August 26, 2013
August 24, 2013
Steve Ballmer, the C.E.O. of Microsoft, finally figured out a way to make some money for himself: he quit. This morning, Ballmer announced that he will retire within the next twelve months. The company’s stock surged; Ballmer is now worth about a billion dollars more than he was on Thursday.
Ballmer is roughly the tech industry’s equivalent of Mikhail Gorbachev, without the coup and the tanks and Red Square. When he took control, in 2000, Microsoft was one of the most powerful and feared companies in the world. It had a market capitalization of around five hundred billion dollars, the highest of any company on earth. Developers referred to it as an “evil empire.” As he leaves, it’s a sprawling shadow. It still has cash—but that matters little.
What has gone wrong? For starters, Ballmer proved to be the anti-Steve Jobs. He missed every major trend in technology. His innovations alienated people. When he tried something new, like Windows Vista, the public lined up around the block to trade it in. Microsoft missed social networking. It completely misjudged the iPhone and the iPad. It embraced complexity in product design just as everyone was turning toward simplicity. It entered growing markets too late. When was the last time you used Bing? In 2000, Microsoft made most of its money selling Microsoft Office and Microsoft Windows. Today, it still makes its money that way. Ballmer’s reign has done more to defang Microsoft than the Justice Department could ever have hoped to do.
The company suffered from the classic innovator’s dilemma. It built extraordinary software that you run on your desktop. And as we moved away from our desktops and into the cloud and onto mobile devices, Microsoft trundled slowly and tentatively. It hesitated to embrace the cloud, and it hesitated to build anything that didn’t work with Windows. In 2005, it brought in a legendary coder, Ray Ozzie, to solve this problem. In 2010, he left. The company has built a technically brilliant gaming system, and the recently launched Xbox One is fully cloud-based—and almost totally separate from the parts of the company that bring in cash.
Ballmer, manic and sweat-stained once too often, failed to be a great manager, or even a tolerable one. As Kurt Eichenwald wrote, devastatingly, in Vanity Fair, the company long utilized a system called “stack rating,” whereby every member of the company was judged relative to his peers. If you worked on a team of ten, you knew that two of your colleagues would get great ratings, seven would pass, and one would fail. “Every current and former Microsoft employee I interviewed—every one—cited stack ranking as the most destructive process inside of Microsoft,” Eichenwald wrote.
What comes next for Ballmer? He’s just fifty-seven, a couple years younger than Gorbachev was when he left. But I think he’ll be quiet: doing good deeds, giving away his fortune, and popping up his head from time to time. The more important question is what comes next for Microsoft—an American company, founded by a skinny nerd, that provides software used around the world. Reversing the company’s decline, in an industry that transforms itself by the day, won’t be easy; Microsoft needs someone who can attract brilliant developers as well as she anticipates trends. They need someone very different from Ballmer. In his memo to Microsoft employees, he wrote, “I cherish my Microsoft ownership, and look forward to continuing as one of Microsoft’s largest owners.” Given the size of his financial stake in the company, there’s almost no one who should want a better C.E.O. for Microsoft than Ballmer himself.
Photograph: Lee Jae-Won/Reuters
This article is originally published in The New Yorker on August 23, 2013.