11 ms·

I think Ballmer is an interesting case study in perception versus results. He's commonly portrayed as a poor CEO that has led Microsoft in the direction of irre

I think Ballmer is an interesting case study in perception versus results. He's commonly portrayed as a poor CEO that has led Microsoft in the direction of irrelevance. And yet, to quote oft critic Gruber, "he knows how to make money" (http://daringfireball.net/linked/2013/04/19/msft-q3 http://daringfireball.net/linked/2013/04/19/msft-q3) I'd love to sit down and talk to him, and see if his vision is a bit more long range than your average industry analyst, similar Paul O'Neill's vision on worker safety and Alcoa in 1987.

gregd 13y ago
I would argue that Gruber is wrong. Microsoft would have made money during it's Ballmer years, regardless of who was at the helm. When Gates left, MS was a Katamari ball rolling down hill, catching all the money in it's path.
- mikeash 13y ago
  People often point to MS's continued profitability in these discussions, but they're missing the point. The question isn't whether they're profitable today, but whether they're profitable and relevant in ten or twenty years. Profits are a lagging indicator for a once-successful company. A large company with entrenched products can coast for a long time while in decline. For example, RIM basically sank in 2007-2008. They had opportunities to save themselves well after that, but that's when it started, and they passed up those opportunities. However, their decline didn't really show up in their financials until 2012. Microsoft looks to me like they're the same way. Surface and the new Windows Phone are analogous to RIM's late, lame attempts to ship a large-touchscreen Blackberry. Microsoft is profitable for the same reason they've been profitable for the past couple of decades: Windows and Office. However, that's now a declining market. It's still huge, and they can milk it for a long time, but it's on the way out. It looks like they missed their chance to move on to something else in favor of hanging on to their cash cows as they sink.
  - sidcool 13y ago
    Though I agree with you mostly, I argue that Xbox and Kinect have greatly contributed to their profits.
    - mikeash 13y ago
      Doesn't look like it: http://www.microsoft.com/investor/EarningsAndFinancials/Financials/FY12/Q4/SegmentRevenues.aspx http://www.microsoft.com/investor/EarningsAndFinancials/Fina... The "Entertainment and Devices Division" is profitable, but contributes a negligible quantity to the overall profits. And either way, the home game console is also a declining market.
      - teamonkey 13y ago
        > the home game console is also a declining market. Source?
        mikeash 13y ago
        It's mostly my opinion, based on the rise of mobile. I don't think they're going to go away, but it does seem like they're already becoming more specialized. Hardcore gamers will always be with us, but the much larger casual market is moving away. I think the numbers back it up to an extent, though: http://en.wikipedia.org/wiki/List_of_best-selling_game_consoles http://en.wikipedia.org/wiki/List_of_best-selling_game_conso... None of the latest generation of consoles are near the top, despite the fact that populations are larger, and the population of people able to afford video game electronics is much larger. That the PS3 and Xbox 360 barely outsold the original NES, despite having access to a billion or two more potential customers, says to me that the market is declining relative to the overall computing world.
        ebrenes 13y ago
        If you only look at individual console you might get that impression, but if you take the generation's totals you'll still see an upward trend. The Playstation 2 for example was king of the hill and dwarfed its competition (Gamecube/Xbox) but still overall you're looking at about ~200 million units. However, with the current generation you're looking at Wii, PS3, X360 all sharing an about even share with PS3 and X360 very closely tied, but the total is around ~250 million units. So we're still seeing growth in that area, and one part that's not reflected is the added value in each platform in terms of revenue for each network (PSN, Xbox Live) as well as the growing list of peripherals (Kinect, Move) that are part of each platform. Not only that, but PS3 and X360 had higher prices on their consoles, some even coming close to doubling the price (a top of the line PS3 at launch was $600 vs a $300 PS2). I would say that gaming over all is becoming more mainstream to the point that the consoles are no longer the realm of hardcore gamers, because they wouldn't have kept those numbers up while people were buying iPads, iPhones and DS3's in such massive quantities if they were really a complete gaming replacement.
- nekgrim 13y ago
  Never thought I'll read a comparison with Katamari one day on HN. Thank you.
mathattack 13y ago
If he really knew how to make money the stock would have performed better. Perhaps he knew how to make money in some industries, and lose money in others.
- tuananh 13y ago
  I think the stock ups or downs isn't about profit. It's more about people's believe. Take Amazon and Apple for example. Amazon barely makes profit while Apple made huge profit, and yet when they released their financial reports (last quarter or 2 quarters ago), AAPL got hit yet AMZN upped.
  - mathattack 13y ago
    Right, and he hasn't moved the stock at all relative to the expectations when it was handed to him.
potatolicious 13y ago
I think both are correct. Ballmer was gloriously good at extracting profits - out of existing, successful product divisions. I believe Ballmer has a firm grasp of the enterprise market, and Microsoft's revenue and profitability numbers reflect this. But new product development, particularly consumer product development, at Microsoft has largely fallen flat in the Ballmer years. WinPhone, Win8, Kin? So while Ballmer has certainly increased the profitability of Microsoft, critics are IMO right to point out that they've been unsuccessful in developing future products to ensure their long-term survival.
- seldo 13y ago
  Reacting to new market conditions is definitely Ballmer's problem. Under Gates, the explosive growth of the web took them totally by surprise, and he managed to swing the whole company around, producing the market-crushing behemoth that was Internet Explorer 6, and green-lit the XBox on the basis that "convergence" (i.e. computers running your TV) was inevitable. Those two alone are really tough, smart, forward-thinking decisions that Gates nailed. Under Ballmer, Microsoft had the same pattern repeatedly: Zune, Kin, Windows Phone, Surface, Windows 8 -- they took too long to see the need, took way too long to make the product, and when they did it was either not good enough, too late, or both.
  - simonh 13y ago
    Except that IE was just a clone of Netscape and XBox was an attempt to duplicate PlayStation. Neither of these were original or ground breaking products. In fact with IE 6 he so badly misjudged the market that he assumed the game was over and didn't even bother continuing development. IE 7 didn't come out until 4 years later! Gates founded Microsoft's online businesses, which have been losing money ever since. You count XBox as a success, yet MS is in the hole over XBox by over a Billion dollars and will probably never make money on it, taking past losses and write-offs into account.
    - Tuna-Fish 13y ago
      > Except that IE was just a clone of Netscape and XBox was an attempt to duplicate PlayStation. Neither of these were original or ground breaking products. This is completely irrelevant. By the same logic, iPod was nothing special, just another mp3 player. IE and XBox managed to muscle into an established market. This is harder than making a new market, and should very much be congratulated. > In fact with IE 6 he so badly misjudged the market that he assumed the game was over and didn't even bother continuing development. IE 7 didn't come out until 4 years later! Not so much misjudged, but started seeing as a threat. IE development hit a wall because the meme that web-based apps will replace windows-based apps got popular, and Microsoft didn't want to wipe out their own monopoly. IE4-IE6 were, at the time, absolutely crushingly good. IE6 is now remembered as the really bad browser, but that is because they stopped updating it, and in the later years it had to compete with much, much better browsers. > You count XBox as a success, yet MS is in the hole over XBox by over a Billion dollars and will probably never make money on it, taking past losses and write-offs into account. XBox also supports windows game development, strengthening their main money maker. What is that worth?
eykanal 13y ago
The man missed mobile. He screwed up search. And social. And Windows Vista, and Windows 7, and Windows 8. He insulted the OEMs with the Windows Tablet, which was also a failure. He created the Zune. He even managed to screw up with Mac Office, by removing and then putting back in VBA. For one man, he sure has a lot of failures on his plate.
- belorn 13y ago
  Lets not forget secure boot, and how that alienated developers and computer enthusiast. That and the NSA agreement.
- sker 13y ago
  You've mentioned Windows 7 twice in this thread. By what measure do you consider it a failure? If anything, Windows 7 is the best thing released under Ballmer.
  - astrodust 13y ago
    Windows 7 is not a success. It's just a non-failure. The only reason people use it at all isn't because it's fantastic, but because it's incrementally better than Windows XP without all the garbage Vista foisted on the user. After having used it for an extended period of time, the only real improvements I've seen are in the explorer shell, which are minor at best, and the theme.
    - wvenable 13y ago
      Windows 7 is just the finished version of Vista. All the big transitions that started in Vista (UAC, DWM, new driver models, etc) are there in Windows 7. If you go back and look at Vista now, you can see how half-baked it is -- a mix of Windows 7 UI and XP UI.
    - mkautzm 13y ago
      Windows 7 is orders of magnitude easier to manage. A lot of the improvements under the hood the consumer didn't see or notice. One that they might have noticed is the ability for the OS to find proper drivers for pretty much any consumer device from a major manufacturer. Other than that, there are other features that put W7 was ahead of XP in terms of management ease.
corresation 13y ago
The markets where Microsoft makes money are almost identical to the markets that they made money in pre-Ballmer, despite a massively changed computing landscape, and it is possibly inertia that has them still making loads of profits. But inertia fades: Exchange servers are being decommissioned. SQL Server instances are being replaced. People are supplanting an enormous amount of computing time that they did on desktops with non-Microsoft tablets and smartphone devices, which is a migration that makes Windows dramatically less entrenched (Office was once the lynchpin of Microsoft's maintenance of a captive market, however the need to use a mix of devices has made Office much less palatable than it once was). In other markets, such as online and Home and Entertainment, it has been a decade of losses, and the xbox is being usurped right as Microsoft was supposed to start profiting off of their moves. And as this happens, Microsoft has responded by essentially tapping their existing business customer base to make up for lost market. The prices of some of the new versions are extraordinary (e.g. a Sharepoint 2013 deploy), leading to more departures. It is unsustainable. Microsoft today feels very similar to RIM of 2010 -- the profits are still there, but the industry has moved on. In no way does that mean that they're doomed, and they can still pivot, but things don't look good. Many younger people on HN have no knowledge of just how much Microsoft dominated technology at the turn of the millennium. I remember eagerly waiting for betas of far off Microsoft products, because every shift of Microsoft had a profound impact on the entire industry.
sytelus 13y ago
Do you know of any specific actions that Ballmer took to "make money"? My understanding/perception is that all the increase is in part result of inflation over last 13 years and in part of enterprise contract strategy that was already in place since Gates era. I don't understand when people say Ballmer helped Microsoft produce .net/C#/XBox. These products were envisioned, created and delivered by few smart people in Microsoft and I personally don't know of any specific contribution from Ballmer in to these products either technical or otherwise.

gregd 13y ago

I would argue that Gruber is wrong. Microsoft would have made money during it's Ballmer years, regardless of who was at the helm. When Gates left, MS was a Katamari ball rolling down hill, catching all the money in it's path.

mikeash 13y ago
People often point to MS's continued profitability in these discussions, but they're missing the point. The question isn't whether they're profitable today, but whether they're profitable and relevant in ten or twenty years. Profits are a lagging indicator for a once-successful company. A large company with entrenched products can coast for a long time while in decline. For example, RIM basically sank in 2007-2008. They had opportunities to save themselves well after that, but that's when it started, and they passed up those opportunities. However, their decline didn't really show up in their financials until 2012. Microsoft looks to me like they're the same way. Surface and the new Windows Phone are analogous to RIM's late, lame attempts to ship a large-touchscreen Blackberry. Microsoft is profitable for the same reason they've been profitable for the past couple of decades: Windows and Office. However, that's now a declining market. It's still huge, and they can milk it for a long time, but it's on the way out. It looks like they missed their chance to move on to something else in favor of hanging on to their cash cows as they sink.
- sidcool 13y ago
  Though I agree with you mostly, I argue that Xbox and Kinect have greatly contributed to their profits.
  - mikeash 13y ago
    Doesn't look like it: http://www.microsoft.com/investor/EarningsAndFinancials/Financials/FY12/Q4/SegmentRevenues.aspx http://www.microsoft.com/investor/EarningsAndFinancials/Fina... The "Entertainment and Devices Division" is profitable, but contributes a negligible quantity to the overall profits. And either way, the home game console is also a declining market.
    - teamonkey 13y ago
      > the home game console is also a declining market. Source?
      - mikeash 13y ago
        It's mostly my opinion, based on the rise of mobile. I don't think they're going to go away, but it does seem like they're already becoming more specialized. Hardcore gamers will always be with us, but the much larger casual market is moving away. I think the numbers back it up to an extent, though: http://en.wikipedia.org/wiki/List_of_best-selling_game_consoles http://en.wikipedia.org/wiki/List_of_best-selling_game_conso... None of the latest generation of consoles are near the top, despite the fact that populations are larger, and the population of people able to afford video game electronics is much larger. That the PS3 and Xbox 360 barely outsold the original NES, despite having access to a billion or two more potential customers, says to me that the market is declining relative to the overall computing world.
        ebrenes 13y ago
        If you only look at individual console you might get that impression, but if you take the generation's totals you'll still see an upward trend. The Playstation 2 for example was king of the hill and dwarfed its competition (Gamecube/Xbox) but still overall you're looking at about ~200 million units. However, with the current generation you're looking at Wii, PS3, X360 all sharing an about even share with PS3 and X360 very closely tied, but the total is around ~250 million units. So we're still seeing growth in that area, and one part that's not reflected is the added value in each platform in terms of revenue for each network (PSN, Xbox Live) as well as the growing list of peripherals (Kinect, Move) that are part of each platform. Not only that, but PS3 and X360 had higher prices on their consoles, some even coming close to doubling the price (a top of the line PS3 at launch was $600 vs a $300 PS2). I would say that gaming over all is becoming more mainstream to the point that the consoles are no longer the realm of hardcore gamers, because they wouldn't have kept those numbers up while people were buying iPads, iPhones and DS3's in such massive quantities if they were really a complete gaming replacement.
nekgrim 13y ago
Never thought I'll read a comparison with Katamari one day on HN. Thank you.

mathattack 13y ago

If he really knew how to make money the stock would have performed better. Perhaps he knew how to make money in some industries, and lose money in others.

tuananh 13y ago
I think the stock ups or downs isn't about profit. It's more about people's believe. Take Amazon and Apple for example. Amazon barely makes profit while Apple made huge profit, and yet when they released their financial reports (last quarter or 2 quarters ago), AAPL got hit yet AMZN upped.
- mathattack 13y ago
  Right, and he hasn't moved the stock at all relative to the expectations when it was handed to him.

potatolicious 13y ago

I think both are correct. Ballmer was gloriously good at extracting profits - out of existing, successful product divisions. I believe Ballmer has a firm grasp of the enterprise market, and Microsoft's revenue and profitability numbers reflect this. But new product development, particularly consumer product development, at Microsoft has largely fallen flat in the Ballmer years. WinPhone, Win8, Kin? So while Ballmer has certainly increased the profitability of Microsoft, critics are IMO right to point out that they've been unsuccessful in developing future products to ensure their long-term survival.

seldo 13y ago
Reacting to new market conditions is definitely Ballmer's problem. Under Gates, the explosive growth of the web took them totally by surprise, and he managed to swing the whole company around, producing the market-crushing behemoth that was Internet Explorer 6, and green-lit the XBox on the basis that "convergence" (i.e. computers running your TV) was inevitable. Those two alone are really tough, smart, forward-thinking decisions that Gates nailed. Under Ballmer, Microsoft had the same pattern repeatedly: Zune, Kin, Windows Phone, Surface, Windows 8 -- they took too long to see the need, took way too long to make the product, and when they did it was either not good enough, too late, or both.
- simonh 13y ago
  Except that IE was just a clone of Netscape and XBox was an attempt to duplicate PlayStation. Neither of these were original or ground breaking products. In fact with IE 6 he so badly misjudged the market that he assumed the game was over and didn't even bother continuing development. IE 7 didn't come out until 4 years later! Gates founded Microsoft's online businesses, which have been losing money ever since. You count XBox as a success, yet MS is in the hole over XBox by over a Billion dollars and will probably never make money on it, taking past losses and write-offs into account.
  - Tuna-Fish 13y ago
    > Except that IE was just a clone of Netscape and XBox was an attempt to duplicate PlayStation. Neither of these were original or ground breaking products. This is completely irrelevant. By the same logic, iPod was nothing special, just another mp3 player. IE and XBox managed to muscle into an established market. This is harder than making a new market, and should very much be congratulated. > In fact with IE 6 he so badly misjudged the market that he assumed the game was over and didn't even bother continuing development. IE 7 didn't come out until 4 years later! Not so much misjudged, but started seeing as a threat. IE development hit a wall because the meme that web-based apps will replace windows-based apps got popular, and Microsoft didn't want to wipe out their own monopoly. IE4-IE6 were, at the time, absolutely crushingly good. IE6 is now remembered as the really bad browser, but that is because they stopped updating it, and in the later years it had to compete with much, much better browsers. > You count XBox as a success, yet MS is in the hole over XBox by over a Billion dollars and will probably never make money on it, taking past losses and write-offs into account. XBox also supports windows game development, strengthening their main money maker. What is that worth?

eykanal 13y ago

The man missed mobile. He screwed up search. And social. And Windows Vista, and Windows 7, and Windows 8. He insulted the OEMs with the Windows Tablet, which was also a failure. He created the Zune. He even managed to screw up with Mac Office, by removing and then putting back in VBA. For one man, he sure has a lot of failures on his plate.

belorn 13y ago
Lets not forget secure boot, and how that alienated developers and computer enthusiast. That and the NSA agreement.
sker 13y ago
You've mentioned Windows 7 twice in this thread. By what measure do you consider it a failure? If anything, Windows 7 is the best thing released under Ballmer.
- astrodust 13y ago
  Windows 7 is not a success. It's just a non-failure. The only reason people use it at all isn't because it's fantastic, but because it's incrementally better than Windows XP without all the garbage Vista foisted on the user. After having used it for an extended period of time, the only real improvements I've seen are in the explorer shell, which are minor at best, and the theme.
  - wvenable 13y ago
    Windows 7 is just the finished version of Vista. All the big transitions that started in Vista (UAC, DWM, new driver models, etc) are there in Windows 7. If you go back and look at Vista now, you can see how half-baked it is -- a mix of Windows 7 UI and XP UI.
  - mkautzm 13y ago
    Windows 7 is orders of magnitude easier to manage. A lot of the improvements under the hood the consumer didn't see or notice. One that they might have noticed is the ability for the OS to find proper drivers for pretty much any consumer device from a major manufacturer. Other than that, there are other features that put W7 was ahead of XP in terms of management ease.

corresation 13y ago

The markets where Microsoft makes money are almost identical to the markets that they made money in pre-Ballmer, despite a massively changed computing landscape, and it is possibly inertia that has them still making loads of profits. But inertia fades: Exchange servers are being decommissioned. SQL Server instances are being replaced. People are supplanting an enormous amount of computing time that they did on desktops with non-Microsoft tablets and smartphone devices, which is a migration that makes Windows dramatically less entrenched (Office was once the lynchpin of Microsoft's maintenance of a captive market, however the need to use a mix of devices has made Office much less palatable than it once was). In other markets, such as online and Home and Entertainment, it has been a decade of losses, and the xbox is being usurped right as Microsoft was supposed to start profiting off of their moves. And as this happens, Microsoft has responded by essentially tapping their existing business customer base to make up for lost market. The prices of some of the new versions are extraordinary (e.g. a Sharepoint 2013 deploy), leading to more departures. It is unsustainable. Microsoft today feels very similar to RIM of 2010 -- the profits are still there, but the industry has moved on. In no way does that mean that they're doomed, and they can still pivot, but things don't look good. Many younger people on HN have no knowledge of just how much Microsoft dominated technology at the turn of the millennium. I remember eagerly waiting for betas of far off Microsoft products, because every shift of Microsoft had a profound impact on the entire industry.

sytelus 13y ago

Do you know of any specific actions that Ballmer took to "make money"? My understanding/perception is that all the increase is in part result of inflation over last 13 years and in part of enterprise contract strategy that was already in place since Gates era. I don't understand when people say Ballmer helped Microsoft produce .net/C#/XBox. These products were envisioned, created and delivered by few smart people in Microsoft and I personally don't know of any specific contribution from Ballmer in to these products either technical or otherwise.