value since Mr Ballmer assumed the chief executive position in January 2000. The company's shares rallied in the first five months of 2013, but suffered a steep decline in mid-July after a poor earnings report that included a $900m writedown for unsold inventory of its Surface RT tablet device.

In July, Microsoft said it would break its eight business lines up in favour of four new segments to focus on engineering and encourage collaboration across the company. The divisions are expected to focus on operating systems, apps, cloud technology and devices. The move largely reversed the strategy and structure put in place by Mr Ballmer in 2005.

"The reorganisation needed new energy in the driver's seat," said Carolina Milanesi, analyst at Gartner. "Their plan is a year behind now, after the launch of Windows 8." 

There is never a perfect time for this type of transition, but now is the right time

- Steve Ballmer

Last month's reorganisation cleared out many potential internal candidates for CEO, Ms Milanesi said, after the departures of Windows chief Steven Sinofsky last year and software architect Ray Ozzie in 2010.  

The succession planning committee will be led by John Thompson, the former chief of internet security company Symantec, and will work with recruiter Heidrick & Struggles International to consider both internal and external candidates. 

In his email to staff, Mr Ballmer said he was "proud of what we have achieved", after seeing the company rise from $7.5m in revenues and 30 employees to $78bn and 100,000 staff today.

Gartner has predicted that Apple's share of the consumer device market, including PCs, smartphones and tablets, will overtake Microsoft's this year, underscoring the struggle that Windows faces for relevance in the mobile age.

According to IDC, Windows Mobile held a 3.7 per cent share of the smartphone market in the second quarter of 2013, compared with Google Android's 79.3 per cent.

Mr Ballmer's 3.95 per cent holding in Microsoft is worth more than $11bn. The value of his stake leapt by more than $900m at the opening bell in New York on Friday as investors responded to news of his departure.

After initially trading as high as $35.20, Microsoft's share price eased in later trading.

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