Should Steve Ballmer Go as CEO?

Shareholder vote to retain the CEO raises questions

The following is a guest blog by freelance editor and self-confessed keyboard geek Marco Chiappetta: At Microsoft's annual shareholder meeting, which took place this past week at the Meydenbauer Center in Bellevue, Washington, Steve Ballmer received votes representing 92% of shares to keep him in place as the company's Chief Executive. In a political election, receiving 92% of votes would be considered a monumental landslide, but in the private sector, at a company as important and as profitable as Microsoft, the results from the shareholder meeting have raised questions as to whether or not Ballmer should be replaced.

Consider this: At last year's shareholder meeting, Ballmer received votes representing almost 95% of shares, so confidence in his abilities to lead the company have clearly waned. The roughly 8% that voted against Ballmer this year equate to approximately 468 million shares  -no small number. Also consider that the remaining directors at the company, including Bill Gates, were all reelected with votes representing over 99% of shares.

The calls for Ballmer's exit seem to mostly stem from Microsoft's relatively stagnant stock price (and perhaps Ballmer's occasionally loony behavior).

March 10, 2011, marked the 25th anniversary of Microsoft's IPO. At the height of the Internet bubble on December 1, 1999, the stock price hit its high watermark at $58.38. Since that point, however, the stock has tumbled and remained mostly flat, hovering around-but mostly below-the $30 mark.

Save for a few peaks and valleys and normal market fluctuations, Microsoft's stock has been mostly flat for the past decade.

Earlier this year, prominent hedge fund manager David Einhorn had called for Ballmer's firing, claiming that, "His [Ballmer's] continued presence is the biggest overhang on Microsoft's stock."

Forgetting about the bean counters for a moment though, having just finished reading Steve Job's Biography, a few comments made by Apple's deceased leader have particularly stuck in my head in light of this latest news. It seems Steve Jobs shared a similar view, but for different reasons. When speaking of Microsoft, Steve Jobs said, "They've clearly fallen from their dominance. They've become mostly irrelevant." He continued with some more mostly negative comments about Bill Gates and the company in general, but this statement about Ballmer is most pertinent to the topic at hand, "When the sales guys run the company, the product guys don't matter so much, and a lot of them just turn off. It happened at Apple when Sculley came in, which was my fault, and it happened when Ballmer took over at Microsoft. I don't think anything will change at Microsoft as long as Ballmer is running it." Considering Jobs' contempt for Sculley just before his passing, comparing him to Ballmer couldn't be more of a derision.

Ballmer has also clearly misjudged many competing products over his tenure, most famously the iPhone, saying it had "no chance" for success. That misstep alone probably cost Microsoft countless millions in the mobile space, but is the company doing poorly enough that Ballmer should be ousted? Looking at Microsoft's most recent financial disclosures and examining a broader piece of the technology landscape, it's difficult to make a case against Ballmer.

Microsoft recently announced record revenue of $17.37 billion for the quarter that ended September 30, 2011, which was a 7% increase from the same period last year. Although Jobs considered the company "irrelevant", Microsoft is also the clear leader in a number of markets. In the game console space, for example, the Xbox 360 has outsold its competitors for months on end and continues to lead. Some would also argue that the PC itself is the premiere gaming platform (myself included). Microsoft has also released one of the more innovative devices of the past decade in the Kinect. Its on-line and standalone Office products continue to perform very well for Microsoft, Bing market share continues to grow, and the Server and Tools division showed 10% year over year growth as well. In addition, Microsoft recently inked deals with a number of manufacturers to receive royalties for every Android device they sell, which will add significant revenues to the company's bottom line. And let's not forget Windows' approximate 92% desktop market share. (There's that 92% again!)

Even at this early stage of development, the majority of the industry also seems high on Windows 8, most notably in the mobile space. And despite lackluster sales of Windows Phone-based devices up to this point, the latest iteration of the OS codenamed "Mango" has been widely praised by reviewers and users alike. Should Windows 8 take off (and most early indicators say it will) and offer seamless integration with Windows Phone 8, the company's presence in the smartphone and tablet arenas could look significantly better in a year or two.

The discussion begs the question: Should a CEO of Technology company like Microsoft be more akin to an visionary or a salesman? In a few rare instances, successful CEOs have excelled at both, but it is uncommon.

Like this? Here's more from Marco:

Microsoft Isn't Apple: Redmond OKs Windows Phone 7 Jailbreak ToolWill Windows 8 really perform on well on low-end hardware? Here's a test

Why Windows 8 is Microsoft’s 'Apple-like' Slippery Slope

Copyright © 2011 IDG Communications, Inc.

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