Published On: Wed, Nov 20th, 2013

Microsoft’s Steve Ballmer Had A Busy Day Yesterday

Microsoft CEO Steve Ballmer Opens 2012 Consumer Electronics Show

                                                                                                                                      Microsoft CEO Steve Ballmer


Yesterday two things happened that were very important for Microsoft’s current Chief Executive Officer Steve Ballmer.

The first was approval, by 99% of Nokia’s shareholders represented at Nokia’s Annual Shareholders meeting, of the deal that Ballmer had engineered to sell Nokia’s mobile phone business to Microsoft .

The deal was struck two months ago to sell Nokia’s mobile handset devices and services business, and to license some of its patents, including Nokia’s highly regarded “Here” mapping technology, to Microsoft for US$7.5 billion in cash.

This acquisition is now on course to close early next year, after obtaining any necessary regulatory approvals. Nokia is so far the only significant user of Windows 8, Microsoft’s belated operating system entry that is playing catch up in the mobile phone wars. To be sure of keeping them in the game Microsoft is taking a big gamble with the purchase, and will now have to follow through and invest heavily in Nokia’s business afterwards

As part of the deal Nokia’s former CEO Stephen Elop, who stepped aside when the deal was first announced, and who is an ex Microsoft executive to begin with, will be moving back to Microsoft with the business. Once at Microsoft he will be heading up an expanded devices team there – i.e. beyond just phones in Microsoft’s newly defined universe as a “devices and services” company.

The second important thing that happened for Ballmer yesterday was what was almost certainly his own final speech as CEO at Microsoft’s own Annual Shareholders meeting, prior to his pending retirement in the coming year which has previously been announced. Indeed Stephen Elop is even one of the potential candidates to replace him as, for that matter apparently, is Ford Motor Company’s current CEO Alan Mulaly.

Speaking from the heart at the Annual Meeting as he always does, Steve Ballmer highlighted the company’s new products, financial performance, future opportunities, and continued progress in its devices and services transformation. He essentially preemptively defended his own vision for the future against potential changes in strategy a successor may bring to the table.

Here are his words from the great man himself:

“Last year at this meeting, I talked about the fundamental shift underway at Microsoft, from a company that expresses its software creativity directly in software, to a company that expresses its creativity in software through a family of devices and services, ” Ballmer said. “Our leadership team and the board of directors have spent a lot of time over the past year working on this strategy, and honing a differentiated point of view in terms of the high-value experiences that we really can bring to life that make people more productive.”

Ballmer then lauded a wave of new products available now and in the coming weeks from Microsoft, including Xbox One, new Windows 8.1 PCs and tablets, Surface 2, and a number of new Nokia devices. He also outlined the company’s momentum in consumer services such as Skype, Office 365 and Bing, and its continued success in delivering first-class enterprise services. In doing so, Ballmer promoted the significant opportunities enabled by the company’s focus on enabling high-value activities delivered through a family of devices and services.

“I’m confident that we have the right strategy in place, ” Ballmer said. “We have the financial assets that allow us to take the risks and the bold bets to invest in new areas that will lead to transformation of how people work and live – and economic success for Microsoft. And we do all that on a foundation of world-class people, world-class talent, who will drive this next generation of world-changing technology.”

The bottom line of his remarks was a passionate plea to ignore calls others have been making to sell the company’s Bing search engine and its Xbox video game console business. In his view they are essential for the future even if they are losing a bit of money today. As their technology is integrated with other Microsoft products, this will help to make them stand out from rivals is his argument.

Steve Ballmer is clearly also taking direct aim at the growing chorus of critics who say that Microsoft would be better off narrowing its focus, after many years of apparently casting around aimlessly without succeeding really well at any of these new initiatives. That includes even the Xbox itself which apparently still loses money even after selling 80 million of them, and albeit with a new version just launched which so far has received highly favourable preliminary reviews.

Steve Ballmer’s argument is that it is better to stay the course, even if in the past progress has been rocky. It will now likely be up to his successor to pick the right growth strategy as Steve Ballmer himself reverts to being “just” a very, very wealthy passive shareholder.

It is a shame in a way, as Microsoft’s revenues and profits have grown significantly during his tenure and their bets on the enterprise have been very profitable. However the technology industry “curse” of a shrinking P/E ratio, assigned to companies that give even the appearance of stagnation, has left the firm’s overall market capitalization not much better now he is leaving than when he started.

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