R.I.P: Ballmer, Retire in Peace

I first met Microsoft CEO Steve Ballmer several years ago, at an event the company held at the Bellagio Hotel in Las Vegas, which I was attending as editor of Digital Life then. His habitually loud voice boomed over the microphone. He gestured excitedly as he moved across the stage, skipping from one corner to the other.

Those who have seen the numerous YouTube videos of the "monkey" antics that accompany his speeches would have an idea of how such hyperkinetic performances might exhaust an audience.

I don't recall what he said. I remember feeling deafened after 40 minutes. I escaped to my hotel room, grateful for the silence.

Mr Ballmer has been the software giant's chief for 13 years and he has long overstayed his effectiveness. He has been friends with company founder Bill Gates since their Harvard days in the 1970s. Mr Gates famously dropped out; Mr Ballmer graduated with a bachelor's in mathematics and economics. He joined Microsoft as its 30th employee and quickly rose up the ranks, making his mark in sales.

His big successes include gunning for and selling the Xbox gaming console, a market leader in console gaming. Another is the Kinect motion sensor technology, now de rigueur in many gaming devices.

Even so, investors last week reacted with glee to the Aug 23 announcement that Mr Ballmer would be stepping down within 12 months. Microsoft's share price soared by as much as 10 per cent on the day he announced his retirement.

For investors and many tech observers, the news could not have come soon enough. During his tenure, the stock lost 36 per cent of its value, excluding dividends paid out - even though revenues more than tripled to US$78 billion (S$99.7 billion) from US$21 billion.

Microsoft, a software powerhouse in the personal computing industry, was caught in a pincer movement led by two groups of competitors: computer consumer firms leading the smartphone and tablet revolution; and the newer enterprise tech vendors promoting more affordable cloud-computing services.

Mr Ballmer, 57, was dismissive of these tectonic changes in the tech industry. He believed Windows, the operating system for most PCs and laptops used in homes and offices, would continue to give Microsoft its tech and profit edge.

Instead, people are now spending more time on tablets using Apple iOS or Android operating systems. Even though Microsoft's market capital is valued at about US$277 billion, it is relegated to playing catch-up in the new technologies that are reshaping modern life and work.

So where did Mr Ballmer go wrong? Let's count the ways.

First, he dismissed the iPhone threat. He famously said in 2007: "There's no chance that the iPhone is going to get any significant market share." Later that year, he added: "Five hundred US dollars (the price of an iPhone in the United States), fully subsidised with a plan! That is the most expensive phone in the world and it doesn't appeal to business customers because it doesn't have a keyboard, which makes it not a very good e-mail machine."

Windows tried to get back into the smartphone game, partnering Nokia - which, yes, offers a touch screen with no physical keyboard. It was too little, too late.

In the second quarter of this year, Windows-based Nokia garnered only 4 per cent of the market - against 80 per cent for Android phones and 14 per cent for iPhones, said research firm Strategy Analytics.

Second blunder: dissing the tablet computer. In 2009, when Apple was still developing the iPad, Microsoft had a similar project code-named Courier. A Fortune report in March 2011 said its engineers had built an icon-rich user interface and a multi-touch operating system with stylus-friendly screens. Yet, when Courier was brought to Mr Ballmer and senior management, the project was canned.

The new interface was to be folded into the Windows 8 system under development then.

This year, more than 200 million tablets will be sold but only a few will run Windows. As was the case with smartphones, Microsoft came too late to the party. It launched the Surface RT tablet last year, using a Windows operating system - that was a flop. It had to write down US$900 million in parts and accessories for the last quarter ended this June.

Third blunder: underestimating the potential of cloud-computing, or Internet-based, software.

In the enterprise business, Microsoft grew rich selling software licences to companies based on the number of users. This business is now threatened by new tech upstarts such as Google, Amazon and Salesforce, which provide cloud-computing services through the Internet. This platform allows users to pay as they use the service, rather than pay a huge sum upfront for a licence.

Cloud computing and pay-as-you-use software trends are sea changes that threaten major industry players such as Microsoft. Mr Dane Anderson, vice-president and research director for the Asia-Pacific at Forrester Research, said computing, storage and networking are now undertaken on the Internet, which has driven down IT infrastructure costs: "For every US$1 spent on using the Web for computing services, about US$3 to US$4 of traditional IT equipment and software is removed."

Mr Ballmer's tech legacy might be tarnished. What of Microsoft's?

It is too soon to write the tech giant's epitaph. After all, it managed to triple revenue even in the face of fierce competition.

For cloud computing, enterprise tech might have moved online, but Microsoft's Office remains a market leader. Microsoft can still extend its reach by ensuring that its software can be used seamlessly on mobile devices as well.

As for mobile technology, making cool-looking smartphones isn't enough. Users expect to be able to use the same software - mobile apps - across their computers, phones and tablets. The content created by the apps must also be integrated across devices.

In other words, operating systems and software - the very things that Microsoft excels in - are more critical than ever on the new tech battlefront.

The Microsoft of today is in danger of becoming a monolith of the previous century. Under Mr Ballmer, it failed to graft Internet and mobile strands onto its core DNA.

But it has a chance to reinvent itself with a new chief.

To reboot its corporate culture and break the Windows DNA, Microsoft ought to see that the job goes to an outsider who has no history with the company so that he can view the problems unemotionally. That will give him room to revamp management, lay off employees if necessary and draw up new strategies.

Software made Microsoft a household name. In a world where every consumer has multiple devices that often can't talk to one another, software remains critical.

If Microsoft can change fast enough, mobile software might extend its user licence by a decade or more.

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