The future of Microsoft: Have they been resting on their laurels?

We knew it would be coming at some point, Microsoft haven’t performed too well. Now with consumers, share holders and analysts looking scarce about Microsoft, somebody had to fall. Steve Ballmer has held the position of CEO at Redmond from 2000, but now he is to step down as top boss of Microsoft within 12 months. Ballmer has said he’ll leave the American software giant after several attacks by investors, who have claimed that the company is ‘undervalued’.

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Ballmer’s decision comes at a time when Microsoft is said to be stagnating in innovation and ideas; their attempts at entering mobile markets, more of a fun experiment. Ballmer suggested in go memo on Friday that the timing of his departure wasn’t his choice. During his memo and later interviews he has demonstrated a sense of reluctance to leave Microsoft, but he now believes the time has come:

“This is an emotional and difficult thing for me to do,”.

When asked if he had pre-planned his departure and felt the time was right, he also said:

“I would say for me, yeah, I’ve thought about it for a long time, but the timing became more clear to me over the course of the last few months.”

Increasingly, investors and stockholders have said that Microsoft is undervalued. ValueAct Capital Management were one of the biggest to attack Ballmer directly – stating he was part of the problem. Rebel investor, David Einhorn – who also gave Apple a hard time – said that he should have stepped down. With Ballmer being “the biggest overhang on Microsoft’s stock”.

With Ballmer taking the helm in 2000, Microsoft’s shares fell below their $52 high in the 90s and lay stagnant at $38 for some time. Now sat at $33, Redmond’s share price rose slightly at the announcement of Ballmer’s departure but have since flopped again. Ballmer hasn’t always been admired across the industry and throughout his reign has been painted as a ‘babbling buffoon’, some clearly disagree. But nevertheless his journey has been interesting. Pressure has built with the launch and subsequent failure of Windows 8 and the slow uptake of Windows Phone. Microsoft hasn’t adapted to market change, and instead of innovating has sat on the income of Windows license sales and renewals for the past 13 years. It hasn’t found a big money grabber in the 21st century and the firm has taken a hit from the likes of Apple and Google who have moved into their patch, stealing some traditional PC users.

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Microsoft is in the middle of a total reshuffle of staff, in order to aid product development and innovation. Adopting a more Apple like approach and structuring to produce a killer product. Instead of product design and software teams working independently on products, Microsoft will become ‘one’. With each department working together on each product, hopefully for better results.

But with Ballmer moving out, where will Microsoft head now? It looks like Stephen Elop, ex-Microsoft Office division, who went to head up Nokia, may be in for a run for CEO. It will be key for Microsoft to take somebody from the inside, or with prior inside knowledge to continue Microsofts current style and reworking of the company at this shifty time. That said, Satya Nadella may also make a good candidate for Redmond CEO. Her current position at  cloud based companies may give Microsoft the edge in the online space. But while the bookies are taking their biggest bets, we can’t rule out Qi Lu, ex-Yahoo employee and now Bing worker.  Microsoft is looking strongly at hiring from inside, but in a personal opinion, this may prove fatal.

Ballmer and Co oversaw a series of deafening blows to Microsoft throughout his reign and bringing some of those higher up through the system may cause a reoccurrence. The scramble to launch Windows 8 and the Surface tablet showed how Microsoft hadn’t kept up to speed with the tablet revolution; but even earlier than this, the signs weren’t good. Apple launched the iPod in 2001, it changed the music industry and left Microsoft behind. Ballmer ushered in the Zune in 2006 and peaked at the wrong time. Microsoft hadn’t launched in time or with the right features. Another blunder by Ballmer led to the open market for the iPad, and XBOX tablet named ‘Courier’ was axed at his command just as the successful Apple pad launched. Microsoft missed a trick.

With all the names high in the air in regards to who will steer Microsoft towards better days, Ladbrokes betting has still pushed a few unlikely names out into the hat.  With Sheryl Sandberg, Facebook Chief Operating Officer (33/1), Twitter founder Jack Dorsey (40/1) and yes, even Apple’s Tim Cook (100/1). It is also unlikely that we’ll see Bill Gates, Founder of Microsoft, return to the helm. Leaving in 2000, he stepped down and took Chair of the Board in Redmond. His work with his Wife, Melinda Gates, in eradicating Polio and fighting humanitarian crisis around the world has led him to leave Microsoft behind. Rejoining Microsoft would draw him away from charity and would be more of a loss than a gain for humanity.

Now Microsoft has to work in a more dynamic and fluid market than ever before. They don’t just have to fight Apple and Google but even retailers such as Amazon. Amazon launched a foray of cloud services to compete with Google and Apple in March; this will have made it much harder for Microsoft to step up the game. With many hoping that Gates would return to Microsoft, the current outlook doesn’t look promising. He has already said that he won’t be returning to Microsoft.

As Gates gets ruled out of the line up, we can only look for new fresh blood to take CEO at Microsoft. Microsoft need fresh ideas and a fresh direction. They can’t rely on Windows licenses forever and any new CEO will need to consider the junctions and crossroads that it will face in a few months. It is unlikely that Microsoft will be able to take on the iPad with Windows 8, even with 8.1 around the corner. Microsoft will need to look for something ‘new’ and different, instead of following the rest of the market. The PC isn’t dead, but manufacturers have shown signs of slowing down in sales and interest in the old aged platform and Microsoft need to move on. The XBOX One will offer a chance for Microsoft to expand its horizon, but only if they execute it properly.

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Microsoft will need to change soon, it won’t die away instantly but it could happen over time. They may soon hold a smaller role in the technology market as their Windows OS is chipped away by the touch revolution, a role that won’t be to the liking of currentSteve_Ballmer Microsoft fans. Without anybody knowing who Microsoft will pick, we can only hope for fresh ideas and fresh thinking at Microsoft. Microsoft needs a fresh thinker, Microsoft needs a fresh leader. And Microsoft need to move on from the past and develop something new and move on from the mistakes of the past.

 

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