In defence of Steve Ballmer

In defence of Steve Ballmer

Mr Steve Ballmer's announcement last week that he would resign within a year drew a flurry of online articles denouncing his 13-year reign as chief executive of computing giant Microsoft.

After reading a tonne of these opinion pieces online, one gets the impression that Mr Ballmer's reign has been totally inept.

Microsoft's laundry list of misses is hard to miss, particularly with regard to its flagship Windows 8 operating system.

Microsoft has been left out of the smartphones and tablets race altogether. Latest numbers from market research firm IDC showed that Microsoft's Windows 8 garnered only 4 per cent market share in global shipments of tablets for the second quarter of this year, a far cry from the 32.5 per cent of iPads and 62.6 per cent of market leader Android.

Windows 8 was supposed to help Microsoft get into the tablets groove but it has so far been a failure. Hybrid PCs running on Windows 8 have not taken off as most hybrid PCs do not work as well as stand-alone laptops and tablets. Unlike iOS and Android, the app store for Windows tablets is divorced from the app store for Windows phones. So you cannot buy an app on a Windows phone and run it on a Windows tablet.

Zune, Courier, Kiln and Windows Vista add to the growing list of things which Microsoft did not get right.

It has faltered even on its well-regarded Xbox. It lost the support of end users with the upcoming third-generation Xbox One console when it tried to do silly things such as restricting gamers from lending or selling their used games and forcing users to be always connected to the Internet even when playing single-player campaigns.

Rival Sony won the hearts of gamers simply by not making any drastic policy changes to its upcoming PlayStation 4 console. In the end, Microsoft had to backtrack to reconnect with its fans and to save its business.

Critics pointed out that when Mr Ballmer took the helm in 2000, Microsoft was worth over US$600 billion in market value. Today, it is worth only about US$270 billion (S$344 billion). On the day that Mr Ballmer announced his resignation plans, Microsoft's stock price shot up by around 8 per cent.

Was Mr Ballmer really that bad? A deeper study of Microsoft's financials actually suggest otherwise. From 2000 to 2013, Microsoft grew its global revenues steadily every year except for 2009, but it immediately recovered the following year. In fact, over the 13 years under Mr Ballmer's charge, Microsoft more than tripled its revenue from US$22.96 billion for its financial year in 2000 to US$77.85 billion this year.

Microsoft is still a sound company and it has not been losing money in a bid to gain market share. While there have been ups and downs in its annual operating income for the last 13 years, overall it has grown steadily and in tandem with its revenue growth, up from US$11.01 billion to US$26.76 billion over the same financial period.

Microsoft's poor track record with its product innovation despite its sterling financial numbers are not inconsistent. When you look at the breakdown of its revenue and income, it is clear that its business software products, such as Windows Server and Microsoft Office, are where Microsoft has been doing really well and continues to do so. While there are no official numbers from Microsoft, anedoctal evidence suggests that its new subscription-based Office productivity suite has been a hit with businesses, though less so with consumers.

Microsoft lists five product divisions in its annual report - Windows, Server and Tools, Online Services, Microsoft Business and Entertainment and Devices (EDD). Its three primary business segments have all done well, generating income growth in tandem with revenue. The Microsoft Business segment, for instance, registered US$24.7 billion in sales this year, earning business income of US$16.19 billion. On the other hand, the consumer segments have not done as well. The Online Services division made a loss of US$1.28 billion while EDD made only US$0.8 billion, small change compared with the larger business-centric segments.

It is an eye-opener studying the numbers. Microsoft has done really well in the last 13 years selling software to businesses, but it has not done as well in the consumer space. Unfortunately for Mr Ballmer, the media takes little interest in server software and remembers only the missteps that the computer giant has made with its consumer devices.

Mr Ballmer may not have extended Microsoft's position in the consumer space, but he is certainly not the failure that many in the media are making him out to be.


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