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Ballmer Says Microsoft Isn't 'Fubar' As He Heads For The Exits

This article is more than 10 years old.

The news that Steve Ballmer is retiring as CEO is the best thing to happen to the company and its shareholders in a long time. Microsoft has badly botched its entry into the fast-growing tablet and smartphone markets, is busy trying to prop up an imploding PC industry with a product few care about, and has seen its value fall by a third since Ballmer took over more than a decade ago. Once upon a time, Ballmer helped Bill Gates build Microsoft from the ground up. Lately, he's build slowly watching it fall into decay. So long Steve, don't let the door hit you on the way out.

Where Microsoft goes from here is uncertain at best. Ballmer says replacing him could take a year. Internally, two candidates seem head and shoulders above the pack. One, Tony Bates, has an enterprise background from Cisco and also ran Skype for a time. The other, Satya Nadella has experience in many of Microsoft's businesses yet isn't overly tied to any one of them. That narrow focus is why Tami Reller, who has been with the Windows group for 6 years, seems a bad fit, unlikely to break with the recent past.

And what a past it has been. Microsoft continues to market its products to everyone and no one at the same time. It has spent hundreds of millions touting that its tablet has a keyboard (and recently tried to excite people about the fact you can shove a memory card into it). This, despite the fact that most people buy tablets to use them without keyboards, especially consumers.

Here, Ballmer never was able to draw the distinction between the customers he was selling to and when Cnet's Mary Jo Foley got him for an interview today, it was clear he still wanted Microsoft to satisfy both groups. "The key isn't are you in consumer or are you in enterprise," Ballmer said. "If you're going to be in e-mail ... You can't say, okay, I only want to be in enterprise e-mail. If you're in real time communications, what, you only want to let enterprise people talk to enterprise people but never talk to consumers? Similarly, if you're in devices ... nobody has ever managed to figure out how to build a device for a user that was just enterprise or just consumer. "

And in one paragraph, you get what he's been missing all along. Microsoft is in e-mail, but Exchange and its web-based Outlook.com are entirely different products. It sells Windows to PC makers, but Dell and others make machines that clearly would only be at home either in home or in the office. Yes, Steve, there is crossover. Some law firms are using iPads in place of PCs, not just to play Candy Crush. But what made the iPad an object of desire was by showing what it does off the clock.

Apple leaves sales on the table yet still makes more profit than Microsoft. Its other competitors adopt different strategies than Apple, but each has a specific goal. Google is seeking ubiquity, which Microsoft could once take for granted with Windows. Google doesn't care whether you use Android or Chrome, even though it might prefer you do. Google makes more from the average iPhone user than it does from the average Android user.

Microsoft, again, wanted everything: "Apple is trying to make a lot of money on the device. Amazon is trying to make it all on the back-end. So is Google. Rather than say the model is FOO or BAR, the model is to deliver these incredible, high value experiences that will span hardware innovation, operating system, consumer experiences and enterprise experiences, and then properly monetize them," Ballmer told Cnet. So not, "foo", not "bar". Instead Microsoft just wants both: fubar.

Apple's comeback under Steve Jobs was about choices, as much as the things they didn't do as the things they did. Microsoft wants to be "not Google, not Apple, not IBM" but it wants elements of them. It still won't sell Office for iPads and Android tablets because it thinks propping up its entirely irrelevant market share in tablets through exclusivity to the software matters. It built those tablets itself because it didn't trust third parties, but has left the phone market to partner Nokia, who is only succeeding by selling smartphones at bargain-basement prices of below $200 (unsubsidized). Hardware good to make; hardware bad to make. Got it.

There's a difference between cutting off activities entirely and spending your energy being great at a few things. Xbox, insulated from most of the rest of the company, became a hit, owning its place along with Sony and Nintendo in the gaming market. Office is the single biggest business for Microsoft and unlike the Windows business -- which will likely fall by half over the next 3-5 years as PC replacement cycles lengthen -- so far seems strong. But it won't remain that way if it's shackled to the slowly dying PC and stillborn Surface.

Microsoft can't really afford another year of not changing direction. The company recently announced a new strategy that seemed to be a mishmash of contradictions. A year from now, PC sales will be down another 10%, tens of millions more non-Surface tablets will be out there, and another billion smartphones will be sold. This is the technology world Ballmer's replacement steps into. He or she has access to Microsoft's tremendous cash -- both in the bank and still flowing in (for now) -- but will need to decide what it wants Microsoft to be or the market will decide for them.

Board member John Thompson was also on the call with Cnet's Foley. "I think it's quite obvious that the consumerization of IT is going on around the world, and if this company is to remain relevant, it's got to have a meaningful position across the spectrum of the user base and the industry," he said. That's why you see Microsoft stores in malls and the relentless television advertising. But the company Ballmer and Gates built sold software and made billions doing that. Will the successor figure that out soon enough? Or will Microsoft continue to insist it doesn't want to be Apple while attempting to mimic that company's strategy? Soon enough, Ballmer won't have to answer those questions anymore. For Microsoft stakeholders, that alone is an upgrade.

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