RSSSteve Ballmer has one more chance to save his job
By Joe Wilcox | Published July 28, 2010, 3:20 PM
July 29, 2010 may be remembered as the most important day in Steve Ballmer's career at Microsoft. Tomorrow, the company hosts its annual Financial Analyst Meeting, or FAM. How much Ballmer and his core leadership team spend concretely talking about the future, rather than the past, will foreshadow how long the chief executive can remain the big boss. Nearly as important: Which executives will make presentations.
Microsoft closed fiscal 2010 on June 30 and last week announced record fourth quarter and yearly results. (I skipped covering Microsoft earnings for the first time in nearly a decade, to attend San Diego Comic-Con. I will likely post a belated "by the numbers" analysis after FAM.) Microsoft uses the event to offer financial analysts a long look back at the old fiscal year and to give a sneak peak at the FY ahead.
Much is different this FAM. There has been increasing public outcry for Microsoft to replace Ballmer. In June, I sadly wrote "I have lost confidence in Steve Ballmer's leadership," about six months after asserting "Microsoft don't give up on Steve Ballmer just yet." More than any other FAM, Ballmer must convey confidence -- that he can steer the good ship Microsoft through the stormy seas ahead.
The CEO must command the FAM stage like never before. He must present tangible, practical vision about what Microsoft will accomplish in three months, six months and by June 30, 2011. The task is so mountainous that reaching the summit would be reason enough to give Ballmer another 12 months as CEO. But the climb will be arduous because of obstacles corporate cultural and logistical.
Historically Microsoft takes the long view to product development -- often planning five years out. This long view worldview is a core strength and one of the fundamental reasons for Microsoft's business success. But with the computing winds shifting in favor of cloud-connected mobile platforms, Microsoft's long view has become near-sightedness. Related: Microsoft's corporate structure, size and money-minting monopolies result in slow-moving directional changes. Ballmer won't easily present achievable short-term goals to financial analysts.
Still, Ballmer has some short-term deliverables to present, such as Windows Live Wave 4, Windows Phone, Xbox Kinect and Yahoo search. To reiterate: FAM attendees need to hear concretely about what Microsoft will deliver within three months and by end of calendar 2010. Everyone knows that Office, Windows and Windows Server are doing well as the economy makes modest recovery, particularly in many strategic international markets. It's what financial analysts don't know -- or only can surmise -- about the future that is the more important information.
Signs of Microsoft Weakness Going into FAM
1. Apple and Google are wooing customers and developers to their mobile platforms. The wait list for new iPhone 4s is two to four weeks, and more than 160,000 Android phones are activated every day.
2. Windows Mobile has fallen to fifth place in smartphone OS market share, according to Gartner.
3. Windows Phone 7 is still months from shipping and its future remains hugely uncertain given its oh-so 2007 feature set and late-to-market release.
4. While improved, valuable volume-licensing renewals aren't reaching pre-recession levels, mainly because of smaller corporate customer workforces.
5. Early Office 2010 retail sales are disappointing, according to NPD, which foreshadows slower consumer demand. Among consumers, the productivity suite category has peaked in appeal.
6. For full fiscal 2010, Microsoft Business Division revenue fell by 1 percent, while income increased by 1 percent -- against favorable year-over-year comparisons. "Operating income increased due mainly to decreased operating expenses, offset in part by decreased revenue," according to Microsoft.
7. Microsoft's Online Services Division continues to lose money, with Yahoo reimbursement offsetting fiscal fourth quarter's 19-percent year-over-year advertising sales gains.
8. Apple sold 3.2 million iPads during the launch quarter, succeeding in a category Microsoft promised to jumpstart a decade ago.
9. HP, Microsoft's most important Windows tablet partner, abandoned ship by buying Palm and announcing products running WebOS.
10. Since the September 2009 financial collapse, Microsoft has refused to give Wall Street forward guidance. The tactic conveys weakness -- that Microsoft is so uncertain of sales it dares not estimate revenue or earnings per share for coming quarters.
Potential Microsoft Strengths for Fiscal 2011
1. Windows 7 is a huge success -- however, Microsoft benefits from strong PC sales. For fiscal fourth quarter, Windows & Windows Live revenue rose by 44 percent and income increased by 59 percent year over year. Microsoft has sold 175 million Windows 7 licenses.
2. SharePoint is the new Office. The product continues to make sales gains even as Office 2010 sells modestly well.
3. Businesses are buying technology again, and version 7 upgrades are a given, since so much of the Windows install base runs XP.
4. International markets, particularly many emerging ones, are recovering faster. These are the markets with greatest growth potential for Microsoft. Related: Economic recovery means more businesses are likely to buy than pirate.
5. Microsoft marketing campaigns for Bing, Internet Explorer 8 and Windows 7 are winners. Microsoft has rediscovered the value of good marketing and is building and rebuilding brands, particularly by aggressive television advertising.
6. Windows Phone 7 will release during first half of fiscal 2011, finally giving Microsoft something to sell against Apple, BlackBerry and Google smartphone operating systems.
7. Bing continues to gain search share (unfortunately more from partner Yahoo than competitor Google). Branding and marketing are as much reasons for gains as technology. Cobranding with "American Idol" host Ryan Seacrest tips off where Bing marketing can yet go.
8. Microsoft has started delivering search results for Yahoo, which also means that the worst of the distracting integration is over. Now Microsoft can present something better to advertisers and partners.
9. The long-awaited, but pricey, Xbox Kinect will release for the holidays. Microsoft may have found a way to reinvigorate Xbox sales without releasing a new console.
10. Microsoft is in process of launching Windows Live Wave 4, and some of the integration with Windows and across social networks looks promising. The latest Windows Live Essentials is the best version yet, nearly closing the gap on Apple's iLife suite.
What Ballmer Must Convey During FAM 2010
Microsoft's CEO has much to lose, starting with his job, should he and his core leadership team fail to deliver a clear and immediate vision of Microsoft's near future. The two lists of 10 things above offer a framework for what and what not to emphasize. If Ballmer apologizes for mobile mistakes and makes promises about next-version done right, Microsoft's board of directors should fire him on the spot. There's no time for apologies or far-off promises. Microsoft's future is now. Because Wall Street analysts and Microsoft watchers see that:
- Google has led in search since early 2003, despite Microsoft's best efforts to catch up
- Microsoft has fallen behind in mobile, after being a leader in smartphone operating systems
- Apple snatched away the tablet category that Microsoft cofounder Bill Gates trumpeted for years
- Microsoft's cloud strategy has drifted from the original vision; its future direction or success is cloudy
- Apple's brand towers over Microsoft among consumers, particularly the next-generation of buyers -- the Millennials
Ballmer must show that he is in charge and has a vision for Microsoft in 6 months and 6 years. The story he tells will mean everything. Ballmer must convince financial analysts that he and only he can forge from Microsoft's past successes a bold future.
I'm most bothered by tomorrow's speakers' lineup, which is tough to read for its meaning. Typically, Microsoft's divisional presidents make presentations during FAM. But, as of this afternoon, none are on the agenda. Only core leaders are scheduled to present, including Ballmer, COO Kevin Turner, Chief Research Strategy Officer Craig Mundie, CFO Peter Klein and Bill Koefoed, general manager of investor relations. Mundie is a perennial presenter and the man who usually talks about far-future products. Visibly missing: Chief Software Architect Ray Ozzie, which is commentary enough on the real state of Microsoft's cloud computing strategy.
If the FAM lineup reflects a focus on financials past, Ballmer has already failed. However, if Ballmer seeks to put himself forth as the hands-on visionary leader in charge, accompanied by his core financial and tactical leadership team, hope remains. Tomorrow's FAM will tell the story.
Microsoft is FAR from failing. Even IBM is still a very successful entity by all accounts. I think most of the disappointment expressed isn't that Microsoft will fail but rather it could fade as a driving influence in the tech market. Some say that's already happened. I don't agree. Redmond still dominates many of her respective markets and has an envious cash flow. A flat stock outlook means little. That said, Microsoft commands far too many resources and attracts far too much talent not to be competing better for the hearts and imaginations of tech enthusiasts the world over.
Score: 1
|I don't understand why the big focus on GuessWhatBallmerDid™
http://tmrepository.com/...rks/guesswhatballmerdid/
I mean, unless you are a Microsoft investor, I could see such criticism. But there WAY better stocks to invest in. And if you are an end user, who cares!
Hey Disney stock has been similar to Microsoft's the last 10 years. Does this mean I stop going to Disney or do a "GuessWhatRoberetIgerDid(Tm)"?
Microsoft is going to keep making..Microsoft products. They will have successes and failures...just like ANY other company.
I wish we could talk more about tech and less about tech politics. It's enough the left and right and (everything in between) are at each other's throats; nobody in their right mind would ever WANT to become "president" nowadays. Way way back, once a president was picked, many people stood behind him. Now people can't accept the outcome, and everything is sensationalism nowadays.
What about Microsoft street slide?
http://research.microsof...street_slide/index.html
Or real time weather on Google earth?
http://google-latlong.blogspot.com/2010/07/rain-or-snow-now-you-can-see-weather-in.html
Score: 5
|It's just fodder for ol' Tabloid Joe, that's all.
Score: 1
|More like Steve Job has one more chance in saving his customer..... You might want to research this since we know Joe will be in full denial of this. If you just updated to OS4 with your iPhone or iPod touch, there will be a major short life of your battery. There report and posting all over forums. I just updated my OS4 and my battery life is like 20% per hour. I had a full charged iPod Touch 3rd generation 32gb and was listening to it in bed and woke up after 4hrs of the battery being dead. I was able to go 8hrs straight playing musics and without any battery problem and still have 50% battery life. It's all over the apple forum but we know Joe won't research or post this as news.
Score: -2
|http://discussions.apple...p;start=15&tstart=0
Score: -2
|Yep, my iPhone 3G is practically useless now. But I guess this is Apple's way of making us upgrade. I feel bad for anyone who recently purchased a 3G, now their phone is slow and their contract is new so they have to put up with it for awhile or spend big bucks to upgrade.
Score: 0
|Dear Steve Ballmer, if Microsoft doesn't want you, please come and be my CEO, I only need my company to perform half as well as Microsoft is doing to sit back and count my money.
Seriously, there are a long list of CEO's in the computer industry who's head should roll long before Steve Ballmer. But just in case my invitation will remain open.
Score: 6
|I will tell you the one reason that Steve Ballmer will keep his job for as long as he wants. There is nobody in Microsoft, that could replace him. In addition, Microsoft's vision problem (which is greatly exagurated by Joe in my opinion), is not Ballmer's problem pre se, but Ozzie's problem. Ozzie is the Chief Software Architect, not Ballmer. He should be the one with the vision.
Score: 4
|Windows 7 is a huge success only in the consumer market.
Score: -7
|I would probably agree that the consumer market is where most of the copies to date have been sold, but these days, most companies dont go out and buy the latest OS the day it comes out. All the clints I deal with are simply going to migrate to windows 7 as they replace computers. Perhaps a few will upgrade, but not many.
Score: -1
|I think Tablets were really ahead of their time and just came too soon. Case in point is the Toshiba Portege 3505 I own. I actually tried loading it with Windows 7 recently and to my surprise it loaded and actually runs reasonably well (certainly good for browsing).
I think we are finally at a point where tablets and the OS running them (Windows 7) can reach a wider audience. I have a touch screen laptop, a touch screen monitor for my desktop and am very interested in future windows 7 touch based devices (slates/tablets). This is where I thik Microsft can really gain some business.
I also think they can compete with the ipod/iphone but they MUST have a solution that is as seamless and a easy to use. There's really nothing easier the loading itunes, syncing an ipod/iphone and adding new music. If they can incorporate this to windows mobile and make it a seamless transition for itunes users I think they can pull people away from their ipods/iphones as well. I know I'd give them a second look in that area.
And lastly, while I see the cloud growing, I am still no convinced its going to take over, so I don't think he who rules the cloud necessarily wins.
Score: 6
|The original implementation of tablets sucked. Normal WinXP on a small screen, thumb keyboard, and a pen is not a good interface. MS never figured out they should design an interface specifically for small screen devices and one that didn't require a pen to use. Apple figured this out, and they are getting rewarded by sales of the iPad and iPhone. (Their proclamations of innovation aren't true, but they did design a good UI.) Until MS shows something, like a Surface based tablet, they are lost. They need to rip everything up and start over. They have the tech and talent, but they won't use it.
The cloud is absolutely going to take over. The basic technology of the cloud is just a server running virtual machines, and the hardware and the technology are just too cheap not to do it.
Score: 0
|Its time to go, he has become dead weight, to Microsoft, like a Political Hack on the Dole, what has he produced, for the users of Microsoft...
Score: -4
|When a corporation posts record earnings for a quarter, that is a sure sign their CEO should be fired or is getting ready to step down... oh wait. What a joke these Joe "The Troll" Wilcox blog posts are. Does anyone still take this court jester seriously?
Score: -2
|@kashin In the quarter passed, two divisions lost money (Online Services & Entertainment and Devices) and the second-most important division (Business) posted a revenue decline and only 1 percent income gain (revenue deferral contributed some of that) against a weak year-ago comparison and during a quarter when Office 2010 launched. Windows 7 is selling well, but in part because PCs are selling and most corporate customers are using 9 year-old Windows XP, which lifecycle support Microsoft had to extend until 2020. Microsoft's share price has languished for about 10 years. Then there is mobile where Microsoft went from being a leader to a follower.
So, Microsoft is succeeding still on past successes. But what about the future? It's the future Ballmer needs to sell to customers, developers, partners and shareholders.
Score: 2
|Apparently YOU take them seriously kashin, you keep posting here. Which makes Joe is even more effective for BN, so I'm sure each of your thought-free posts gives him a warm feeling.
Score: 2
|I wonder what defensive strategy Microsoft has, just in case Google or Apple start offering their operating system to OEMs?
In other words, how will Microsoft fare if people start choosing their operating system, rather than just using what came with their PC?
That's a question I'd like answered.
Score: 3
|I highly doubt that Apple will ever release its operating system to OEMs.
Score: 5
|Apple would sell a Windows iMac before they license OSX to an OEM. I truly belive boot camp was orignally a market test to see if people would run windows on their hardware.
Score: 3
|Apple may not release its iOS to other OEMs. However, it may find itself under pressure to release other things.
All analysis says that Android will eventually become much much bigger than iPhone. Apple knows it. Jobs made a speech to Apple employees saying that Google "wants to destroy us".
So Apple is quickly making hay while the sun shines in its direction. It is subsidizing iPads in order to quickly gain the dominant content delivery platform. It is this content platform (DRM etc) that Apple will end up licensing to others, while keeping the iOS experience to itself.
Score: 0
|I'm sure the strategy reads something like, "Create clients for MS services for everything; port important client applications to everything." First and foremost, MS is a development house. They make their money selling development tools, but they coincidentally also sell an operating system, an office suite, and everything else you could want to use with those development tools. If Windows goes belly up, MS will just find a new OS to target. It could be RHEL, Solaris, something else, or everything.
With that being said, no other company integrates their systems as well as MS does. Every part is designed to sell another part, and there is not another company which does that.
Score: 0
|1. Comparing Bill Gates' version of a tablet to iPad is a joke. Bill's tablet is a real, fully functioning PC. The reason Windows tablets have such a small market share is that they generally start at $2000 or more - they're specialty devices with absolutely no intent to compete with iPad. One exception seems to be the consumer-focused HP tm2t, which at around $900 seems to be selling well and is praised by its owners.
2. Comparing Apple and Microsoft is irrelevant. Apple/Microsoft, Samsung/Microsoft, Amazon Downloads/Microsoft - who cares?
3. I've been a Ballmer fan and defender for years, but I've reached the point where I could see his leaving as an opportunity for Microsoft. They're going to have to set the bar pretty high, though. And looking negatively at the lackluster stock performance ignores the record revenues and profits, their place on the Fortune 500, etc. Today's WSJ points out that part of Apple's market cap exceeding Microsoft's is because of money MS has put into stock buybacks. MS is hardly a company that comes to mind when thinking about corporate failures.
Score: 7
|increasing public outcry = Joe and a few iLosers with no jobs
Score: -4
|@chinch987 At least my analysis is honest and public. Who are you but another anonymous commenter with crappy attitude? You want to be taken seriously -- to engage in real discussion -- start by crawling out from behind the rock of anonymity you cowardly hide behind. That goes for other comment trolls fouling Betanews and other Websites.
Score: -2
|Seconded.
Score: -5
|I agree with Joe.
I don't mind what technology readers like or dislike. I like to hear both sides. But please make your arguments based on the technology. Personal harassment of Joe or other readers is boring, and frankly, personal attacks serve no purpose and should be deleted.
Score: 3
|"Ballmer has already failed"
You should worry about "beta news" being "taken seriously" with editorials posing as news or analysis.
You might consider referencing information and taking baby steps back into reality.
For example your "public outcry" statement deserves actual citations or legitimate polling. You can't just cite a Carmi or S.F. blog article.
Score: 3
|Three comments:
1. Live Essentials "closing the gap" on iLife? Aside from Garage Band, I would say Essentials is surpassed iLife. Essentials has always been a decent suite, but the new beta is a nice package.
2. "Pricey" Kinnect? I'm not an X-box owner, but I thought the pricing was very fair for such a cool piece of technology.
3. Traditionally, companies have skiiped a version of Office. Version 2007 is widespread so, following the trend, you would expect 2010 to be lightly implemented. Yes, Sharepoint 2010 has had crazy high sales. Microsoft should leverage that somehow to bundle or intice people to buy Office 2012. Besides, there is not much value add going from 2007 to 2010. I run 2010 and it is nice (the ribbon is finally in Outlook), but I couldn't build a biz case to upgrade my company.
Score: 11
|What is Ballmer still doing in his job?
Any other CEO would have been sacked for the Yahoo! attempted buy-out fiasco alone.
Then, when you add the demise of Windows Mobile, the billion dollar Kin fiasco, and the mishandling of Windows Phone 7, Ballmer's position is completely untenable.
Right now, Microsoft's slate market is also crumbling away.
Score: -4
|Great article overall- the date referenced at the very beginning should be July 29, 2010 though.
I'm currently working for M80 (a social media marketing firm hired by Microsoft) on a unique Office 2010 and SharePoint 2010 advertising campaign that encourages visitors to find easter eggs hidden within videos, text and pictures posted to the Allure Bays Corp microsite (http://www.allurebays.com). Take a look and feel free to share it or let us know what you think on Twitter, Facebook or YouTube.
Score: -7
|Last time I checked, Joe, Steve doesn't report to you. (probably a good thing for Steve)
Score: 1
|