Friday, March 25, 2005

Better off without Ballmer?

So would Microsoft be better off without Ballmer? Should he be replaced?

I haven't touched on this because I think that our woes are not about one person (even the CEO) but rather about a whole mess of persons that we can do without. But as of late, the comments here and elsewhere have been more and more anti-Ballmer.

About two years ago, I was surfing the web after War Team and followed a Forbes article off of MoneyCentral grading various CEOs. Ballmer got a 31% approval rating. I was in shock. Microsoft's CEO getting such a low rating? Worse than Carly? Whoa. This was the first crack in my rose-colored reading glasses. I was actually so mad at such a horrible assessment of my beloved CEO that I voted with my browsers "back" button. Come on, Ballmer doesn't only bleed the Microsoft colors, he sweats 'em!

One comment asks:

I'm not sure if it is fair to blame Ballmer for the current state of the stock value.

I mean, what has he done or not done that is impacting the stock?

Now, maybe this was just bait. Because, dang, the next comment unloaded both barrels and a good swing of an energy sword to boot:

  • along with Gates, made decisions that resulted in the company being found guilty of breaking the law twice(and counting)resulting in fines, restrictions on future conduct and incalculable loss of corporate respect/credibility
  • along with Gates, invested over $10B of cash in failed telecom investments that ended up being written offf
  • failed to make any meaningful investments at the bottom of the market crash when numerous companies were available for cheap, MSFT had tons of cash and other smarter CEO's were taking the opp to make their companies stronger
  • invested $10B's in various "emerging" businesses that even years later represent only about 10% of MSFT's revenue, aren't growing at even 10% (in BSol's case, not growing at all) and collectively aren't profitable
  • taken huge charges against earnings for options expenses and related most of which has gone not to average emps but to the snr most mgt who in many cases have failed to deliver and yet bail on their shares at every opportunity (basically a non-performance performance bonus).
  • as a result of several of these, has allowed the company to go FIVE years w/o increasing earnings despite revenue having grown by 50% (last time I checked, stock prices are a reflection of earnings)
  • approved the onerous Licensing 6 program when many companies were hurting economically thereby pissing off a good portion of our customers and fueling the move to Open Source.
  • has been at the helm as MSFT failed to take security seriously and then has had to drop everything to play catch up, missed the paid search move and had to play catch up, missed the move to web services and had to play catch up, missed the portable music wave and had to play catch up, let IE stagnate and had to play catch up, and now seemingly can't ship any major product on time even stripped of formely core features (can you say Longhorn, CRM, SQL, VS, etc. etc. etc?).
  • has been at the helm as MSFT's overall growth has slowed from 20-30% to less than 10% and forecast to slow further with no seeming end in sight.
  • despite the stock having lost 50% over the past 5 years, approved/promoted the $32B payout plan when virtually every expert suggested that doing an accretive acq, a larger buyback or increasing the ongoing dividend would all be better for the stock -with the subsequent catastrophic results.
  • as a result of all this, has basically lost the confidence of Wall St and investors, who no longer see MSFT as well managed/positioned/aggressive but rather poorly managed/increasingly poorly positioned and always playing catch up. Hence the massive recent sell-off, the new 52-week low, the historically low P/E and the current 30% discount to its peer group which if anything is getting wider. Indeed, I think the prevailing sentiment has gone from "MSFT is solid, it's only a matter of time until they rebound" to "Is this company done?". There have even been several articles in the popular press recently making exactly that case.

    Can I stop now or would you like more examples? Not questioning his desire, but the facts suggest that he may not have the ability/judgement required and sometimes simply making a change can shake things up for the positive. One thing is for sure, weakness breeds more weakness in companies, stocks, etc. So either we start showing we're not done and start [positively] surprising people with our products, business moves, results, etc, or else those doubting us are likely to be proved correct.

The stock is in a piss-poor state of affairs right now. It would be good for senior management to come out and address the current reality of the stock and the analysts views that things aren't rosy and even when we do release Longhorn that it most likely won't be much of a boost to the stock. Things are not destined to get better anytime soon. MSN paid search, while a good idea, is only going to help the stock price from skidding below the mid-20s and just plain hold the line, not make it rocket off into the stratosphere.

But if the approach to lack of interesting products is to start talking up Blackcomb and all the cool whizzy features we'll be releasing then, well, you can be sure that this rhetoric is best accompanied by the band playing on the sinking Titanic.

We're getting ready to go through a rough haul and it's going to take a lot more than towel cut-backs and office-supply consolidation. We need a massive reorganization and a nice, big-fat trimming of staff, worldwide. Those that are left can roll-up their sleeves and impress the hell out of the world.


Anonymous said...

Interesting case for a CEO switch. But who'd take the job and risk the ego wars with Bill? Basically, it's back to Bill or nowheresville.

But let's get serious for a second. You and your commentators say that Microsoft needs trimming, particularly in management. I concur. So let's name some names. Of the VPs and higher, who would be first on your list? Contrary, which VPs and higher would you hate to lose?

Anonymous said...

Need for trimming? No kidding. It takes 2X the emps now to deliver the same amt of profit as in 00 and we're seemingly more hated by our customers than ever - so it's not like we can argue the extra people have been to better satisfy them.

To your question, Bill has to go too - no doubt. Not only is he complicit in many of the items listed for Ballmer but as you suggest, no new CEO could actually govern effectively with Bill there. Plus, what's really improved technology-wise since he took over as CTO? MSFT likely needs an outsider just as IBM did with Gerstner who can evaluate the facts as they exist w/o sentementality/baggage, make the appropriate changes (many are going to really hurt) and set an appropriate new course. Personally, I think the market would actually reward a change at the top - it would send a message that the board is serious, the mgt team is accountable, the company isn't resigned to it's current fate and this isn't your grandfather's MSFT. Of course, we could simply do nothing and continue the inevitable downward spiral. For example, here's news today suggesting that by 2008, Linux will be the only OS platform showing growth:

What happens when Servers stop growing at 18% and join Windows in the barely growing or Office in the negative growth category? What if all three are heading south by that point and all we have is the money-losing emerging businesses?

Re the VPs, how about starting with the ones who have so little confidence in the future of the company that they're bailing at every opportunity? Plus, their bails represent the significant amt of $ the company has to spend on buybacks to avoid dilution and take as an expense which otherwise could go to the bottom line. Many also have average to lousy results in their areas which makes it even easier - so goodbye Raikes (have you seen how much he's selling these days?), Bach, Burgum, Cole, Courtois, Vaskevitch. Would also consider Allchin and Ayala based on results - or lack thereof. That should be sufficient for those remaining to either re-double their efforts and/or voluntarily jump so that they can be replaced by more effective hires.

Anonymous said...

Top of the list - whoever is in charge of PR & Marketing

Anonymous said...

Whats really insulting is listening to Ballmer, et al preaching about ethics and what not in those goddamn videos we're forced to watch. Um, yeah that really means a lot coming from you guys...

Anonymous said...

Mich Matthews is in charge of corporate marketing and PR.

Raikes, maybe. He's been around forever, Office XP and 2003 were both dogs, and growth is down. Then again, it's a big cash money business.

Burgum's already on his way out.

Bach--give Xbox 2 a chance. If it doesn't turn into a $1b/year profit center (not revenue, profit) in this gen, then yeah, he's gone.

What does Vaskevich do?

Will Poole, and to a lesser degree, Allchin and Valentine--clock is ticking. Longhorn delays? Media Center adoption? Windows Media Format and device adoption? PC run rate? Tick tock.

Cole, disagree. He was smart to get MSN out of he ISP business and focus on ad-supported stuff, even though they were late to search (but that's not all his fault, as the previous management were focused on bullshit like Hailstorm and bCentral).

Good ones? Rudder and Muglia seem to be solid and mostly well-liked and driving some good products in '05. Don't know enough about the sales org to judge, but Ayala's revamp of the partner program seems to be a good thing so far.

Who on the board would vote Bill out as chairman? Not gonna happen.

Anonymous said...

Ok, so we dump Raikes so that he can go focus on whatever it is his selling is going towards and BECAUSE Office is a big business and underperforming, speed Burgum's demise so that - imagine if you will - a bunch of business solution company's that were all growing before we bought them might actually do so again, give Bach 18 more mths to show that the Xbox hasn't been a colossal sink hole, get rid of Vaskevitch because neither of us even know what he does except exercise options, add Pole based on your advise, send Alchin packing, consider dumping Valentine (going to get some push back there but he's dumped lots of stock too so I'll go along), give Cole 18 more mths to prove the recent flicker of life at MSN is more than just a death spasm, and give Ayala 12 more months to finally make good on the multiyear promise that the SM market can actually deliver huge upside to MSFT - plus, his Ricky Ricardo accent is amusing to listen to.

Re the board, yesiree you've got a point there. The answer is none of them will - unless enough large external holders started calling for such. So there's the Catch 22: change is needed to avoid a death spiral and unless a death spiral becomes evident to all, external holders won't likely come out in sufficient numbers to force the board to make a change. Oh well, although there are lots of differences and it would be much harder with Gates/MSFT, it did happen to Eisner at Disney and our stock performance is even more Mickey Mouse (I know...couldn't resist).

Anonymous said...

I'm so pissed that I can barely convey it. I'm a longterm employee and I'm forced to sell an expiring set of options this year from 1998. What are they worth? Well, I haven't looked at the price today but it was less than $1 a share last week based on our 1998 strike price.

Fuck that. I should go work for Google, Apple or anyone else who can grow their stock and actually ship something.

Anonymous said...

"I'm so pissed that I can barely convey it. I'm a longterm employee and I'm forced to sell an expiring set of options this year from 1998."

Me too. Our first clue should have been when senior mgt opted to put ALL of their options into the trade-in program vs regularly employees like us who retained 50%+ of ours. They may have execution issues, but no one said they were stupid. Also, while we've been getting nailed, they've been helping focus the hammer by leading the ENTIRE industry in insider selling. When external investors see 350,868,000 shares sold YTD by top officers, are they more likely to buy or short? My advice is take the $1 and invest it in long term out-of-the-money MSFT puts - if we're right, you might just turn that $1 back into meaningful money again.

Anonymous said...

You guys are kinda harsh. I just re-read the employee memo and everything is going to be okay. We've got as much opportunity to grow as anyone, we've got the right strategies, we're making the right investments, the stock is the best positioned to grow since since '98... well...maybe he got one wrong. But look, he's recently quoted as saying "we like to be first. we like to get it right. we like to be first to get it right". Now who doesn't believe that? Plus, he said it so it must be true. Right?

Anonymous said...

I'll remember that BS when I net 50 cents each after taxes on a couple of thousand options. Maybe I'll use it to buy an ipod.

Anonymous said...

We're getting ready to go through a rough haul and it's going to take a lot more than towel cut-backs and office-supply consolidation. We need a massive reorganization and a nice, big-fat trimming of staff, worldwide. Those that are left can roll-up their sleeves and impress the hell out of the world.

Those of us down in Product Support Services would pray to God that you keep your mouth shut, because with this management, we're screwed. Nothing bad about you, but we know exactly where these "money saving cuts" will come from, as they already have.

In the United States alone we're down almost 30%, and we're not getting backfilled. One shift has dropped from an average of 33 people down to 9. Microsoft is cutting its nose off despite its face with these trimmings, because customers are increasingly more annoyed with our outsourcers and offshore "FTEs." Like it or not, support is the face of Microsoft, and no matter how good the company or the product is, we're the people the customers talk to first.

These last two years have not been good to PSS/CSS/whatever our name is now, and we'd really appreciate it if the rest of the company would recognize this fact.

Anonymous said...

Mike Nash should go. He just has to leave. Think of all the BS he has amassed in his org. All marketing bla, bla, bla. Have you been at his all hands meetings at freakin' 8 a.m.? Nothing but marketing BS.

Anonymous said...

Maybe it's just me, but if my CEO had ever run around on a stage screaming like a monkey, I'd be concerned about his mental health, and in turn concerned for his capabilities in his office.

Anonymous said...

"Will Poole, and to a lesser degree, Allchin and Valentine--clock is ticking... Media Center adoption?... Tick tock."

No comment re: Willp and the other guys but um, Media Center just hit 1,000,000 units sold... that beats projections by a LONG shot. Seems like a pretty good adoption rate to me.

Anonymous said...

I agree with the comments about Ballmer's "schtick." I thought he should have taken more of a conservative approach. He created a good image of 1999 enthusiasm, but the associated performance just never arrived.

Anonymous said...

You are correct, Media Center was stronger than expected right out of the gate when it launched in fall 2002. That's why 40 OEMs jumped on board. Between them, they've sold 1m in 2.5 years--that's, what, 400k/year? Not bad. About 0.6% of the global consumer PC market.

Now, at the last financial analysts meeting, Mr. Poole agreed with IDC that MCE would ship 20m/year by 2008. (Actually, he said that MSFT's estimates were higher.) That's a big ramp up.

So do you think they opened MCE to the sysbuilder channel last fall? Surely it wasn't because the name OEMs were failing to deliver?

Tick tock.

Anonymous said...

The core problem is that nobody (at least in the product group) here gets paid on things that directly relate to executing on business needs. Sure, I'd love to ship my product on time but you know what? I'll still get paid if I don't. Have my whole team work 80 hours a week to meet a goal? We'll get a nice pat on the back and maybe an afternoon at a pool hall. If you do enough of this stuff your bonus might go up a few percent and you'll maybe even get a raise that beats out the inflation rate, but that's about it. It's not going to get me a bigger house or a new car or anything...

Anonymous said...

As you say, Microsoft is a criminal company. Blaming it on the 2nd in command is kind of foolish don't you think? If you want to dump someone, dump the boss, or work somewhere else.

Anonymous said...

Microsoft is better off without wealthy bureaucrats - and that includes Bill Gates.

His vision is dying and only a fool would hold it any longer.

His company must change strategy, which happens to be one of its strengths, to position itself synonymous with open source communities - friendly, passionate, multiple contributers with goals for better software not for money.

Anonymous said...

If you're going to unleash the beast, you need significant reorg at the top. The names given are a good start. The new leadership should spin off several divisions for faster growth & development in each - Windows, Office, Consumer Products could all go seperately and achieve faster times to market w/ better products. And the question of speed to market should be addressed with performance incentives - hell, they do that for the road construction guys.

Anonymous said...

You realize, of course, there are lots of folks out there who pray for Ballmer, Gates, Allchin, etc., to stay on...until they manage to sink the ship.

Anonymous said...

Open source all Microsoft products and become a media content and resource application provider based on google ad sharing and market innovation.

Anonymous said...

It's entirely possible that what is happening to MSFT is indicative of a slowdown/death-of in the entire IT industry. Regardless of bad management, if Office 2000 is good enough, you're not going to buy 2003 or download OpenOffice 2.0 for that matter.

Servers are good enough unless you're Google. Office XP is good enough. Soon, the graphics in Xbox will be good enough. Now in a couple years when Windows XP and Office 2003 are starting to show their age, open source alternatives are going to be good enough.

The entire industry is headed for a decline because of open source and the "good enough" factor. That's great news for any business not in the IT business.

Anonymous said...

Media Center Math Time

1,000,000 / 40 is 25,000
25,000 / 2 - 12,500

12,500 unit a year per OEM?

Sorry guy's. That sucks.

Makes puny Apple's Mac run rate of roughly 1 million Macs per quarter look absolutely massive

Anonymous said...

I could agree with some of the names but would definitely save some. Cole has made MSN profitable much earlier that forecasted and he did his own spring clean up at MSN. Kummert gone, Bradford gone, Hozli gone and the list goes on.

I think the question is whether this company can really inovate and get new products to market first with the current size and a sales guys on top (Balmer), as opposed to a product team guy or technology visionary.

Anonymous said...

Microsoft is so top-heavy with "executives" that it's no wonder things are going the way that they are. How about a 50% across-the-board cut from among the following employes:

Anonymous said...

Forget about Longhorn and its vapourware.

Mac OS X Tiger is out on friday (29th) and it has all the features and alot more than Lonhorn ever will have.

No virusis, malware, security problems, pop-ups etc.

GET A MAC and forget the dying dinosaur that is Microsoft!


Anonymous said...

A couple of years ago, everyone said that MSFT was on the verge of being broken up into multiple companies.

I said then, and continue to say now, that to do that would have been a good thing all around - for employees, stockholders, competitors and the public.

However, I now believe that it's too late - MSFT is tainted in the public eye, and this will only grow over time. I don't care even if, as unlikely as it seems, Longhorn is as secure as Tiger - the security issues that MSFT has failed to deal with in Windows will continue to haunt it.

MSFT is dead. It just doesn't know it yet.

Anonymous said...

I would have to say they would be better off breaking up the company and spinning it off into pieces. This way, it would create optimal value for shareholders, as those pieces would likely all appreciate above the combined $25/share MSFT now gets. Check out my site and give me feedback at

Anonymous said...

If Microsoft managment really care about "share holders' value", they should spin off MSN. MSN is obviously undervalued when tagged on with MSFT. Imagine what the stock price of MSFT will do if MSN gets the valuation of Google - an instant 25% jump.

Anonymous said...

"No comment re: Willp and the other guys but um, Media Center just hit 1,000,000 units sold... that beats projections by a LONG shot. Seems like a pretty good adoption rate to me."

Yeah, but how many people are happy with the media center experience and use the machine afterwards primarily for that purpose? I have seen many, many boards of users that are less than enamored with this solution and have dumped the technology. I used to have to reboot my pc. Now I have to reboot my TV, and my mobile phone (smartphone??)...

Anonymous said...

MBS is such an abortion. We have to can Doug Burgam and Satya Nadella and all managers one level below Satya. Doug has been a no-op from day one, protecting his hatchlings in Fargo instead of doing the right thing for the business and culling the dead wood. The fact that Burgam is even in an exec VP position smacks of nepotism (of a sort?), he and Ballmer are old school buddies you know. Satya is a charasmatic useful idiot. He has as much business sense as an old boot. The new branding campaign is the 4th time they've renamed the grand unification of the disparate code bases we bought. Um, hello, we failed for 5 years to make something happen in MBS. How much longer do we let a 2.5 billion dollar investment in Navision, Great Plains, Solomon dilute the stock? Time to cut bait. Instead of whacking execs from across the company, pull in some of the cronies from Windows who have at least shipped real products (valentine, alchin) to fix up MBS, make them work for a living, and hold them accountable to revenues generated. Longhorn doesn't need the cadre of execs that it currently has. Fire all managers in MBS at the director level and above, reorg with real talent from the company, sell the Fargo and Vedbaek campuses (give people there a one time option to be *interviewed* for a job in Redmond), really write a single ERP solution and quit fucking around with branding campaigns.

Anonymous said...

Media Center is garbage. Its are due to CompUsa and Best Buy slapping it on just about every computer they make. It's slow and clunky. As a Senior IT Architect at a very large bank I recommend Open Source whenever possible and I use a Mac at home. Its gotten to the point that if you implement a new app you have to have a reason to not run it on Linux.

Anon Ehmus said...
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Anon Ehmus said...
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Anon Ehmus said...

I can see your points made here and agree with many but in defense of "The way things go", I think you also have to understand that things also run in cycles and the simple fact that Giants either die or hide out in Big Blue caves. Obviously I refer to IBM. Microsoft can survive AND reap profit by combining a balanced mix of both open source and locked down code as well. Many peripherals can be made available to the open source community for improvement but key API's and other black box types can still be licensed at considerable cost. As for paid search, there needs to be fairness in this model to the advertisers and a sense of partnership as well. Paid search is ok but it only reaps a profit for the popular products.

Understand too that Gates deserves your respect. One as your employer (Without whom you would not be where you are now) and as a Major Innovator in the industry. Try to remember, his vision did change the world as we know it. Yes I agree he is too focused on profit and should slow down.

This is something that is not easy to do once you have reached the level he is at. I think only prayer can help him there. Note to Bill Gates: If you are reading this, you need to regain the trust of the home consumer if you are going to make any kind of comeback in the trust game. One major way to do so is to come back to the old neighborhood and cut the price on key products for a while.

Not to use a bad example for gain, but think of what it takes to get your user base built up before you can call on them. Remember that Windows 98 sold for $89.00. it went fast and furious and there were a lot of people standing in line for it as well. But as the O/S platform changes yearly, the average Joe won't drop $200 bucks for a new O/S if the current one works just fine. Note that dropping support for the current O/S “that works just fine” to force your base to upgrade is a very nasty tactic that will gain you many enemies in a very short time. Also note that we all saw right through that one too. The bad example I refer to is the drug industry model for sales. They give it out for free till they hook em then they charge em when they come back for more once they are hooked. Of course you have to continue to offer beter usability and practicality to your users as well.

If you want your users to be dependant on your product, you may need to start giving out some free samples for a while. MSASW (AnitSpyware - by the way the whole Giant company thing is hilarious, I admire the person who named that one) anyway MSASW is a GREAT tool of example for saving face in a market that hates you because you are big and appear to be greedy and willing to break the law for profit. (I ramble I know bare with me…)

I guess number one is STOP BREAKING THE LAW! Number two is go show you are a team player. Do something like help Steve Jobs climb a bit higher than he can on his own. Good deeds are highly rewarded and you might even regain an old friendship. The moral here is ditch Ballmer (good guy but too much - not a fit for the MS image) and start repairing the villages you have destroyed.
Make amends for your wrongs and get with the new society of the Open Source Klan. You might take a hit in the profit book in the short run but the long term bennies will be well worth your while. Mini-MS it's good to talk about your woes and your concerns but just remember that it is better to keep more behind the counter than you put out on display. Although your intentions may be well meaning, airing the dirty laundry of the company only gives the others more ammunition to "Divide and Conquer" the MS Giant.

Find a way to take this back inside and start pulling together. It takes two to tango and change comes from within. If you don't like where you are then you should just leave, but don't try to get even. Business is business and sometimes it's good and sometimes you have to suffer a bit.

Personally I think MS is going to be around for a long time to come. Your software IS like a drug with all the fresh candy coating. Sparkle seems like a real big winner and I think this is just the tip of the revolutionary technology wave yet to come from the worlds most revolutionary software provider.

Understand also that Bill Gates is hated not just for being pushy in the market (He is a genius there) but he is hated first for being better at this than the ones who hate him and they hate him BECAUSE he is better at it than they are.

It's a catch 22 but remember you always know how well you are doing by counting how many people/competitors hate you. Tis true, trust needs to be regained but with a few "Right Moves" I think it can be done. But you have to gain the trust of the little guy first, because he is the one who does most of the talking. Think about it...

Anonymous said...

You all sound tired, beaten, and poor. That is your fault for working 25 hours a day. Microsoft’s people have a virtual life and soon and nothing more; in XMAS parties they talk MS, at friends parties they talk MS and now they are talking BS. There is god first then there is Microsoft not he other way around. If you have marketable skills sell them and be happy

Anonymous said...

MS, an interesting place. Has anyone seen the recent BusinesswEEK ARTICLE POINTING OUT THE HAVES AND THE HAVE NOTS. tHAT IS EXACTLY WHAT THIS PLACE is like. The few millionaires at the topand the overworked others. Ugh

Anonymous said...

You people should be kissing my feet!