Microsoft CEO Steve Ballmer to step down in next 12 months

Microsoft Corp. Chief Executive Steve Ballmer will step down from the troubled tech giant in the next 12 months, ending the career of a man who helped usher in the modern computing age, only to watch it turn on him and threaten to devour his company.

The software company made the surprising announcement Friday after a tumultuous year in which it radically redesigned nearly all of its major products for a new computing era defined by mobile and touch-screen computing. No successor was named, a signal to analysts that Ballmer, 57, was pressured by the board to go.

"This came very sudden and wasn't of Ballmer's choosing," said Patrick Moorhead, principal analyst at Moor Insights and Strategy. "Any time there is an extended search announced, it means that it hasn't been planned."

Microsoft felt like an unstoppable force in the 1990s. The Windows operating system became the standard platform for desktop personal computers. But Microsoft couldn't adapt fast enough to the mobile and cloud-computing era.

The Redmond, Wash., company's influence waned. Its stock price stalled. And Ballmer emerged as a divisive figure. Although supporters cheered his push into business markets, critics tarred him for a lack of vision in consumer technology and for his inability to inspire the innovation needed to keep Microsoft as relevant as rivals Google Inc. and Apple Inc.

A large, bombastic presence, Ballmer often seemed as much Microsoft's cheerleader-in-chief as its CEO. He put all his frenetic energy into reinvigorating Microsoft this last year, determined to leave behind the kind of juggernaut he had inherited.

Instead, it appears Microsoft's board nudged him aside, a decision Ballmer accepted even as he hinted at regrets about not being allowed to finish what he started.

"This is an emotional and difficult thing for me to do," Ballmer wrote in a letter to Microsoft employees. "I take this step in the best interests of the company I love; it is the thing outside of my family and closest friends that matters to me most."

Speculation immediately turned to who will succeed Ballmer, a decision tinged with historic importance as the 38-year-old company wrestles with what qualities it wants in its third CEO. For all its stumbles, Microsoft's products still are among the most widely used in the world.

Among the names immediately mentioned by observers: Tami Reller, Microsoft's executive vice president of marketing; Tony Bates, Microsoft's executive vice president who runs business development; Vic Gundotra, Google's senior vice president for engineering; Sheryl Sandberg, Facebook's chief operating officer; Kevin Johnson, former Juniper Networks CEO who came from Microsoft; and Lou Gerstner, former IBM CEO.

The committee created by Microsoft's board to find the next CEO includes co-founder and board Chairman Bill Gates, who stepped down as chief executive in 2000 and left day-to-operations completely in 2008 to pursue his interests in philanthropy.

"As a member of the succession planning committee, I'll work closely with the other members of the board to identify a great new CEO," Gates said in a statement.

Gates dropped out of Harvard to start Microsoft with co-founder Paul Allen in 1975, at a time when the idea of personal computers in the home was the stuff of science fiction and the tech industry scoffed at the notion that software could be a business. Gates was later joined by his Harvard classmate, Ballmer, who brought business and marketing savvy.

Together, they formed a partnership that outmaneuvered rivals such as IBM and Steve Jobs at Apple.

By the time Ballmer became CEO, Microsoft had a seemingly invincible lead thanks to the dominance of its Windows operating system and a reputation for steamrolling rivals. With a bruising federal antitrust case winding down, Ballmer began his tenure by trying to soften Microsoft's reputation and settling feuds with Silicon Valley rivals.

Over the course of the next decade, Ballmer and Microsoft had their successes. Annual revenue has grown from $23 billion in 2000 to $77.8 billion for the 2013 fiscal year that ended in June.

"He tripled the revenue for the company in 13 years," Forrester Research analyst Ted Schadler said. "That's pretty significant."

The creation of the Xbox made Microsoft a force in gaming. And the introduction of the Kinect, a motion-sensing gaming control device that became one of the fastest-selling consumer electronics devices in history, hinted at the kind of innovation the company could deliver.

But Ballmer's strongest move was to dramatically expand Microsoft's services for businesses, including its cloud-computing platform. His supporters said he never got enough credit for these initiatives.

"What Steve Ballmer achieved at Microsoft is actually amazing," entrepreneur Anil Dash said in a tweet. "It's underrated simply because consumer tech casts an irrationally big shadow."

When it comes to how history judges Ballmer, however, these hits are likely to be dwarfed by his misses in consumer technology.

"There's no chance that the iPhone is going to get any significant market share," Ballmer said in a 2007 statement that continues to haunt him. "No chance."

In recent years, Microsoft's attempts to launch a music player to match the iPod and a smartphone to rival the iPhone flopped. The company poured huge sums of money into Internet services to catch Google, including its search engine Bing, only to watch these efforts hemorrhage money. A spectacular bid to acquire Yahoo was thwarted.

These misfires backed Microsoft into a corner. The desktop PC, the source of Microsoft's power for so long, was becoming less important in an age of mobile and cloud computing.

That led to a radical overhaul of Microsoft's products the last year, starting with the Windows 8 operating system, which was redesigned with "live tiles" for mobile and touch-screen devices. There was also a new Windows Phone 8. And there was the introduction of the company's own tablet, the Surface, which fell flat with consumers and irritated its partners.

Ballmer was never much of a hit on Wall Street, where Microsoft's shares have fallen about 43% during his tenure before Friday's announcement. Compare that with Apple, whose stock has soared more than 1,900% during the same period, or Google, which has seen shares climb 707% since the company went public in 2004.

This summer, Ballmer unveiled a major reorganization of Microsoft just before taking a staggering $900-million write-down because of unsold Surface tablets.

With the company stalling, the board apparently had enough.

"My original thoughts on timing would have had my retirement happen in the middle of our company's transformation to a devices and services company," Ballmer said in a statement. "We need a CEO who will be here longer term for this new direction."

Perhaps in the most telling verdict on Ballmer's tenure, the company's stock on Friday rose $2.36, or 7.3%, to $34.75 on news of his departure. That was the stock's biggest one-day jump in more than four years.

Twitter: @obrien

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