Ballmer forced out after $900M Surface RT debacle, analyst says | Hacker News Reader

Ballmer forced out after $900M Surface RT debacle, analyst says

computerworld.com

60 pointspsibi46 comments

This strikes me as likely; as noted, announcing a departure along with a search for a replacement is telling.

Was the Surface RT the trigger? Well, one does wonder how many billion dollar write offs can occur under a CEO's watch before the board says enough. E.g. the KIN (http://en.wikipedia.org/wiki/Microsoft_KIN), even if that wasn't to my knowledge formally written off.

I had completely forgotten about the KIN. In all reality, I was hoping that the Surface would compete and bring Microsoft back in the competition (I hate Microsoft, but I'd hate to see them die off I'm also not a fan of Apple... but that's, I guess another story).

I thought the Courier was a great idea not just for the dual screens but the software as well the scraps and notes seemed like a great idea.

https://www.youtube.com/watch?v=UmIgNfp-MdI

It was!

There's also lots of gloriously amazing tech that the Microsoft Research division produces. However, from what I can see, for whatever reason, much of it doesn't see the daylight.

Much research does't see daylight in general. That is the nature of research. Some does make into products, but you'd be hard pressed to trace its path from research to product from the outside.

Politics, from what I've heard. Projects like the KIN where killed off my VPs who were afraid it would compete with their products, like Windows Mobile.

For example, they had to pay a terrible platform tax in making it work with Exchange using buggy supplied code. Given the young consumer market they were targeting, that was stark raving mad.

As I remember the KIN was also screwed at the last moment when Verizon decided to abandon it. Not only did they not push it like they had planned, they decided it would count as a smartphone, thus your teenager's new "feature phone+" would cost you $50-$70 a month instead of the $10 or $20 it should have.

That put directly in the iPhone price range, and the KIN was never designed to compete with the iPhone or any other real smartphone.

Too bad. I heard the sync software for it was actually pretty fantastic.

As I recall Verizon didn't do that out of spite, they did it for a variety of reasons that were pretty much Microsoft related, like it being late and lacking some necessary features. I suspect the ways in which Microsoft screwed over or tried to screw over T-Mobile didn't help,

I'm wondering if the reorganization was Ballmer's idea or if the board was behind that. My impression when the reorganization came out was that Ballmer was feeling pressure and the reorganization was an attempt to save his job.

Replace "analyst says" with "area man says" and you get a story from The Onion. I'd be more impressed if an "unnamed Microsoft board member" was the source.

That was my first thought, too. "Oh, analyst w*nk."

A frustration that I don't hear mention too often is the mess that is MS software licensing. From my perspective, there is often confusion over what is covered and what it will cost and nobody will answer simple questions.

I have been to five TechEd's and it is becoming common that speakers start a presentation with "do not talk to me about how to buy this" or "please talk to the license guys". I get this same answer from my local and regional MS sales reps.

Sometimes getting pricing on the virtualization and what is covered by SA is a royal pain. Perhaps I have it bad because I work in higher ed, but it was that way when I worked in private enterprise.

The licensing cluster that was just plain consumer Windows 7 licensing was a disaster. The complete opposite of "focused".

The credulous initial stories about his "retirement" were funny. Ballmer was 100% fired. In the long term, the company seriously failed on many fronts. In the short term, Ballmer posted poor quarterly results and sent out a rambling 1400-page email about reorganizing the company, a last ditch effort to show the board he was trying to right the ship. How often does a CEO announce a major reorganization and then quit? And MSFT's official statement says Ballmer is out as soon as they find a successor.

It was kind of the board not to cap him execution-style, since he'd put in 30 years of loyal service, but let's be honest about what this "retirement" really is.

> sent out a rambling 1400-page email about reorganizing the company

I really hope you mean 1400-word, but the fact that I can't say that for sure says a lot itself. ;)

Definitely seems true. You can almost feel it in his internal retirement letter to employees where he writes "My original thoughts on timing would have had my retirement happen in the middle of our transformation to a devices and services company" and "I take this step in the best interests of the company I love"

Pretty surprised nobody mentioned the $6 billion writedown of AQuantive. MS bought them as a (crazily impulsive) reaction to Google's DoubleClick purchase. That was also under Ballmer's watch.

You could argue $900M isn't much, but $6B has got to be one of the bigger failed acquisitions in business history.

http://www.bloomberg.com/news/2012-07-02/microsoft-will-writ...

If the board signed off on the acquisition, which strikes me as very likely, they might not score the resulting failure the way they'd score sharp and more quick failures to execute like the Surface RT and KIN.

Reading the article, its a bit less clear cut---e.g. failure over a 5 year period intertwingled with their on-line efforts---than warehouses and a supply chain stuffed with devices they can't sell, vs. so many others having wild success at selling roughly the same sorts of devices. A forward looking failure, seeing as they're missing out on the hottest categories of "new things" while e.g. old competitor Apple is succeeding despite also having the drag of a legacy PC system.

But, yeah, as I note below, "A billion here, a billion there, pretty soon, you're talking real money." (http://en.wikipedia.org/wiki/Everett_Dirksen).

I doubt it was any one thing, but it might have been the final straw. Microsoft has suffered embarrassing setbacks on its entire line of products and services, except Office. And with the PC market dwindling and Surface DOA, they're having to put Office in new places like iOS which they wouldn't have seriously considered a few years ago.

Overall the Windows Server and Tools division has been extremely successful and maintained solid product momentum. It has six billion dollar businesses inside of it (server, sql, systems center, visual studio, virtualization, enterprise services). This division is the crown jewel these days, it's worth more going forward than consumer Windows is.

I would have bought one of those damn things too, if only they didn't lock them down.

Why the hell did they even do that? Were they really concerned that people like me would buy them and then not use windows on them? I don't see that being much of a threat to their business.

I always thought that their angle was going to be that they would sell (the product ecosystem) to content providers as a trusted platform, same to businesses; who might want that to some degree. If they could do that, and get the trust of the copyright mafia, then they might have been able to sort of monopolize distribution of movies and music. Maybe even keep their monopoly on office productivity apps (I hear that people use those on their tablets?).

I agree that there can't be enough geeks willing to buy one just to install Linux on it for MS to worry.

Eh, maybe. My impression is that only the ARM ones were locked down though. I think the Surface Pro lets you install Linux or whatever.. I haven't really looked into that since that device doesn't really seem interesting to me.

If their angle was that they needed to keep it locked down to secure slick media contracts, I would expect both to be locked down so that they could keep some semblance of feature parity between the two.

Yeah, well, I'm no Steve Ballmer, so I couldn't pretend to fully understand their business strategy for the last decade.

Ha! True. Trying to figure out why they do things the way they do is likely an exercise in futility.

The odd thing is that they weren't selling the RT to businesses. Despite being a Microsoft tablet with a "real" copy of Office, it couldn't join a domain and thus didn't fit the most obvious business case.

I figured it was because they were copying the iPad model, which actually makes a ton of sense. If all the apps are locked down to their own little sandboxes, the support costs go way down and the machine becomes nearly trivial to administer. It reduces so many headaches, I think it really was a good win. They didn't need to require signed stuff, but the sandbox model has been proven to work on the iPad.

That said, I don't think anyone would complain if it looked like an iPad. Having the Metro interface was all they needed. Instead they put the full Windows desktop on there because they weren't far enough to replicate all functionality in Metro. I'd also guess that Office wasn't ready for Metro.

So what you got, instead, was the equivalent of an iPad that looked like occasionally fell into OS X, but wouldn't actually let you install any OS X programs.

Truth is, Apple was very smart to make iOS look completely different from OS X. Among other things, it gave them a clean break to change expectations of how computers work and how much control & administration the end user will do.

There were plenty of other bad decisions. I'd say the low end model (storage wise) probably should have just been cut so they didn't end up with those "I only get 4 gigs on my 32 gig tablet" problems. They featured a keyboard as the key differentiator in their ads, but neglected to mention that was a $120 add on instead of a pack in.

My guess is that they locked down ARM (and only ARM) to allow for subsidized devices, in case someday they might have to match subsidized devices being offered by competitors, or in case they might want to offer subsidized devices at a loss to grow the market for their software.

Yeah. I guess I just don't get why allowing for the possibility of subsidized devices requires a locked down bootloader. If they are going for some sort of razor blades model then they would lose money every time somebody buys one and doesn't use their OS / shop at their App market, but people that do that are undoubtedly a miniscule minority.

On the other hand, I guess because they are a miniscule minority then they aren't going to care about them...

Meh, I don't know. I kind of get the feeling that they locked down the bootloader just because doing that is the "Cool thing to do"(tm) and didn't with the Pro only because it would be unprecedented for x86.

The most interesting question now to me is, not why is Ballmer stepping down, but who could run Microsoft well and succeed him?

MS has only ever had two CEO's - the founder, and the founder's right-hand-man. This will be quite a transition for them.

What does the board want, what are that person's areas of expertise, background, and experience, man or woman, etc.

Bullshit. $900mm is a small mistake for Microsoft. They're too big for them to fire Steve over a billion dollar mistake. They still have multiple billion+ business. Im not saying they dont have massive problems, but that's absurd.

"A billion here, a billion there, pretty soon, you're talking real money." (http://en.wikipedia.org/wiki/Everett_Dirksen)

MS has been making a litany of $bil mistakes. Keep in mind, the $900m is just the write down from slashing the price by $150. The real downer will come when they realize that those warehouses full of tablets with now outdated hardware will cost them 3 billion.

In 2009, MS had OSes on 70%+ of hardware. Now, it's 21%. All that is from them missing mobile. They missed mobile in the same way IBM missed the PC market. If he truly was ousted, this is why.

The untold billions of lost profit from missing out on mobile, not to mention the billions the lost on product failures, and I'm shocked the guy wasn't thrown out by security long ago.

The mess that got Sinofsky fired, was ultimately Ballmer's fault, as the buck stops with the CEO. So this is clearly not limited to one $900m mistake.

maybe a bit off topic but the failure of the surface is really depressing, it's really nice hardware (a lot better than other laptops people are being pushed onto at least), and it also happens to be a tablet. I'm not sure what the messaging is on that though (tablet with windows/ultrabook with touchscreen)

The first Surface was always going to have issues. But I think the real problem was that it should have come to market much sooner. And yet the idea of Microsoft getting into hardware must have been a difficult move given the culture and alliances they've worked so hard to build over the years.

Of course it's plausible, that's why they wrote this article citing a nameless "analyst". It also happens to be fantastic clickbait but I'm sure that has nothing to do with it...

Not sure about the nameless part:

"'He was definitely pushed out by the board,' said Patrick Moorhead, principal analyst with Moor Insights & Strategy, in an interview Friday"

As the second largest shareholder, Ballmer is more of "the board" than anyone except Gates. He owns more stock than any institutional investor.

Th3 $900 million writedown was less than the fine Microsoft paid to the EU for not offering browser choice with Windows 8 - probably the precipitating cause of Sinofsky's departure last year.

What is happening is a the generational shift from pre IPO leadership to post IPO leadership. The heirs have been identified and it's time to let them reshape the company. (My money is on Larson-Green with Reller running the numbers).

Vanguard is holding 358m shares as of June 30th. Ballmer is sitting on 333m shares. Gates is holding 460m shares according to this USA Today article:

http://www.usatoday.com/story/tech/2013/08/23/ballmer-micros...

Although Yahoo Finance is reporting him at 398m shares.

Ballmer owns about 4% of the outstanding shares. While that is an enormous holding, by no measure does that protect him if the board decides to punt him (the board doesn't speak on behalf of shareholders in descending unit order. They speak to the majority of shares).

Shame that forcing him out cost $768m - almost as much as the debacle in question...

How did forcing him out cost $768m?

The story about Ballmer making $768m is not about a golden parachute he received. Instead, because he owns ~$10b in stock, the increase in their stock price on news of his retirement "netted" him $768m.

Analysts say lots of things.

My theory is that it hasn't quite hit the fan yet.

Microsoft and mobile handsets hangs by a thread at Nokia. If Nokia fails, and it probably will, that's it for Microsoft and "devices" as in a "devices and services company."

That means Microsoft can wait a decade or two for the Next Big Thing, while it watches Android take 50% or more of enterprise endpoints. And that is enough to make a dent in revenue.

Reply on news.ycombinator.com