Yes, I know I missed the news window for writing about Steve Ballmer’s “retirement”, but the man was CEO for more than 13 years. The reaction pieces I have seen thus far are judgmental and simplistic. There is much armchair CEO-ing about. I’d like to add the following points to the discussion.
1. Acting crazy doesn’t mean you are a bad CEO.
Let’s just get this out of our system.
In a display of their own idiocy, people seem to feel that Ballmer is totally unaware of what he looks like in these clips. They think this is what was captured by a secret camera like Romney’s 47% comment.
The above clip is performance art. You are the audience. Ballmer is demonstrating his commitment as a salesman for Microsoft. He is showing his style–his purposefully exposed, curated style. Ballmer wants you to think he’s a bit insane. He wants his employees to know he is all in. It is not conventionally attractive, but it is purposeful. It is an advertisement.
2. Ballmer actually grew Microsoft’s core business.
Ballmer was handed the keys to two cream puff 911s: Windows and Office. His most important job was not to **** them up, and he mostly succeeded. Despite the lamentations of many, Vista was not an irrecoverable disaster. Operationally, Microsoft did OK under his reign. Revenues increased as did net income (bumpily). What everyone complains about is the stock price, which is not exactly fair since stock prices are fickle. Ballmer took the reigns at the height of the dot-com bubble. Shareholder return is a misleading metric.
3. Ballmer’s Microsoft created a good, new business.
The Xbox is a successful business launched after Ballmer took over the cash register. Unfortunately, Windows and Office were so large that success with the XBox makes comparatively little difference. When Apple was successful with the iPhone, it mattered to Apple. The iPhone now accounts for more than half of Apple’s revenues. It was a coup for them. The Xbox meanwhile is a fraction of Microsoft.
4. Ballmer seemed ignorant of some industry trends, but might not have been.
What do we make of Ballmer’s reaction to the iPad?
As mentioned previously, Ballmer is a salesman. Everything he says is said as the CEO of Microsoft, so he can’t show too much public appreciation of what his competitors are doing. (Note that Steve Jobs often discounted ideas implemented by other companies until Apple adopted them.)
Does Ballmer believe what he is saying in this clip? Does he really think everyone who bought an iPad was stupidly ignorant of the advantages of laptops they had all been using for the last 15 years? Or is he buying time by trying to convince his audience to stick with laptops until Microsoft can respond?
Given what the Surface ended up being, I tend to believe that he was in fact drinking his own Kool-Aid. He should have gotten some kids together and watched them play with an iPad for a while and gotten some other kids to play with laptops. That seemingly silly use of time might have modified some of his views and allowed the Surface to be competitive.
This clip where Ballmer opines about the iPhone has been viewed more than a million times:
Note that for all his bluster, he does not deny watching the iPhone’s public release. That itself is humility. I don’t see anything terribly wrong with his response here. The problem was that it took until 2010 to release a competitive product in Windows Phone. Does this mean he didn’t see the iPhone’s brilliance? Or was he answering the question as a salesman, buying time for Microsoft to release a worthy competitor?
A source from the Windows Phone team at the time suggests that Ballmer did take the iPhone seriously:
Windows Mobile/Phone 7 was in full-swing development from 2008 and the beta was supposed to come out long before it did. I think what happened, and the delays, was actually a result of Microsoft’s response to the iPhone. The ditched products was a sacrifice in changing trajectory. What was supposed to be Windows Mobile/CE, a more technical OS, suddenly *had* to become more iPhone-esque. The writing was on the wall.
So anyway, I don’t think it’s the case that they were late in discovering the need to respond to the iPhone. I think that they already had a train going in the other direction, and had to turn it around. They might as well have started from scratch.
So, Microsoft apparently saw the relevance of the iPhone. Our contact does suggest, however, that this appreciation may have been superficial:
I think part of the reason for the confusion was a failure to understand why the iPhone was awesome. Given that they chose to emulate all the wrong things, I wonder if they still don’t understand. Or whether it even matters.
5. Ballmer screwed up some capital allocation decisions.
Ballmer invested heavily in the Bing search engine. This was a poor battle to choose to fight, with billions invested and little to show. This included the more-than-$6 billion purchase of aQuantive, a digital marketing company.
The company also bought Skype for $8.5 billion (unfortunately while I was a shareholder!). This was a seemingly synergy-free acquisition with few changes to Skype’s business plan. I have recently seen advertisements for Skype-enabled TVs, which seems cool, but somehow I doubt it will either Microsoft much money or sell many TVs.
Ballmer was saved from his most expensive mistake: the $45 billion take-over of Yahoo. While the acquisition would have given Microsoft access to some established web services, I am doubtful that much value would have been created through Microsoft’s ownership. The Yahoo non-aquisition is a decision that should be counted against Ballmer.
Good CEOs allocate capital wisely; bad ones do not. Ballmer’s merits as a steward of Office and Windows are mitigated by his willingness to spend on acquisitions and technologies of dubious strategic value. Ballmer missed some technological trends, but so did IBM, and no one complains. Ballmer could have done better, but his tenure was not as bad as portrayed in the media.
Photo credit: Wikimedia Commons
Edit: I wish to disavow this interpretation of Ballmer’s career at the Washington Post:
His company’s fate was inextricably tied to the success of the PC, and the PC’s fortune peaked with the Nasdaq around 2000. The emergence of interactive Web applications around 2004 began to turn PCs into interchangeable commodities. Then Apple introduced the iPhone in 2007, and the iPad three years later, kicking off a tablet computing boom that left the PC in the dust.
Ballmer’s failure to establish a position in these markets wasn’t inevitable as suggested in the column. Microsoft getting shut out of these markets was avoidable. It would have been very difficult, but it could have perhaps been done by a great CEO rather than the adequate one that Ballmer was.