Five reasons why Ballmer needed to go

At long, long last Steve Ballmer is leaving Microsoft. Here's why.
Written by Steven Vaughan-Nichols, Senior Contributing Editor

Steve Ballmer is going to retire from Microsoft sometime within the next 12 months. Well, that's the official story. I think Microsoft's board finally gave him a choice: Jump or be pushed.

There will be no more "Monkey Boy." Ballmer is leaving Microsoft.

Why? Because Ballmer's been a flop even before the summer of 2008 when Bill Gates left and he officially became Microsoft's top dog. How has he failed? Let us count the ways:

1) Vista and Windows 8 Fumbles

Vista was a flop. It was so bad that Microsoft had to give Windows XP Home a new lease on life to beat back Linux netbooks that were eating up the low-end PC market in 2009. Steven Sinofsky then saved Microsoft's desktop operating system bacon with Windows 7.

As bad as Vista was, Windows 8's sad sale numbers made it look like a winner. Long before it became clear that no one really wanted Windows 8 with its annoying Metro interface, Sinofsky had been shown the door. Ballmer should have been shown the blue screen-door of death instead.

2) Tablet and smartphone non-starters

The writing is on the wall: People are buying tablets and smartphones. The PC will never go away, but there's no growth left in those markets. Under Ballmer, Microsoft tried and failed over and over again to make an impact in the mobile space.

True, Windows Phone 8 has made some gains, but it's done so because of the collapse and fall of the BlackBerry empire more than by any virtues of its own. Google's Android is well on its way to dominating smartphones the way Windows used to own the desktop.

As for tablets, Ballmer can put out as many ads as he wants about how the Windows 8-powered tablets such as the Lenovo Yoga are better than iPads; it doesn't matter. Android-based tablets have overtaken the iPad and Windows-based tablets have barely any presence.

As for Microsoft's own much ballyhooed Surface tablets, they've gone nowhere. In particular, Surface RT has proven a total and utter failure.

3) Microsoft's online failures

You don't need to use Bing to see that quarter after quarter Microsoft's Online Services Division loses money. The "good" news? It's no longer losing half-a-billion dollars a quarter.

Maybe Microsoft should have bought Yahoo after all. In little more than a year, new Yahoo CEO Marissa Mayer somehow managed to make Yahoo the top US Web property in July 2013. Thinking of which, if Microsoft had bought Yahoo and then brought Mayer in to run it, they'd have a much better "insider" candidate for Microsoft CEO than the current pick of the executive crop.

4) The corporate culture from hell

Ever hear of stack ranking? It's Microsoft's personnel and department ranking system. In it every staffer, and unit is rated on a 1 to 5 scale. So far, so typical. What makes stack ranking poisonous is that one out of every ten staffers and departments must be given a bad rating.

Say you have 100 people in your division and five of them really aren't much good. Too bad. As a boss, you still must label five otherwise OK employees as failures. At the same time, you have to fight to make sure your department doesn't fall into the 10 percent pit or you're likely to be in the unemployment line soon too.

Combine this draconian system with Microsoft's annual attempts to reorganize itself. After years of minor shakeups, Microsoft decided to really and truly reorganize itself to focus on shifting the company from a software company to a devices and services one; to make it "One Microsoft," a more agile and responsive tech company.

It was a nice idea. Microsoft divisions had fought like cats and dogs in a sack thrown into the river. There was no "One Microsoft." There were divisions fighting among themselves for the top and some that were clawing for simple survival.

Could Ballmer pull off this top-down cultural and management change and make Microsoft into a gentler, kinder company? Management experts like Paul Carroll didn't think so. Indeed, Carroll couldn't think of a single CEO who'd pulled off the kind of sea-change Ballmer had called for.

Microsoft's board didn't think Ballmer could do it either. They appear to think that Ballmer couldn't change a toxic corporate culture into one capable of dealing with a far more competitive business landscape than the one Gates faced as a start-up in the 1970s.

5) The market didn't believe in Ballmer

Ballmer was never really a good CEO choice. He was always first and foremost a salesman . But, when year after year all he could had to sell was sizzle instead of steak, the market turned against him.

In January 2000, Ballmer became CEO. On August 22, 2000, Microsoft's stock closed at $35.62. On August 22, 2013, it closed at $32.39. If you look at Gates' last days in 2000, when the stock was around $55 a share, it's decline is even worse.

For over a decade Microsoft has largely declined in real value. Its rivals? Apple's currently at $501.42 and Google's at a mind-bending $871.29 a share.

Is it any wonder that for years analysts have been screaming for Ballmer to be shown the door. Unsurprisingly, now that the market knows Ballmer is leaving, Microsoft's stock has bounced up about 6-percent.

Where does Microsoft go from here? That's a good question and I don't have a good answer.

What I do know is that it needs radical change. Yes, it still make billions, but in 2013 it's still a PC operating system and business PC software company in a world that's turned from PCs to smartphones, tablets, and the cloud. To remake Microsoft, even with all its riches, into a true 21st century technology company is going to take radical change.

It can be done. IBM did it. General Motors and Ford did it. Until we know who will take over Microsoft's reins we can't even really guess if Microsoft will be able to do it.

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