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The Microsoft Death Watch Report: More Demands for a New CEO

I have often wondered how anyone can take Microsoft CEO Steve Ballmer seriously anymore. Since he took over from Bill Gates in 2000, the company has gone almost nowhere. Sure, profits are great, sales are decent considering the state of the PC industry (other than Apple of course), but pretty much every new initiative has failed, despite pouring billions and billions into them.

It may even be that the company itself doesn’t take Ballmer’s rantings seriously. Just the other day, Microsoft’s corporate spin department was beginning to walk back a Ballmer statement about the possible arrival of Windows 8 in 2012. We were all reminded that the successor to Windows 7 hasn’t even received an official name yet, although Windows 8 is the one developers are using.

Now imagine, just imagine, if Apple’s PR people attempted to backtrack on something Steve Jobs had said. Their positions wouldn’t list five minutes, and that’s stretching it some, assuming it would take that long before Steve actually discovered what they’d done.

So loose lips aren’t necessarily sufficient to sink a CEO, for otherwise the co-leadership at RIM would have been long gone. But you have to look at the misbegotten steps Microsoft has taken in recent years to become relevant. Just recently, they decided to spend (or waste) $8.5 billion to acquire Skype. Now Skype is certainly a standard for Internet-based communications and all, but the company has never been hugely profitable, although sales of some services have improved. Besides, Microsoft already has instant messaging, which includes audio and video, so what they’d be getting with Skype would be a peer-to-peer technology, and the infrastructure to send and receive phone calls from traditional landline and wireless numbers. But is that worth $8.5 billion? What about a simple licensing deal, or, stay with me now, harnessing the power of Microsoft’s alleged innovation and developing such capabilities in house?

Some time back, with sales of Windows Phone 7 smartphones failing to gain traction, except for a few product placements on TV shows, Microsoft made a deal to license the mobile platform to Nokia. This happened only months after Nokia named a CEO who used to work for Microsoft. A stalking horse?

Worse, Nokia handsets won’t receive Windows Phone 7 (or a later version) until 2012, which kind of makes their current latest and greatest mobile gear dead in the water. Besides, you wonder what competing handset makers think of this possible act of desperation, considering that billions of dollars will come Nokia’s way to fund development costs. Well, HTC, a licensee for Microsoft’s mobile platform, claims they will continue to produce such products, but what about next year when Nokia’s new smartphones appear? Would they require a bribe to keep using the OS?

Let’s not forget the Ya-Bing affair, where failing Yahoo! licensed Microsoft’s Bing search technology in return for a wad of cash. Was there anything wrong with Yahoo!’s home-grown capabilities, which predate Google? Was Bing so much better, or was this just a desperate move on the part of both to fight Google?

Indeed, the curious decision to acquire Skype occurred not long after public reports appeared that both Face-book and Google were after that company.

In any case, Google’s search market share remains in the 65% range, give or take a point or so. Pretty much all Microsoft has done was cannibalize Yahoo!’s search share, which seems an embarrassing waste of money. And I haven’t begun to consider that pathetic Bing ad campaign that needs to be sent packing.

Well this week, a prominent hedge fund manager, David Einhorn, president of the Greenlight Capital fund, came out and said that Ballmer represents “the biggest overhang” on Microsoft’s stock, and was forthright in suggesting he leave and “give someone else a chance.” In turn, Microsoft’s stock price increased, which surely means Wall Street has taken notice and agrees with Einhorn.

In passing, Greenlight owns millions of shares of Microsoft stock, although it only amounts to some 0.11 percent of the total. Regardless, Einhorn is quite influential in the financial community, having reportedly predicted the notorious accounting troubles at Lehman Brothers, a large investment bank, before it collapsed in 2008.

So when someone with that stature says it’s time for Ballmer to go, will Microsoft’s board of directors take it seriously? What about former CEO Bill Gates, who these days plays the philanthropy game with huge success? Even though Gates and Ballmer are long-time friends, is that enough to inspire confidence? I would think that, if Gates personally intervened and suggested Ballmer take an early retirement — and it’s not as if he needs the money — maybe he’d do so with the appropriate excuses about spending more time with his family and all.

But the larger question is whether Microsoft has groomed anyone to replace Ballmer now or in the future. Over the years, there has been an exodus of key talent, such as Chief Software Architect, Ray Ozzie, not to mention thousands of employees who were shown the door in a cost-cutting move.

I suppose Microsoft could look outside the company, perhaps finding some seasoned executives out there with an innate understanding of the tech industry in the 21st century, and what strategy Microsoft needs to follow as its core businesses continue to age. Maybe they could poach someone from Apple, although their leadership might have poison pill contracts that would make such a move difficult.

However, as more and more people express disappointment in Ballmer, the real question is whether he’ll take the message and do what’s necessary to save the company, or if the board has the courage to deliver a no-confidence vote.