Who Would Even WANT to Be Microsoft CEO?

by Brad Moon | January 9, 2014 11:58 am

A leading position is up for grabs at one of the nation’s most storied organizations, and it might be one of the least appealing around.

microsoft-ceo-msft-jay-grudenWhile whoever is hired will be paid handsomely, he or she must turn around an organization that has repeatedly failed to live up to expectations, and they’ll be operating under a media spotlight and second-guessed on every move they make.

If you guessed the Washington Redskins, you’d be close — but that pressure-cooker position reportedly has just been filled by Jay Gruden[1].

No, the unenviable post in question right now is chief executive officer of Microsoft (MSFT[2]) … though MSFT and the Redskins have an awful lot in common right now.

The Redskins of the Tech Industry?

Like the Redskins, Microsoft is a highly valued and highly visible veteran of its industry. Also like the Redskins, Microsoft is flailing and has been for years.

But perhaps most important, MSFT’s best performances have been in the past. When Steve Ballmer took over as Microsoft CEO in January 2000, MSFT was trading near $60; within a year it had plunged to near $25, and has spent most of the last decade below $30.

In the meantime, former conference bottom-dweller Apple (AAPL[3]) re-invented itself and surpassed Microsoft as the world’s most valuable technology company.

With the PC business Microsoft relies on fading, Ballmer tried to re-invent the company as a services and devices business[4], but the results haven’t gelled in a meaningful way. Now, Ballmer is out, and the hunt is on for a new Microsoft CEO — likely the technology industry’s highest pressure position.

Plenty to Tackle as Microsoft CEO

But who would want to be Microsoft CEO considering the challenges?

Shareholders are impatient after more than a decade of MSFT treading water, and they’re watching upstarts like Apple and Google (GOOG[5]) repeatedly eat Microsoft’s lunch. The decline of PC sales is even worse than had been forecast, expected to drop 10% in 2013[6] — cutting into the Windows and Office revenue that’s Microsoft’s bread and butter. At the same time, cheap Google Chromebooks came out of nowhere to take 21% of all U.S. laptop sales in 2013[7].

Microsoft’s first run at tablets was years late and ended in disaster with a $900 million writedown on unsold Surface RT tablets — reportedly the final straw that led to Ballmer’s ouster[8].

MSFT’s tablet-inspired Windows 8 operating system failed to come anywhere near sales expectations, and the company has been in damage control since, fighting to tweak the OS to keep from alienating longtime Windows users.

In the meantime, its Windows Phone 8 platform has displaced BlackBerry (BBRY[9]) for third place, but still remains below a 4% worldwide market share. And that volume is almost entirely accounted for by Nokia (NOK[10]), the struggling smartphone maker Microsoft is now buying with the intention of folding its Lumia phones under the “devices” wing.

MSFT fumbled the launch of its Xbox One video game console in 2013, alienating gamers with an early issue over used game support, concerns about Kinect privacy and emphasis on entertainment rather than hard-core gaming. Sony (SNE[11]) capitalized on the mistakes, and its PS4 outsold the Xbox One by a significant 1.2 million-unit margin[12] over the holidays (albeit with one extra week to work with).

And just to make things even more interesting for Microsoft, by getting into the hardware game with the Surface, it annoyed longtime PC hardware partners. As a result, they bailed en masse on Windows RT tablet commitments[13] (leaving Microsoft to go it alone). At CES 2014, Intel (INTC[14]) announced its chips would dual-boot, allowing PCs to run Google’s competing Android operating system, while Hewlett-Packard (HPQ[15]) — the world’s largest PC maker — unveiled a new all-in-one desktop aimed at the enterprise that runs Android exclusively[16], with no Windows or Office support.

In other words, whoever replaces Ballmer is going to be taking over a company that hasn’t “made the playoffs” in years, even as the board, shareholders and Windows fans expect a return to the glory days. And the media is going to be all over every move the new CEO makes.

The MSFT Short List

One of the early front-runner candidates, Ford (F[17]) CEO Alan Mulally, has taken himself out of the race[18]. Meanwhile, Qualcomm (QCOM[19]) promoted its COO, Steve Mollenkopf, to company chief to keep him from bailing to Microsoft.

That doesn’t leave a whole lot of potential candidates.

Satya Nadella and Tony Bates are insiders frequently cited as being on the Microsoft CEO short list. Nadella is a 20-year MSFT veteran who has been driving the company’s cloud efforts, while Bates came on board in 2011 as part of Microsoft’s Skype acquisition. There might be reluctance to hire an insider when drastic change is required, though, and both could be weak on the “devices” side of the new Microsoft.

To me, at least, that leaves Stephen Elop — a former Microsoft guy who went on to become CEO at Nokia (NOK[10]) before jumping back to MSFT last year after its acquisition of Nokia’s devices business. He has a mix of insider and outsider perspective, he already has been chief of a major (though struggling) tech company, and he knows the devices and mobile side of the business.

But would he take the Microsoft CEO role if offered? If so, Elop hasn’t tipped his hand yet.

Bottom Line

With Ballmer’s one-year deadline expiring in August, the clock is ticking down on the start of a new season at Microsoft.

MSFT is willing to pay the big bucks[20] (Ballmer got only $1.3 million last year at his own request, while Nadella made $7.7 million), but whoever it is, the new CEO will have his or her work cut out in turning around this tech giant.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

Brad Moon has been writing for InvestorPlace.com since 2012. He also writes about stocks for Kiplinger and has been a senior contributor focusing on consumer technology for Forbes since 2015.

Endnotes:

  1. reportedly has just been filled by Jay Gruden: http://espn.go.com/nfl/story/_/id/10267454/washington-redskins-hire-jay-gruden-coach
  2. MSFT: http://studio-5.financialcontent.com/investplace/quote?Symbol=MSFT
  3. AAPL: http://studio-5.financialcontent.com/investplace/quote?Symbol=AAPL
  4. services and devices business: http://www.businessinsider.com/microsoft-device-and-services-2013-8
  5. GOOG: http://studio-5.financialcontent.com/investplace/quote?Symbol=GOOG
  6. expected to drop 10% in 2013: http://www.pcworld.com/article/2068520/idc-pcs-decline-is-far-worse-than-expected.html
  7. take 21% of all U.S. laptop sales in 2013: https://investorplace.com/2013/12/google-chromebook-msft/#.Us2jaHkTuOE
  8. reportedly the final straw that led to Ballmer’s ouster: http://www.computerworld.com/s/article/9241867/Ballmer_forced_out_after_900M_Surface_RT_debacle?pageNumber=1
  9. BBRY: http://studio-5.financialcontent.com/investplace/quote?Symbol=BBRY
  10. NOK: http://studio-5.financialcontent.com/investplace/quote?Symbol=NOK
  11. SNE: http://studio-5.financialcontent.com/investplace/quote?Symbol=SNE
  12. PS4 outsold the Xbox One by a significant 1.2 million-unit margin: http://www.gamespot.com/articles/playstation-4-sales-reach-4-2-million-outselling-xbox-one-by-1-2-million-units-in-2013/1100-6416987/
  13. bailed en masse on Windows RT tablet commitments: https://investorplace.com/2013/01/samsung-to-windows-rt-never-mind/#.Us2idHkTuOE
  14. INTC: http://studio-5.financialcontent.com/investplace/quote?Symbol=INTC
  15. HPQ: http://studio-5.financialcontent.com/investplace/quote?Symbol=HPQ
  16. all-in-one desktop aimed at the enterprise that runs Android exclusively: https://investorplace.com/2014/01/ces-2014-4k-tv/2/#.Us2io3kTuOE
  17. F: http://studio-5.financialcontent.com/investplace/quote?Symbol=F
  18. has taken himself out of the race: http://seattletimes.com/html/businesstechnology/2022616919_microsoftmullalyxml.html
  19. QCOM: http://studio-5.financialcontent.com/investplace/quote?Symbol=QCOM
  20. MSFT is willing to pay the big bucks: http://www.cnbc.com/id/101087090

Source URL: https://investorplace.com/2014/01/microsoft-ceo-msft-stephen-elop/