Microsoft’s Ballmer Known as People Guy
When it came time for Microsoft Corp. to engage in last-ditch settlement talks with European antitrust officials, it was largely the quirks of their calendars that sent Chief Executive Steve Ballmer to Brussels instead of Chairman Bill Gates.
Gates provided some long-distance direction to Ballmer and Microsoft general counsel Brad Smith, but Smith was relieved that Ballmer was in the driver’s seat.
“My preference was for it to be Steve,” Smith said last week. “Steve’s background is very well-suited to those kinds of very challenging exercises.”
The talks last month with the European Commission failed, and Microsoft was ordered to offer a stripped-down version of its Windows PC operating system. Within weeks, Ballmer’s pragmatic and business-oriented approach produced a surprising accord with longtime enemy Sun Microsystems Inc., the biggest in a spate of peace treaties signed since he took over Gates’ CEO post in January 2000. In the latest pact, Microsoft said Monday that it would pay $440 million to end a patent fight with InterTrust Technologies Corp.
Those deals were easier for Ballmer to execute than they would have been for Gates, company employees and observers said, because Ballmer thinks as much about new customers as he does about new technologies and he has a salesman’s ease with people. And opposing parties have an easier time being constructive with someone -- anyone -- who is not Bill Gates.
“Other industry leaders never attached the same sort of hostility toward Ballmer that they did toward Gates,” said Yankee Group analyst Laura DiDio. “He has lowered the level of hostility, and he has made it easier for Microsoft to go forward.”
The string of settlements, which ended several cases brought by competitors and most class-action suits by consumers, is the most visible result of changes Ballmer has wrought since inheriting control of the world’s largest software company. Other major steps include a massive reorganization of the Redmond, Wash.-based company into seven independent divisions and a revamp of internal strategy to make employees more responsive to customers and less focused on pursuing technology for its own sake.
The shifts are emblematic of the differences between Ballmer and Gates, close friends since their days as Harvard sophomores in the 1970s. Compared with the company’s founder, Ballmer is less emotionally invested in longtime industry rivalries, people who know him said, and more comfortable fraternizing with both customers and competitors.
“He’s more of a schmoozer than Bill,” said analyst Dwight Davis of Summit Strategies in Seattle. “He just gets out and about more.”
The biggest payoff from that approach has come in Silicon Valley. Gates flies down for the occasional conference, but Ballmer makes yearly presentations to and socializes with venture capitalists in Northern California. He has made trips to see Oracle Corp. CEO Larry Ellison, a semi-reformed Gates baiter, and to spend time with the partners at Kleiner Perkins Caulfield & Byers, who have financed such Microsoft foes as Sun, Netscape Communications Corp. and Google Inc.
Ballmer’s outreach program started after he decided that Microsoft needed to accept more of the responsibility that came with its unmatched power. As he wrote in a companywide e-mail in 2002 after settling a long and acrimonious antitrust case with the Justice Department, “Our industry wants us to be more actively engaged and open about who we are, and about our roadmap for the future.”
Running Microsoft as a mature company instead of a start-up on steroids doesn’t come easily to the exuberant Ballmer. He’s boisterous and prone to shouting; a video of him waving his arms, skipping and sweating at a sales rally made him an accidental Internet star. Now Ballmer, 48, is working hard to discipline both the company and himself, recently losing more than 50 pounds through diet and exercise and sounding more like a corporate statesman in public.
By settling with Sun and muting some of Microsoft’s other corporate critics, Ballmer has been able to focus on issues such as software security and the threat posed by the free Linux operating system.
Ballmer, who declined a request to be interviewed, also has been responding to big customers that have said Microsoft’s longtime efforts to tie its products together have made it difficult to use software from other companies. That emphasis on pleasing customers is a hallmark of the new Microsoft.
The improved diplomacy helped defuse a potential crisis in 2001, when Microsoft changed licensing terms for its software to prod customers into paying annual subscription fees. After visiting unhappy clients in Europe, Ballmer called a meeting with top sales executives to gauge customer discontent. He put off a deadline for the customers to adopt the changes, then softened the terms, said world sales chief Kevin Johnson.
Equally important, Ballmer pushed for a computerized system that displays customer complaints by intensity and region. Microsoft’s large customers say the company has gotten far easier to deal with, and they have credited Ballmer for much of that improvement.
With Linux turning into Microsoft’s biggest headache, it’s important that the man in charge of the company specializes in listening to customers, analysts said, and he may even follow Sun’s lead and acknowledge that there is room for companies to have software from both Microsoft and Linux.
Because Gates has become less visible, outsiders sometimes attribute too much of the company’s evolution to Ballmer, Smith and others said. They point out that Gates and Ballmer have very similar views on fundamental issues, including legal strategy, and that Gates played a significant role behind the scenes in the European talks. It was Gates, not Ballmer, who led last year’s successful effort to settle a private antitrust suit by Netscape parent Time Warner Inc. for $750 million.
Shortly after Ballmer became CEO, he and Gates clashed vocally in front of their executives over which of them should have the final say on running the business side of Microsoft. But since then, the two have defined separate spheres of influence inside the company. Gates remains the leader of technical efforts, overseeing new products and long-term strategy, while Ballmer handles business issues.
Ballmer’s increased power has translated into greater internal emphasis on traditional management techniques. Gates resisted creating divisions with their own profit-and-loss statements, but Ballmer pushed it through in the name of greater accountability. He has also formalized employee reviews and earned wide praise from staffers for replacing volatile stock option grants with awards of shares in the company.
Fewer employees are leaving the company -- voluntary turnover surged during the dot-com bubble but has fallen below 10% annually, partly because of Ballmer’s changes. Microsoft now has little problem recruiting from IBM Corp. and other companies. Ballmer’s new push is to borrow techniques from the likes of General Electric Co. -- one of the two companies worth more than Microsoft -- for grooming top managers by moving them from one kind of job to another.
When candidates to succeed Ballmer are identified in 15 years or so, said human resources vice president Ken DiPietro, “I can’t imagine they won’t have extensive non-U.S. experience. I can’t imagine they won’t have a deep technological background. I can’t imagine they won’t have deep people experience.”
