Atlantic Why Steve Ballmer Failed The resignation of Microsoft's CEO is also an acknowledgement: The computer world changed, and Microsoft hasn't. _Derek Thompson_ (http://www.theatlantic.com/derek-thompson/) Aug 23 2013
(http://cdn.theatlantic.com/static/mt/assets/business/800%20ballmer.png) Microsoft CEO Steve Ballmer, a _thunderous_ (http://www.youtube.com/watch?v=wvsboPUjrGc) leader who presided over a deadly quiet decade for the tech giant, announced _he will retire within the next year_ (http://blogs.wsj.com/moneybeat/2013/08/23/microsoft-ceo-steve-ballmer-to-retire-in-12-months/) . It is quite easy to say that Ballmer failed. And, in a way, he did fail. In September 2000, nine months after Bill Gates named Ballmer chief executive, Microsoft was worth $642 billion, a nominal record for an American company that wouldn't be eclipsed until Apple squeaked by in August 2012. But as the Nasdaq imploded, Microsoft fell hard, and leveled out. And stayed level. For a decade, Microsoft's stock price has functioned like _a thermostat set to $25_ (http://qz.com/118232/steve-ballmer-is-stepping-down-after-more-than-a-decade-of-microsoft-shares-going-nowhere/) . And shareholders tend to not like thermostatic stock. Rather than fall for some great man theory of technology, it's fairer to observe that Ballmer failed not because of some obvious product flop (even though Surface stinks) or some famous design snafu (even though Windows 8 is sort of a nightmare). Instead, he failed because he inherited a company whose success relied on desktop computers stuffed with Windows and Excel. And his tenure coincided with the rise of another sort of computer -- mobile computers -- that Microsoft couldn't continue to monopolize. The long view is useful here. Windows, along with Intel, got its clock cleaned by Apple and Google in the last decade. Their global market share of operating systems fell from 96 percent around 2000 to 35 percent in 2012. Apple and Google wedged their way into our laptops, phones, and tablets, while Microsoft saw its sliver of the mobile market _decline_ (http://qz.com/88980/mary-meekers-2013-internet-trends-all-the-slides-plus-highlights/) between 2005 and 2012. (http://cdn.theatlantic.com/static/mt/assets/business/WinTel%20market%20share.png) Let's travel back in time. It's the year 2000, and Microsoft is a ginormous software company. In particular, it is an operating systems company. It builds the foyer of American computers. Microsoft derived more than half its profits from Windows when it was the biggest tech company in the history of the republic. Most of the rest came from Office and its Word and Excel operating systems. Here are two illuminating graphs from Microsoft's annual report in 2000 showing you exactly how the company made money. [Glossary: Windows = Windows; Apps = Microsoft Office, Exchange, and other software; Consumer = grab bag of devices and learning apps] (http://cdn.theatlantic.com/static/mt/assets/business/Screen%20Shot%202013-08-23%20at%2010.38.21%20AM.png) Schooled by the California's geniuses of consumer experience, Microsoft has tried to remake itself as a consumer company. Arguably, it has succeeded in only one place: XBox. But becoming a consumer company requires more than a great product idea. It requires a top-down change in corporate culture to turn around an entire company's ethos. But look at how Microsoft makes money today. I've left the Windows category in green for easier comparison. [Glossary: Windows = Windows; Server/Tools = Windows Server, Azure, Premier support, Microsoft Consulting Services; Business Division = Microsoft Office, Exchange; Entertainment Devices = Xbox, Skype, and Windows Phone; Online Services = Bing/MSN] I don't know what these graphs tell you, but here's what they tell me. Microsoft, for all its celebrated attempts to be beloved by consumers, is still not a consumer company. It's a rich company. It's a huge company. But it's still an Excel and Windows firm, now with a servers side-business. When you take away XBox -- which still isn't a huge part of the company's overall business -- Microsoft still isn't a place that builds things people really like. It's a place that builds things people -- and, particularly, business people -- think they have to use. To say that Ballmer didn't recognize the frailty of the "put-our-stuff-into-PCs" strategy is too simple. In his tenure, he has replaced almost every major division head at Microsoft, shifted the company away from its "PC-first heritage" toward search, video games, and Internet calls. But he arguably failed to anticipate the simplest and most important shift in his business, which is that people were taking computers off their desks. He didn't compete with Google and Apple to protect the moat around his software business, and today Ballmer's would-be competitors hardly even consider him worthy competition. As Google Chairman Eric Schmidt said of Microsoft: "They're a well-run company, but they haven't been able to bring state-of-the-art products into the fields we're talking about." Steve Ballmer made some very bad things. But his tenure will probably be judged by the things he didn't make and the big picture he didn't see. Microsoft used to be huge, and then the computers got small. -- -- Centroids: The Center of the Radical Centrist Community <[email protected]> Google Group: http://groups.google.com/group/RadicalCentrism Radical Centrism website and blog: http://RadicalCentrism.org --- You received this message because you are subscribed to the Google Groups "Centroids: The Center of the Radical Centrist Community" group. To unsubscribe from this group and stop receiving emails from it, send an email to [email protected]. For more options, visit https://groups.google.com/groups/opt_out.
