6 ms·

Ballmer forced out after $900M Surface RT debacle, analyst says

60 points by psibi 13y ago

Dotnaught 13y ago
Replace "analyst says" with "area man says" and you get a story from The Onion. I'd be more impressed if an "unnamed Microsoft board member" was the source.
- davidgerard 13y ago
  That was my first thought, too. "Oh, analyst w*nk."
cududa 13y ago
Bullshit. $900mm is a small mistake for Microsoft. They're too big for them to fire Steve over a billion dollar mistake. They still have multiple billion+ business. Im not saying they dont have massive problems, but that's absurd.
- adventured 13y ago
  The mess that got Sinofsky fired, was ultimately Ballmer's fault, as the buck stops with the CEO. So this is clearly not limited to one $900m mistake.
- hga 13y ago
  "A billion here, a billion there, pretty soon, you're talking real money." (http://en.wikipedia.org/wiki/Everett_Dirksen http://en.wikipedia.org/wiki/Everett_Dirksen)
- AmVess 13y ago
  MS has been making a litany of $bil mistakes. Keep in mind, the $900m is just the write down from slashing the price by $150. The real downer will come when they realize that those warehouses full of tablets with now outdated hardware will cost them 3 billion. In 2009, MS had OSes on 70%+ of hardware. Now, it's 21%. All that is from them missing mobile. They missed mobile in the same way IBM missed the PC market. If he truly was ousted, this is why. The untold billions of lost profit from missing out on mobile, not to mention the billions the lost on product failures, and I'm shocked the guy wasn't thrown out by security long ago.
untog 13y ago
Of course it's plausible, that's why they wrote this article citing a nameless "analyst". It also happens to be fantastic clickbait but I'm sure that has nothing to do with it...
- jdcryans 13y ago
  Not sure about the nameless part: "'He was definitely pushed out by the board,' said Patrick Moorhead, principal analyst with Moor Insights & Strategy, in an interview Friday"
  - deleted 13y ago
    [deleted]
michaelpinto 13y ago
The first Surface was always going to have issues. But I think the real problem was that it should have come to market much sooner. And yet the idea of Microsoft getting into hardware must have been a difficult move given the culture and alliances they've worked so hard to build over the years.
hga 13y ago
This strikes me as likely; as noted, announcing a departure along with a search for a replacement is telling. Was the Surface RT the trigger? Well, one does wonder how many billion dollar write offs can occur under a CEO's watch before the board says enough. E.g. the KIN (http://en.wikipedia.org/wiki/Microsoft_KIN http://en.wikipedia.org/wiki/Microsoft_KIN), even if that wasn't to my knowledge formally written off.
- apgwoz 13y ago
  I had completely forgotten about the KIN. In all reality, I was hoping that the Surface would compete and bring Microsoft back in the competition (I hate Microsoft, but I'd hate to see them die off I'm also not a fan of Apple... but that's, I guess another story).
- dhughes 13y ago
  I thought the Courier was a great idea not just for the dual screens but the software as well the scraps and notes seemed like a great idea. https://www.youtube.com/watch?v=UmIgNfp-MdI https://www.youtube.com/watch?v=UmIgNfp-MdI
  - joshavant 13y ago
    It was! There's also lots of gloriously amazing tech that the Microsoft Research division produces. However, from what I can see, for whatever reason, much of it doesn't see the daylight.
    - seanmcdirmid 13y ago
      Much research does't see daylight in general. That is the nature of research. Some does make into products, but you'd be hard pressed to trace its path from research to product from the outside.
    - i386 13y ago
      Politics, from what I've heard. Projects like the KIN where killed off my VPs who were afraid it would compete with their products, like Windows Mobile.
devanti 13y ago
Definitely seems true. You can almost feel it in his internal retirement letter to employees where he writes "My original thoughts on timing would have had my retirement happen in the middle of our transformation to a devices and services company" and "I take this step in the best interests of the company I love"
mratzloff 13y ago
I doubt it was any one thing, but it might have been the final straw. Microsoft has suffered embarrassing setbacks on its entire line of products and services, except Office. And with the PC market dwindling and Surface DOA, they're having to put Office in new places like iOS which they wouldn't have seriously considered a few years ago.
- adventured 13y ago
  Overall the Windows Server and Tools division has been extremely successful and maintained solid product momentum. It has six billion dollar businesses inside of it (server, sql, systems center, visual studio, virtualization, enterprise services). This division is the crown jewel these days, it's worth more going forward than consumer Windows is.
snowwrestler 13y ago
Analysts say lots of things.
arbuge 13y ago
Shame that forcing him out cost $768m - almost as much as the debacle in question...
- adventured 13y ago
  How did forcing him out cost $768m?
  - deleted 13y ago
    [deleted]
- wikyd 13y ago
  The story about Ballmer making $768m is not about a golden parachute he received. Instead, because he owns ~$10b in stock, the increase in their stock price on news of his retirement "netted" him $768m.
SkyMarshal 13y ago
The most interesting question now to me is, not why is Ballmer stepping down, but who could run Microsoft well and succeed him? MS has only ever had two CEO's - the founder, and the founder's right-hand-man. This will be quite a transition for them. What does the board want, what are that person's areas of expertise, background, and experience, man or woman, etc.
brudgers 13y ago
As the second largest shareholder, Ballmer is more of "the board" than anyone except Gates. He owns more stock than any institutional investor. Th3 $900 million writedown was less than the fine Microsoft paid to the EU for not offering browser choice with Windows 8 - probably the precipitating cause of Sinofsky's departure last year. What is happening is a the generational shift from pre IPO leadership to post IPO leadership. The heirs have been identified and it's time to let them reshape the company. (My money is on Larson-Green with Reller running the numbers).
- adventured 13y ago
  Vanguard is holding 358m shares as of June 30th. Ballmer is sitting on 333m shares. Gates is holding 460m shares according to this USA Today article: http://www.usatoday.com/story/tech/2013/08/23/ballmer-microsoft-stock-worth/2692721/ http://www.usatoday.com/story/tech/2013/08/23/ballmer-micros... Although Yahoo Finance is reporting him at 398m shares.
- corresation 13y ago
  Ballmer owns about 4% of the outstanding shares. While that is an enormous holding, by no measure does that protect him if the board decides to punt him (the board doesn't speak on behalf of shareholders in descending unit order. They speak to the majority of shares).
ixnu 13y ago
A frustration that I don't hear mention too often is the mess that is MS software licensing. From my perspective, there is often confusion over what is covered and what it will cost and nobody will answer simple questions. I have been to five TechEd's and it is becoming common that speakers start a presentation with "do not talk to me about how to buy this" or "please talk to the license guys". I get this same answer from my local and regional MS sales reps. Sometimes getting pricing on the virtualization and what is covered by SA is a royal pain. Perhaps I have it bad because I work in higher ed, but it was that way when I worked in private enterprise.
- bane 13y ago
  The licensing cluster that was just plain consumer Windows 7 licensing was a disaster. The complete opposite of "focused".
Zigurd 13y ago
My theory is that it hasn't quite hit the fan yet. Microsoft and mobile handsets hangs by a thread at Nokia. If Nokia fails, and it probably will, that's it for Microsoft and "devices" as in a "devices and services company." That means Microsoft can wait a decade or two for the Next Big Thing, while it watches Android take 50% or more of enterprise endpoints. And that is enough to make a dent in revenue.
jlgreco 13y ago
I would have bought one of those damn things too, if only they didn't lock them down. Why the hell did they even do that? Were they really concerned that people like me would buy them and then not use windows on them? I don't see that being much of a threat to their business.
- fnordfnordfnord 13y ago
  I always thought that their angle was going to be that they would sell (the product ecosystem) to content providers as a trusted platform, same to businesses; who might want that to some degree. If they could do that, and get the trust of the copyright mafia, then they might have been able to sort of monopolize distribution of movies and music. Maybe even keep their monopoly on office productivity apps (I hear that people use those on their tablets?). I agree that there can't be enough geeks willing to buy one just to install Linux on it for MS to worry.
  - jlgreco 13y ago
    Eh, maybe. My impression is that only the ARM ones were locked down though. I think the Surface Pro lets you install Linux or whatever.. I haven't really looked into that since that device doesn't really seem interesting to me. If their angle was that they needed to keep it locked down to secure slick media contracts, I would expect both to be locked down so that they could keep some semblance of feature parity between the two.
    - fnordfnordfnord 13y ago
      Yeah, well, I'm no Steve Ballmer, so I couldn't pretend to fully understand their business strategy for the last decade.
      - jlgreco 13y ago
        Ha! True. Trying to figure out why they do things the way they do is likely an exercise in futility.
thucydides 13y ago
The credulous initial stories about his "retirement" were funny. Ballmer was 100% fired. In the long term, the company seriously failed on many fronts. In the short term, Ballmer posted poor quarterly results and sent out a rambling 1400-page email about reorganizing the company, a last ditch effort to show the board he was trying to right the ship. How often does a CEO announce a major reorganization and then quit? And MSFT's official statement says Ballmer is out as soon as they find a successor. It was kind of the board not to cap him execution-style, since he'd put in 30 years of loyal service, but let's be honest about what this "retirement" really is.
- jlgreco 13y ago
  > sent out a rambling 1400-page email about reorganizing the company I really hope you mean 1400-word, but the fact that I can't say that for sure says a lot itself. ;)
rtpg 13y ago
maybe a bit off topic but the failure of the surface is really depressing, it's really nice hardware (a lot better than other laptops people are being pushed onto at least), and it also happens to be a tablet. I'm not sure what the messaging is on that though (tablet with windows/ultrabook with touchscreen)
chubot 13y ago
Pretty surprised nobody mentioned the $6 billion writedown of AQuantive. MS bought them as a (crazily impulsive) reaction to Google's DoubleClick purchase. That was also under Ballmer's watch. You could argue $900M isn't much, but $6B has got to be one of the bigger failed acquisitions in business history. http://www.bloomberg.com/news/2012-07-02/microsoft-will-write-down-6-2-billion-related-to-aquantive-deal.html http://www.bloomberg.com/news/2012-07-02/microsoft-will-writ...
- hga 13y ago
  If the board signed off on the acquisition, which strikes me as very likely, they might not score the resulting failure the way they'd score sharp and more quick failures to execute like the Surface RT and KIN. Reading the article, its a bit less clear cut---e.g. failure over a 5 year period intertwingled with their on-line efforts---than warehouses and a supply chain stuffed with devices they can't sell, vs. so many others having wild success at selling roughly the same sorts of devices. A forward looking failure, seeing as they're missing out on the hottest categories of "new things" while e.g. old competitor Apple is succeeding despite also having the drag of a legacy PC system. But, yeah, as I note below, "A billion here, a billion there, pretty soon, you're talking real money." (http://en.wikipedia.org/wiki/Everett_Dirksen http://en.wikipedia.org/wiki/Everett_Dirksen).

60 points by psibi 13y ago

Replace "analyst says" with "area man says" and you get a story from The Onion. I'd be more impressed if an "unnamed Microsoft board member" was the source.

davidgerard 13y ago
That was my first thought, too. "Oh, analyst w*nk."

cududa 13y ago

Bullshit. $900mm is a small mistake for Microsoft. They're too big for them to fire Steve over a billion dollar mistake. They still have multiple billion+ business. Im not saying they dont have massive problems, but that's absurd.

adventured 13y ago
The mess that got Sinofsky fired, was ultimately Ballmer's fault, as the buck stops with the CEO. So this is clearly not limited to one $900m mistake.
hga 13y ago
"A billion here, a billion there, pretty soon, you're talking real money." (http://en.wikipedia.org/wiki/Everett_Dirksen http://en.wikipedia.org/wiki/Everett_Dirksen)
AmVess 13y ago
MS has been making a litany of $bil mistakes. Keep in mind, the $900m is just the write down from slashing the price by $150. The real downer will come when they realize that those warehouses full of tablets with now outdated hardware will cost them 3 billion. In 2009, MS had OSes on 70%+ of hardware. Now, it's 21%. All that is from them missing mobile. They missed mobile in the same way IBM missed the PC market. If he truly was ousted, this is why. The untold billions of lost profit from missing out on mobile, not to mention the billions the lost on product failures, and I'm shocked the guy wasn't thrown out by security long ago.

untog 13y ago

Of course it's plausible, that's why they wrote this article citing a nameless "analyst". It also happens to be fantastic clickbait but I'm sure that has nothing to do with it...

jdcryans 13y ago
Not sure about the nameless part: "'He was definitely pushed out by the board,' said Patrick Moorhead, principal analyst with Moor Insights & Strategy, in an interview Friday"
- deleted 13y ago
  [deleted]

michaelpinto 13y ago

The first Surface was always going to have issues. But I think the real problem was that it should have come to market much sooner. And yet the idea of Microsoft getting into hardware must have been a difficult move given the culture and alliances they've worked so hard to build over the years.

hga 13y ago

This strikes me as likely; as noted, announcing a departure along with a search for a replacement is telling. Was the Surface RT the trigger? Well, one does wonder how many billion dollar write offs can occur under a CEO's watch before the board says enough. E.g. the KIN (http://en.wikipedia.org/wiki/Microsoft_KIN http://en.wikipedia.org/wiki/Microsoft_KIN), even if that wasn't to my knowledge formally written off.

apgwoz 13y ago
I had completely forgotten about the KIN. In all reality, I was hoping that the Surface would compete and bring Microsoft back in the competition (I hate Microsoft, but I'd hate to see them die off I'm also not a fan of Apple... but that's, I guess another story).
dhughes 13y ago
I thought the Courier was a great idea not just for the dual screens but the software as well the scraps and notes seemed like a great idea. https://www.youtube.com/watch?v=UmIgNfp-MdI https://www.youtube.com/watch?v=UmIgNfp-MdI
- joshavant 13y ago
  It was! There's also lots of gloriously amazing tech that the Microsoft Research division produces. However, from what I can see, for whatever reason, much of it doesn't see the daylight.
  - seanmcdirmid 13y ago
    Much research does't see daylight in general. That is the nature of research. Some does make into products, but you'd be hard pressed to trace its path from research to product from the outside.
  - i386 13y ago
    Politics, from what I've heard. Projects like the KIN where killed off my VPs who were afraid it would compete with their products, like Windows Mobile.

devanti 13y ago

Definitely seems true. You can almost feel it in his internal retirement letter to employees where he writes "My original thoughts on timing would have had my retirement happen in the middle of our transformation to a devices and services company" and "I take this step in the best interests of the company I love"

mratzloff 13y ago

I doubt it was any one thing, but it might have been the final straw. Microsoft has suffered embarrassing setbacks on its entire line of products and services, except Office. And with the PC market dwindling and Surface DOA, they're having to put Office in new places like iOS which they wouldn't have seriously considered a few years ago.

adventured 13y ago
Overall the Windows Server and Tools division has been extremely successful and maintained solid product momentum. It has six billion dollar businesses inside of it (server, sql, systems center, visual studio, virtualization, enterprise services). This division is the crown jewel these days, it's worth more going forward than consumer Windows is.

snowwrestler 13y ago

Analysts say lots of things.

arbuge 13y ago

Shame that forcing him out cost $768m - almost as much as the debacle in question...

adventured 13y ago
How did forcing him out cost $768m?
- deleted 13y ago
  [deleted]
wikyd 13y ago
The story about Ballmer making $768m is not about a golden parachute he received. Instead, because he owns ~$10b in stock, the increase in their stock price on news of his retirement "netted" him $768m.

SkyMarshal 13y ago

The most interesting question now to me is, not why is Ballmer stepping down, but who could run Microsoft well and succeed him? MS has only ever had two CEO's - the founder, and the founder's right-hand-man. This will be quite a transition for them. What does the board want, what are that person's areas of expertise, background, and experience, man or woman, etc.

brudgers 13y ago

As the second largest shareholder, Ballmer is more of "the board" than anyone except Gates. He owns more stock than any institutional investor. Th3 $900 million writedown was less than the fine Microsoft paid to the EU for not offering browser choice with Windows 8 - probably the precipitating cause of Sinofsky's departure last year. What is happening is a the generational shift from pre IPO leadership to post IPO leadership. The heirs have been identified and it's time to let them reshape the company. (My money is on Larson-Green with Reller running the numbers).

adventured 13y ago
Vanguard is holding 358m shares as of June 30th. Ballmer is sitting on 333m shares. Gates is holding 460m shares according to this USA Today article: http://www.usatoday.com/story/tech/2013/08/23/ballmer-microsoft-stock-worth/2692721/ http://www.usatoday.com/story/tech/2013/08/23/ballmer-micros... Although Yahoo Finance is reporting him at 398m shares.
corresation 13y ago
Ballmer owns about 4% of the outstanding shares. While that is an enormous holding, by no measure does that protect him if the board decides to punt him (the board doesn't speak on behalf of shareholders in descending unit order. They speak to the majority of shares).

ixnu 13y ago

A frustration that I don't hear mention too often is the mess that is MS software licensing. From my perspective, there is often confusion over what is covered and what it will cost and nobody will answer simple questions. I have been to five TechEd's and it is becoming common that speakers start a presentation with "do not talk to me about how to buy this" or "please talk to the license guys". I get this same answer from my local and regional MS sales reps. Sometimes getting pricing on the virtualization and what is covered by SA is a royal pain. Perhaps I have it bad because I work in higher ed, but it was that way when I worked in private enterprise.

bane 13y ago
The licensing cluster that was just plain consumer Windows 7 licensing was a disaster. The complete opposite of "focused".

Zigurd 13y ago

My theory is that it hasn't quite hit the fan yet. Microsoft and mobile handsets hangs by a thread at Nokia. If Nokia fails, and it probably will, that's it for Microsoft and "devices" as in a "devices and services company." That means Microsoft can wait a decade or two for the Next Big Thing, while it watches Android take 50% or more of enterprise endpoints. And that is enough to make a dent in revenue.

jlgreco 13y ago

I would have bought one of those damn things too, if only they didn't lock them down. Why the hell did they even do that? Were they really concerned that people like me would buy them and then not use windows on them? I don't see that being much of a threat to their business.

fnordfnordfnord 13y ago
I always thought that their angle was going to be that they would sell (the product ecosystem) to content providers as a trusted platform, same to businesses; who might want that to some degree. If they could do that, and get the trust of the copyright mafia, then they might have been able to sort of monopolize distribution of movies and music. Maybe even keep their monopoly on office productivity apps (I hear that people use those on their tablets?). I agree that there can't be enough geeks willing to buy one just to install Linux on it for MS to worry.
- jlgreco 13y ago
  Eh, maybe. My impression is that only the ARM ones were locked down though. I think the Surface Pro lets you install Linux or whatever.. I haven't really looked into that since that device doesn't really seem interesting to me. If their angle was that they needed to keep it locked down to secure slick media contracts, I would expect both to be locked down so that they could keep some semblance of feature parity between the two.
  - fnordfnordfnord 13y ago
    Yeah, well, I'm no Steve Ballmer, so I couldn't pretend to fully understand their business strategy for the last decade.
    - jlgreco 13y ago
      Ha! True. Trying to figure out why they do things the way they do is likely an exercise in futility.

thucydides 13y ago

The credulous initial stories about his "retirement" were funny. Ballmer was 100% fired. In the long term, the company seriously failed on many fronts. In the short term, Ballmer posted poor quarterly results and sent out a rambling 1400-page email about reorganizing the company, a last ditch effort to show the board he was trying to right the ship. How often does a CEO announce a major reorganization and then quit? And MSFT's official statement says Ballmer is out as soon as they find a successor. It was kind of the board not to cap him execution-style, since he'd put in 30 years of loyal service, but let's be honest about what this "retirement" really is.

jlgreco 13y ago
> sent out a rambling 1400-page email about reorganizing the company I really hope you mean 1400-word, but the fact that I can't say that for sure says a lot itself. ;)

rtpg 13y ago

maybe a bit off topic but the failure of the surface is really depressing, it's really nice hardware (a lot better than other laptops people are being pushed onto at least), and it also happens to be a tablet. I'm not sure what the messaging is on that though (tablet with windows/ultrabook with touchscreen)

chubot 13y ago

Pretty surprised nobody mentioned the $6 billion writedown of AQuantive. MS bought them as a (crazily impulsive) reaction to Google's DoubleClick purchase. That was also under Ballmer's watch. You could argue $900M isn't much, but $6B has got to be one of the bigger failed acquisitions in business history. http://www.bloomberg.com/news/2012-07-02/microsoft-will-write-down-6-2-billion-related-to-aquantive-deal.html http://www.bloomberg.com/news/2012-07-02/microsoft-will-writ...

hga 13y ago
If the board signed off on the acquisition, which strikes me as very likely, they might not score the resulting failure the way they'd score sharp and more quick failures to execute like the Surface RT and KIN. Reading the article, its a bit less clear cut---e.g. failure over a 5 year period intertwingled with their on-line efforts---than warehouses and a supply chain stuffed with devices they can't sell, vs. so many others having wild success at selling roughly the same sorts of devices. A forward looking failure, seeing as they're missing out on the hottest categories of "new things" while e.g. old competitor Apple is succeeding despite also having the drag of a legacy PC system. But, yeah, as I note below, "A billion here, a billion there, pretty soon, you're talking real money." (http://en.wikipedia.org/wiki/Everett_Dirksen http://en.wikipedia.org/wiki/Everett_Dirksen).