Technology

Why You Don't Want to Be Microsoft CEO


Why You Don't Want to Be Microsoft CEO

Photo illustration by 731; Mug photograph by Don Nichols/Getty Images

(Corrects photograph in table to show John Donahoe.)

The job hasn’t been posted—at least not yet. But the opening has been public knowledge since Aug. 23, and for some reason no candidate has stepped up to grab what would appear to be a dream gig: chief executive officer of Microsoft (MSFT). In fact, much of the news around the position so far is the long list of people who’ve decided they’d rather fulfill their dreams elsewhere.

Steve Mollenkopf, Qualcomm’s (QCOM) No. 2 executive, was a serious candidate until he opted to take a promotion to CEO at the semiconductor company. EBay (EBAY) CEO John Donahoe and former VMware (VMW) CEO Paul Maritz both took a pass on the Microsoft job, say five people with knowledge of the talks who aren’t authorized to speak on the record. And there was so much chatter about Ford Motor (F) CEO Alan Mulally being on the list that he publicly announced he was staying at the carmaker. Through spokesmen, the others declined to comment. For its part, Microsoft says things are proceeding as expected. “It is not uncommon for CEO searches of this magnitude to require four to six months,” says spokesman Pete Wootton. The company is expected to make an announcement in the next couple of weeks, according to a person familiar with the board’s schedule.

Fixing Microsoft will take a lot of strategic imagination. When Steve Ballmer took over from founder Bill Gates in 2000, 93 percent of consumer computing devices ran on the company’s Windows operating system; in 2012 it was 19 percent, according to Goldman Sachs (GS). As Microsoft stares down middle age, some investors want it to focus on business and cloud software and jettison lower-margin consumer hardware. Others are concerned that those markets have become too intertwined for the company to do that.

Most CEO-caliber executives relish these kinds of challenges, especially when the prize is going down in history as the savior of a great American company. But Microsoft may not be offering the kind of freedom required to play hero. Gates, still chairman, may take a more active role in the company depending on who fills the big chair, say three people familiar with his thinking. Mulally decided to end his candidacy partly because he was worried he wouldn’t be able to shift away from what predecessors have done, according to a person close to him. Matt McIlwain, a managing director at venture capital firm Madrona Venture Group, says a candidate who’s nervous about appealing to Gates shouldn’t be the next chief executive of Microsoft. Gates is “going to be more involved,” McIlwain says. “If somebody’s not comfortable with that, they should figure that out now.”

Then there’s the Ballmer factor. He was elected to a new one-year term on Microsoft’s board in November. When he became CEO in 2000, he had some trouble exerting his influence with his former Harvard hallmate Gates around, so he well understands what it’s like to have a former chief executive in the room. Two people familiar with Ballmer’s thinking say he’ll consider his successor’s wishes when deciding whether to remain on the board. That leaves the incoming CEO with two unenviable options: asking Ballmer to please take a hike, or trying to carve out a fresh path, possibly unwinding part of Ballmer’s legacy—with him there to see it.

Should an outside leader arrive in Redmond, Wash., the welcoming committee will include several internal candidates who have been interviewed for the top job: business development, strategy, and evangelism Executive Vice President Tony Bates; Chief Operating Officer B. Kevin Turner; and Satya Nadella, who oversees the company’s cloud and enterprise business. Also in the running has been former Nokia (NOK) CEO Stephen Elop, a longtime Microsoft executive who recently returned to the company after Nokia agreed to sell Microsoft its handset business.

Winning over the rivals and other Ballmer loyalists could be tough, though Nadella says he’ll stick around. So could losing them, especially given the exodus of top talent from Microsoft since July, when Ballmer tried to break down long-running fiefdoms by reorganizing around hardware and cloud services. Three senior executives of Xbox, Office, and Windows departed the company as a result. “Fiefdoms don’t seem to be tolerated that much anymore,” says Wes Miller, an analyst at independent IT planning service Directions on Microsoft. “But the key thing is, can they get to the point where the organization doesn’t prevent them from succeeding? We’re not quite there yet.”

It will be up to Ballmer’s successor to see that reorganization through—no easy task in a company with roughly 100,000 employees. “For a big company like Microsoft, that’s like trying to turn a battleship on a lake,” says Joel Koblentz, senior partner at executive recruiter Koblentz Group, which isn’t involved in the search. And Ballmer’s purchase of Nokia’s mobile phone business in September committed the company to hardware and consumer products, two areas many investors and even some CEO candidates don’t favor.

There was a time when a Microsoft CEO could ignore investor demands to look at options such as spinning off its Xbox video game console. But that may be harder after March, when activist shareholder ValueAct Holdings is set to take a newly created 10th seat on the board. ValueAct is sour on Microsoft’s consumer and hardware businesses and wants more focus on business and software products, say two people familiar with the company’s thinking. “Dealing with the various shareholder issues is going to require a different set of optics than looking inside,” says Koblentz. “It’s going to take an exceptional person, and there’s only really a handful of people who could do it.”

Despite the challenges, Microsoft still has its lures. In what will most likely be Ballmer’s final quarter in charge, the company posted record revenue. Its shares rose 40 percent in 2013, partly in reaction to the announcement of his retirement. For an incoming CEO, even that good news could seem like yet another negative. Ballmer will be a hard act to follow.

The bottom line: Microsoft has had trouble recruiting because it isn’t clear whether the new CEO will be able to make big changes.

With Jeff Green
Bass is a reporter for Bloomberg News in Seattle.

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Companies Mentioned

  • MSFT
    (Microsoft Corp)
    • $47.52 USD
    • 0.84
    • 1.77%
  • QCOM
    (QUALCOMM Inc)
    • $75.53 USD
    • -0.91
    • -1.2%
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