5 highs and lows of Steve Ballmer’s Microsoft tenure

The Boardroom

by Joe Curtis| 20 August 2014

Now the dust has settled, what is Ballmer’s legacy as Microsoft CEO?

Six months since retiring as CEO of Microsoft, Steve Ballmer announced he was stepping down from the board yesterday.

He said his departure, effective immediately, was so he could focus more on his personal acquisition, the Los Angeles Clippers basketball team.

In his public resignation letter to new boss Satya Nadella, he wrote: "I bleed Microsoft - have for 34 years and I always will.

"It would be impractical for me to continue to serve on the board, and it is best for me to move off. The fall will be hectic between teaching a new class and the start of the NBA season so my departure from the board is effective immediately.

"Microsoft has been my life's work and I am proud of that and excited by what I see in front of the company and this leadership team. There are challenges ahead but the opportunities are even larger."

His letter got a respectful response from Nadella, praising Ballmer's steering of the Redmond ship - but his departure from the CEO role in February triggered a massive 24% rise in Microsoft shares.

So how successful was Ballmer in charge of one of America's biggest companies? Here's CBR's take on the five biggest highs and lows of Ballmer's tenure.

Skype

Microsoft bought Skype for $8.5bn in 2011, prompting a deluge of speculation as to whether it had spent a tonne of money it will never see again, owing to the fact that most Skype calls are over-the-internet calls, and therefore free.

However, in the three years since the purchase, Redmond has been busy integrating Skype into its many applications. Ballmer made sure it connects directly into Outlook.com, Office 365, Xbox, Windows 8, Bing, Microsoft Messenger, Windows Phone and Lync, its B2B VoIP technology.

That integration means that while Skype isn't the biggest cash generator on Microsoft's books, it doesn't need to be. The simple fact that users of other Microsoft products get Skype access from most of their daily applications means they're more likely to stay with those applications: they don't need to leave an app and use Skype, or another VoIP service, separately. That in turn means they're less likely to ditch Microsoft for a competitor.

Xbox

The first Xbox was released way back when in 2001, representing Microsoft's early but bold steps into the videogame industry. It sold 24 million units over the next five years, with its successor, the Xbox 360, selling 83 million units until March 2014, when Redmond announced the Xbox One.

The console has seen plenty of hit games, many exclusives, and has turned the videogame market into a three-way battle between Nintendo, Sony and Microsoft.

However, Redmond has faced calls from investors for it to dump the device - and others including its Surface tablet as recently as February, seeing it as a distraction from its main business.

Xbox is thought to still be a few billion dollars in the red, which has mainly been attributed to the original costs of entering the games market and the R&D behind the latest Xbox One release.

But with Nadella's focus on moving away from Windows to focus on a strategy of being mobile-first and cloud-first, the Xbox has proved a hit as far as product integration via the cloud goes.

"The single biggest digital life category, measured in both time and money spent, in a mobile-first world is gaming," Nadella wrote in a recent blog.

"Xbox is one of the most-revered consumer brands, with a growing online community and service, and a raving fan base. We also benefit from many technologies flowing from our gaming efforts into our productivity efforts - core graphics and NUI in Windows, speech recognition in Skype, camera technology in Kinect for Windows, Azure cloud enhancements for GPU simulation and many more."

Does that mean he has saved Ballmer's bacon? We'd argue no, because without all the groundwork Ballmer did in creating the product, Nadella's cloud strategy -and its reach to consumers - would be severely hampered.

Tablets and smartphones

The big criticism of Ballmer's reign is that he ballsed up by missing the boat on tablets and devices. Rumours abound that Redmond had plenty of interesting developments going on but would shut them down quickly if they threatened the central business of Windows or Office.

The first iPad was released in April 2010. Redmond didn't respond with the Surface tablet until October 2012, which time Apple had already announced the fourth-generation iPad. Microsoft was even forced into a $900m write down through poor sales of the Surface.

That's tablets - there's also smartphones to consider. Yes, Microsoft bought Nokia for $7.2bn at the start of the year, but by then Apple and Google, through its operating system Android, owned almost the entire smartphone market.

Ballmer admitted as much in a call with analysts last September: "I regret that there was a period in the early 2000s when we were so focused on what we had to do around Windows that we weren't able to redeploy talent to the new device called the phone."

Ouch, that is a major blot in his copybook, and Microsoft is still playing catch up now.

Innovation

Under Ballmer, Microsoft revenues rocketed (from $25bn to $70bn)and Windows and Office became a powerhouse, cementing Redmond's domination of the enterprise software market. But perhaps due to this success, Microsoft is now having to contend with more open products influenced by social media. Tools like Huddle make collaborating on a document easier, while Facebook's former CTO has even set up Quip, a stripped down document editing suite that works across devices.

Yammer

Ballmer's $1.2bn acquisition of Yammer is Microsoft's great hope for the enterprise social world. What's more, integration between the enterprise social network and Redmond's SharePoint is getting better - a key move to establish both as serious applications for companies to share ideas and boost collaboration.

There's definitely an argument that while Skype was a smart buy it was also too expensive, but Yammer's one that might actually pay off.

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