(Originally published here.)
So now we know that Microsoft’s Chief Executive Officer, Steve Ballmer, plans to retire within the next year. “Huzzah!” said the markets, as the stock price jumped on the news in what also must have been just the latest blow to Ballmer’s self-esteem. No wonder, though: Ballmer oversaw Microsoft during what’s been called its lost decade, and here’s a look at opportunities missed — and botched — during his tenure.
Photographer: Tomohiro Ohsumi/Bloomberg
Microsoft achieved dominance at a time when everyone wanted to own a personal computer tethered to his or her desk at home or at the office. It forged lucrative relationships with major PC-makers and optimized its software around the Intel processors, thumping the competition along the way (including, mind you, Apple). That strategy worked brilliantly until other devices started taking screen time away from the desktops and laptops that were Microsoft’s bread and butter. (See also the fate of Dell, Hewlett-Packard and Intel.) As users have developed a decided preference for computing anytime and anywhere they want, PC sales have suffered and have been in an outright decline for more than a year.
The biggest threat came from smartphones, a market that is growing by about 50 percent annually. Ballmer had Windows Mobile on the market way back when, but it was never a great product, despite his repeated promises to make it better. He also struck a belated partnership with Nokia, and reviews suggest that their product has some neat advantages (such as the camera’s ability to take pictures at night — cool!), but it all smacks of too little, too late.
Photographer: Chris Rank/Bloomberg News
It’s easy to forget that Apple was nearly dead in the late 1990s. Their computers were overpriced and were incompatible with most software. Apple was saved by iTunes and the iPod, which provided a legal and convenient way to download and share music. Apple ended up succeeding in smartphones because they took what they learned making music gadgets to revolutionize the smartphone market. While Microsoft had an early head start making software for the portable music market, the manufacturers it relied on to make devices weren’t very good at making great music gadgets. Eventually, in 2006, Microsoft came up with its own product — the Zune — but despite some neat features like the ability to share music over wifi, it turned out to be…wait for it, wait for it…a flop.
Photographer: Daniel Acker/Bloomberg
Microsoft debuted e-book software back in 2000, long before rivals like Amazon and Apple had offerings, but it failed to take off because no one had invented a screen that was easy on the eyes for hours at a time until Amazon gave us the Kindle. (See the pattern? When Microsoft first dominated the arena, software trumped hardware. But as time went on, software divorced from great hardware came to be a liability and Microsoft, except for the Xbox, has never been a primo hardware company.) Microsoft Reader was embedded on the Windows Pocket PC platform for mobile devices, and later, on Windows. But it was discontinued in August 2012. As with music, it was another case of getting in early but botching the execution.
Photographer: Daniel Acker/Bloomberg
Microsoft knew that the Internet was big and was ruthless at fighting and winning the browser war. Internet Explorer was so successful that Microsoft had to spend years fighting off antitrust suits that now seem silly. Those clashes probably distracted the company from the Internet’s real money-maker: search products.
Microsoft later realized that Google’s success was due to its monopoly in search-based ad sales and tried to compete with its own service, Bing. Too late. Google already had become the Microsoft of search, and went out to strengthen its grip with the help of its Chrome browser, which included an integrated search engine. That sounds a lot like Microsoft’s old strategy of bundling Internet Explorer with Windows, doesn’t it? The difference is that Google hasn’t faced the kind of regulatory scrutiny and backlash that Microsoft endured.
5. Innovation at Scale
Photographer: Andrew Harrer/Bloomberg
Microsoft did launch one very successful new product during Ballmer’s tenure: the Xbox game console. Unlike its tablets, phones and music players, the Xbox brand combines a fine piece of hardware with excellent software. I may be partial to Sony’s PlayStation, but no one can deny the impact of games like Halo and Gears of War on the industry. The question is: Why was the Xbox the only successful venture Microsoft made into a new product line? Maybe the answer lies in the next point.
6. Corporate management
Photographer: David Paul Morris/Bloomberg
Running companies well is hard. Running huge companies well is even harder. Thus it has been and thus it will always be. It takes dedication, hard work, foresight and — one of the trickiest ingredients of all — creativity. All of Microsoft’s problems boil down, at some level, to a mixture of bad luck and bad management. Microsoft continues to make excellent office productivity software (I’m writing this on Word, and I use Excel all the time), and I have no interest in trading in my Windows operating system for anything else. Yet these are successes engineered by a company that is, essentially, a very profitable utility, not a company that is a groundbreaking innovator. That explains why Microsoft’s stock price hasn’t budged for more than a decade even as management has distributed billions of dollars in dividends. The company has certainly been willing to invest lots of money and effort in competing in a range of markets, yet it keeps losing to nimbler, more creative rivals like Apple and Google. Microsoft has helped make up some of these losses by branching into business services, although it hasn’t made that transition as well as IBM.
Steve Ballmer certainly wasn’t the only reason for these failures, but it was ultimately his responsibility, as Chief Executive, to fix them. His departure is long overdue, and his successor has a lot of work to do.
(Matthew C. Klein is a writer for Bloomberg View. Follow him on Twitter.)