Reuters reported recently that Steve Ballmer will earn a $100,000 less this year.
Steve Ballmer is a billionaire. He has an estimated wealth of more than 11 billion. Do you think he cares about making $ 100,000 less this year?
Well, I think he does. A lot.
It must suck to be Steve Ballmer.
Sure, the money and power is great but he just never gained the admiration and respect he must be yearning for. Take a look at some interviews recently and you will have a hard time finding one where there isn’t a comparison being made between Apple and Microsoft or Jobs and Ballmer. Every time Jobs is mentioned you can almost see Ballmer cringe.
You would think that at least other CEO’s and managers respect him right? Well, not according to Forbes CEO Approval tracker. For years now poor Ballmer has been getting nothing but bad reviews from his peers who read Forbes. Compare that to Steve Jobs’ ratings and the contrast is stunning.
Screw those managers right? As long as investors keep loving Microsoft who cares about the rest of the world? Well, no luck there either. Microsoft’s shares have started losing their value the day Steve Ballmer took over as CEO and seem to have never recovered.
So how unfair is this exactly? Isn’t he the greatest manager of all time steering one of the biggest and most powerful companies in the world? Well yeah, but he seems to be steering it into the ground. The news of Ballmer’s bonus being slashed is the first, but telling, sign that Ballmer is on his way out.
That is a bold statement so I will repeat it: Steve Ballmer is on his way out.
Let me tell you why I think that Steve Ballmer should and will retire from Microsoft (or announce his retirement) in January 2010.
1: in January 2010 Steve Ballmer will have been the CEO of Microsoft for exactly 10 years
2: in that time Microsoft has lost more than half of its stock value
3: there isn’t a single product or service that was launched under Ballmer that is successful today
Shareholders have been patient with Ballmer. Compared to the shareholders at most other companies they must have been comatose.
Consider Carly Fiorina at HP. She was CEO of HP from July, 1999 till February, 2005 and saw HP’s stock price fall from $52 per share to $21. She also spearheaded a controversial merger with Compaq which didn’t show immediate results so she was forced out as a result. Declining stock, bad deal with Compaq, and she’s out. Business as usual really.
So how different is Steve Ballmer from Carly Fiorina? Well, his stock didn’t exactly decline 59% in 6 years. It declined 53% in 10 years. Slightly better than Fiorina but any other CEO would have been forced out long ago.
So what did Ballmer do these past years? He doubled the employee count from roughly 30,000 to more than 60,000 and managed to multiply his revenue almost 2,5 times over (from $19.75 billion in 1999 to $60.42 billion in 2008) and almost tripled Microsoft’s net income from $7.79B to $22.49 billion. Not bad at all right?
Not unless you take a look at the worldwide PC sales numbers. Those tripled too in the same period: from 130 million PCs per year in 2000 to an estimated 330 million in 2009. All Microsoft was able to do is grow with the flow. Computer sales grew 2,5x and Microsoft’s revenue grew 2,5x. But they didn’t really grow, they only just ‘kept up’ with consumer demand. That’s all memorable but hardly what you would expect from a great company.
With $ 23 billion cash in the bank(!) Apple could today buy more than 10% of Microsft. Not long ago Microsoft had to ‘save’ Apple by investing 150 million in the then struggling company. Apple’s market cap was around 12 billion at the time so that 150 million got them between 1 and 2% at most.
Talk about a reversal of fortune…
This Thursday Steve Ballmer is being interviewed somewhere in the Netherlands and I’m going to be there. If get a chance I will ask him about his plans for the future. I’m not assuming he will confirm my theory of course but it is interesting to hear how he feels about his achievements these past 10 years.
And, I will do a follow-up post in January 2010 or course.
Ballmer admitting defeat?
“Microsoft never recovered from Vista blow, says Steve Ballmer”
http://www.telegraph.co.uk/technology/microsoft/6263248/Microsoft-never-recovered-from-Vista-blow-says-Steve-Ballmer.html
I watched that interview too and although he made a much better impression on me than he did in other interviews (relaxed, thoughtful) I still got the impression that he knew very well what was wrong with everything he ever did but just couldn’t find a way to express it. He never admits that other products are doing better than his products and chooses to ignore developments that are threatening or which could be opportunities.
Comparing Microsoft to Apple is something that is done far too often, and more often than not, in the wrong context.
Apple had 35K employees at the end of Q1 ’09, by no means a small number, but not comparable to the mammoth force of 60,000 employees at Microsoft.
Don’t get me wrong, I’m a Mac man through-and-through, but the article reads too one sided to me. Having not met Steve Ballmer in person, I can’t comment too heavily for or against, but after seeing his recent interview on TechCrunch, I can’t help but think the guy has his head in the right place.
I think he’ll be sticking around for some time to come.
Steve Ballimer understands healthy competition I’m sure. As a mature entrepeneur and successful in his ventures, it’s going to take a lot more than a ‘second place’ product and a handful if nay-sayers to scare him into a corner and quit.
I’m curious to know what will come out of Microsoft next.
Apple and Microsoft are driving this era into a simplier, more productive culture all around. In a world of rapid growth and innovation, healthy competition is the driver of change, that is reshaping our culture and the world as we know it.
Great article Boris. @Armin It is not only compared to Apple, check out some graphs I made.
Very insightful article.
Minor typos: 2,5% should be 2,5x, twice.
Needless to say, i don’t like this guy. It seems to me that he has no clue of what he’s doing and no clear vision of where the company is going or is supposed to be going. He’s not a contributor to the company or technology and based on recent evidence, he’s.. well… doing harm. Not to mention the embarrassing moments like “developers… developers…”.
Ballmer was hired just because he was good friends with Gates and Allen and a good salesman (?!?!?!!? – we’ve all seen the windows 1.0 ad). Rumor has it that he’s a funny guy and always in a party mood but that’s not what makes a good CEO or a good company’s president.
I think he’s a joke and young CEOs should study him in order not to be like him
I agree with you article, of course.
In many ways it was Bill Gates fault. He picked someone who was loyal.
All Ballmer has been doing is holding onto the status quo. Microsoft was virtually taken no real risks.
I read an interview of his once where he was proud of the fact that he had every hour of his time planned out for the year. He reminded me a lot of Carly Fiorina.
A good CEO in a tech company should be managing the strategy and looking out for how the world will look like 10 years from now and planning accordingly.
A case in point is Gates who came out with Windows 1.0 in 1983 and held onto it until it was a standard finally in 1990.
Of course, like you mentioned Jobs is simply the gold standard CEO of tech companies right now.
-Augustus
“there isn’t a single product or service that was launched under Ballmer that is successful today”
*Cough* Xbox 360 *Cough*
PS- Windows XP was launched in October 2001….
I love the first “reason”: He’s going to quit because 10 is a nice and round number to quit at.
luv luv this post…highlights that some execs are paid way too much just to ride out market trends, grind out some profits and destroy shareholder values.
I think there should be an exchange program where big CEOs have to run a start up for 6 months. They can really learn how to make effective decisions, launch good quality products quickly, run marketing on limited budgets and make shareholders happy.
Balmer is not going anywhere. Developers, developers, developers, developers.
Thinking about something insightful to say……..Gears of War anyone? :D
I do believe that there are some other factors to also consider when looking at the performance of Balmer:
1. He had to go through the dot com burst
2. He also has to steer the company during the Current Credit Crunch Crisis
3. Rise of Netbooks that could not run ‘fatty’ Windows
4. Nutty Competitors that provide free competing software
5. Windows Vista was released too soon.
Points 1 en 2:
Keeping sales steady during a major economic crises is hard. And he was forced to do that twice. The dot com burst was also accompanied with a major slow down in pc sales. And the current crisis isn’t doing him any favors.
Point 3:
Netbooks had a quick rise, but customers are abandoning their Netbooks for more powerful laptops.
This will help MS in selling more copies of Windows in the future. A lot of Netbooks had some version of Linux installed. But a lot of customer simply weren’t pleased with the Linux version they got on their little Netbook.
This is a major blow to Linux in general.
This was their opportunity to shine and show what Linux was capable of.
But no Netbook user is going GaGa over Linux and their Netbook. A Tiny form factor, an underwhelming OS and Little Power to run heavier programs has made the Netbook look like a silly option.
Point 4:
MS is getting a lot of competition from companies that are willing to give their software away for free in order to compete with MS.
I am thinking of MySQL, FireBird Postgres etc. But also office applications like Open Office, Zoho and Google apps.
MS is now (finally) competing with free versions of their office products and companies will tend to go for old faithful (even if faithful is evil).
Point 5:
Vista was released too soon. The vista specs were too steep. The fact that some devices were not compatible with Vista was also a major blow. But Vista and the changes to the core OS were needed, they were the basis for Windows 7 and a lot of things to come.
The road ahead
Microsoft’s bad luck is about to change.
1. MS is gaining momentum with Windows 7.
2. Bing seems to have found its niche in Search.
3. Customers prefer a Windows OS on their Netbook instead of the standard ‘alien’ Linux version.
4. They are competing with free tools of their own: SQL Server Express, Visual Studio Express, Free online versions of Office products
5. BizzSpark program and Webspark program that provide FREE software and licenses to startups.
Maybe stock holders should be glad that baldy was able to keep the company a float during two major economic crises.
They should thank him for keeping stock dividends steady. Yes peeps, market value isn’t the only thing that shareholders look at. Big institutions, especially, look at dividend, dividend payout rate, stock to dividend ratio and intrinsic stock value.
Those factors make MS stock VERY interesting.
So should we really be pissing on Steve this much?
The comments section on the blog seems to be broken…..I sometimes don’t see the comments….but I am still able to post new comments.
I also noticed that you showed MS stock in 1999.
1999 was the height of the dot com bubble. The stock value of hotair.com and petstore.com was 50 bucks back then. :D
Another fast and loose fact: The rise in MS stock value from 1997 – 2000 is simply mad hype in the market. Mad hype that was fueled by the dot com bubble.
Steady share trends are a good thing! Only daytraders and f-ing short sellers like to see sharp rise/falls in stock values.
That’s why they spread rumors and release bogus press releases. Like: stolen/breached password files on certain popular mail sites. :D
This is ridiculous.
Before becoming CEO, Steve served as the development manager for Windows, creating one of the greatest franchises in the history of business.
As you point out since becoming CEO he tripled the profits and revenue, such that Microsoft is now the 3rd most profitable publicly traded company in the U.S., behind only Exxon and Chevron. And FAR ahead of Apple, Google, Amazon, etc. He did this during a decade of intense competition, including a business model built entirely on free software. A decade ago, people just like you were certain Microsoft would be gone within just a few short years. Instead it’s the 3rd most profitable company and far and away the most profitable software company in the world. Your point that Microsoft grew only as an effect of growing PC sales is questionable at best. Why do people buy PCs! Surely not to have a piece of hardware sit idle in their office. More likely software plays a key role in spawning PC sales, evidenced by the intense commoditization in the PC industry during the 90s and early 2000s.
Have people at Apple or Google done great work during the same time? Sure, and more power to them. Keep in mind their growth rates are based on starting from scratch. Apple was teetering on bankruptcy when Jobs took over. But when it comes to who has created the most absolute value in dollars, Microsoft is far and away the leader in the software industry.
The stock price alone is not an adequate measure of the work Steve has done. Keep in mind the company has also returned over $20 billion to shareholders as dividends during this time. When they issued a special one-time dividend several years ago, it was cited by the Federal Reserve as an economic event that had ripple effects throughout the economy because of its staggering size.
56 comments yet I see none?!!? I think someone is fiddling with the wordpress system.
I think you’ll find Xbox is a successful product and it was launched in 2004.
Your post must poorly thought through or you wouldn’t make such sweeping statements.
Seriously get him down. Just ask a simple question, can you trust a guy who does monkey dances?
Parts of Ms are very profitable but unfortunatly this is offset by major expenditure and areas of losses.
Do we need bing? Could it just be called yahoo instead? Does hotmail need to be called live? Lots of money has been spent on rebranding and renaming when it really has added zero benefit to the customer. Does a accountant care that win 7 boots faster than vista. Does this make the reports happen quicker? Do we really need screens that we wipe our fingers on after going to the bathroom? The answer is no.
The truth is MS is in to make money and the only way for MS to do that was to get rid of the press-donkey called vista and end xp which does more to harm the integration than Linux does. People are more suspicious of MS as there are more choices now for great software than there has been for a while.
Shut up
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Well, ‘successful in his ventures’? He hasn’t been doing a very good job for the past 10 years. How much longer do you want to give him? Not that it is for us to decide, but the shareholders must have an idea…
fixed, thanks!