The case against Stephen Elop as Microsoft CEO

Summary:Before we start calling Stephen Elop the heir apparent to the Microsoft corner office, let’s not forget the factors working against him.

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Image: CNET/James Martin

With Microsoft buying out Nokia's phone business for $7.2 billion and Nokia CEO Stephen Elop officially rejoining his old compadres, the assumption has become that Elop is now the heir apparent to the Microsoft CEO job. However, don't get too hasty to jump on that bandwagon.

While the assumption is understandable since Elop was already considered one of the front-runners for the job even before the Microsoft-Nokia deal, there are a number of factors that argue against it. So, indulge me while we play devil's advocate.

First, Wall Street is unlikely to get excited about Elop as the next Microsoft CEO. His performance at Nokia didn't inspire much confidence in anyone. While Nokia was in decline when Elop took over, he hastened its demise by choosing to go almost exclusively with Windows Phone as the company's phone platform, alienating much the company's existing user base and having to lay off over 20,000 employees because of the company's poor financial results.

On the one hand, you have to admire Elop's courage for taking a big risk and trying to move Nokia in a new direction. On the other hand, the move failed spectacularly as Nokia's smartphone market share plummeted from 37% to less than 5% and the company's stock price lost 85% of its value during Elop's tenure, falling from $10 to a low of $1.63.

Those are the kinds of numbers Wall Street analysts and Microsoft board members are going to look at when they consider Stephen Elop for the Microsoft CEO job. That kind of failure does not typically get rewarded by becoming the CEO of an even larger company.

Two Wall Street analysts -- Ben Thompson and Benedict Evans -- are already questioning whether Microsoft actually bought Nokia because Nokia was threatening to stop making Windows Phones, and not because Microsoft wanted Elop.

Another factor that works against Elop as CEO is that about 10 of Microsoft's 16 separate billion dollar businesses are now enterprise businesses. The company needs an enterprise leader, as I wrote in the Monday Morning Opener . Elop has limited enterprise experience, other than a stint as a CIO earlier in his career and a one-year tour at Juniper Networks. He has mostly worked with end user applications at Lotus, Macromedia, and Microsoft, where he primarily oversaw Microsoft Office. Elop technically ran "business" software at Microsoft, but it was not the kind of back-end cloud infrastructure that is destined to dominate Microsoft's future, mostly centered around Azure.

Officially, Microsoft announced Elop will now run the company's Devices and Studios business unit , which will be beefed up with the addition of 32,000 Nokia employees. The question we should be asking is whether this move indicates that there is another shoe still waiting drop.

Is Microsoft planning to put its healthy, high-margin enterprise businesses at the center of the company and spin off its low-margin consumer businesses into a new venture? Making Elop the CEO of that spin-off (which would likely include phones, tablets, and Xbox) would at least make more sense than Elop as the CEO of the enterprise-heavy Microsoft as we know it today.

Global coverage:  Nokia Interim CEO: Microsoft deal makes us stronger  |  Even with Nokia devices, Microsoft wants to license Windows Phone to other makers  |  Does its Nokia buy thwart or fuel a possible Microsoft break-up?  |  Microsoft shows how to flush decades of Nokia goodwill away  |  Microsoft gets less than $10 per Windows Phone unit  |  Microsoft-Nokia deal: Reaction from the Twitter trenches  |  Elop drops Nokia CEO role to lead devices team under Microsoft deal

Topics: Mobility, Microsoft

About

Jason Hiner is Editor in Chief of TechRepublic and Long Form Editor of ZDNet. He writes about the people, products, and ideas changing how we live and work in the 21st century. He's co-author of the upcoming book, Follow the Geeks (bit.ly/ftgeeks).

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