The Schwartz Report

Blog archive

Split Up Microsoft? Most IT Pros Say No

With Microsoft now in search of a new CEO, the noise level suggesting Microsoft should split itself up into multiple companies is predictably up. Yet the steps that "retiring" CEO Steve Ballmer and Microsoft's board have taken make that seem unlikely in the short term, though of course in business anything can happen.

But with last week's deal to acquire Nokia for $7.2 billion, short of it unexpectedly imploding before the deal closes early next year, Microsoft is on a path to add parts, not remove them. Even so, the latest buzz theorizing a Microsoft divestiture comes from Nick Wingfield, the Seattle-based reporter with The New York Times who today stitched together a scenario that has Microsoft being split into four businesses based on interviews with longtime Microsoft watcher Rich Sherlund of Nomura Securities and other experts.

Wall Street always becomes infatuated with the notion of breaking up companies investors feel they can chop up to make a quick buck. Sometimes divestitures happen for good reason and they're successful.  While most IT pros might not care if Microsoft were to spin off its Xbox gaming business or Bing search engine, most have a stake in the ties between the client, server and the cloud. Hence few IT pros have interest in Microsoft breaking itself into multiple businesses, especially if those ties are broken.

An online survey of more than 1,100 Redmond magazine readers fielded immediately after Microsoft announced that Ballmer will retire as CEO in the next year shows only 12 percent feel Microsoft's next CEO should split Microsoft into multiple companies. So what do they think the next chief executive should do?

Nearly half, or 49.4 percent, believe the next CEO needs to focus on breaking down the silos and fiefdoms that many believe has stifled Microsoft's ability to provide common services across different product lines. Ballmer's "One Microsoft" strategy, which coincidentally is the basis of his July corporate re-org, aims to break down those silos. Just as Ballmer solidified his "devices and services" strategy with the Nokia deal, the new CEO will inherit One Microsoft.

Nearly a quarter of respondents (24.7 percent) believe the new CEO should make major acquisitions that would embolden the company's "devices and services" strategy (ironically we fielded the survey just days before Microsoft announced it plans to acquire Nokia's handset business). Only 13.9 percent believe Microsoft should make moves into new markets.

Just as many investors and others on Wall Street had long wanted Ballmer to go, more than half (58.2 percent) of Redmond readers also welcome the change in leadership. Only 10.6 percent were disappointed in the news, believing only Ballmer or Gates could run Microsoft, while 31.2 percent don't believe Ballmer's departure changes anything.

"There's a lot of finger pointing and blame to go around," said Directions on Microsoft analyst Rob Sanfilippo. "Whether Ballmer has caused some of the issues at Microsoft over the last decade, I think [it] is a lot more complicated than could be blamed on one person."

Some survey respondents agree, saying Ballmer deserves more credit than he received. "Microsoft's rise in the enterprise over Ballmer's tenure is explosive, and he's on the right road to fix the consumer missed opportunities," one respondent said. "Mr. Ballmer is a one-of-a-kind individual, in every positive sense of the word," adds another. "He's a human dynamo -- one of the few people in the world besides Bill Gates who could keep a juggernaut like Microsoft on the track."

One reader sees Ballmer's departure as an opportunity for Microsoft to reevaluate everything. "Ballmer's retirement is a chance for Microsoft to reinvigorate itself," the reader said, adding his successor needs to reevaluate Microsoft's Windows strategy, restore the traditional (Windows 7) interface, work closely with application vendors in regard to mobile versus desktop use and make Windows 8 really effective for tablets and phones. The new CEO also must work to make cloud-based applications "the most secure [and] effective available and sell subscriptions at a very reasonable price-point."

While many are relieved Ballmer is leaving, they're also anxious about the uncertainty new leadership might bring. "His successor needs to first define why Microsoft is in business and not just follow Ballmer's plan of [becoming a] services and devices company."

Many survey respondents believe Microsoft's next CEO must accelerate Microsoft's break with past protective practices, such as offering Office on Apple's iOS platform, while breaking down the political divisions across business units that have stifled innovation.

"Whoever succeeds Ballmer must find a way to continue to break down silos and depoliticize if that's even possible for Microsoft, and accelerate innovation," one concluded. "Microsoft may survive forever as an 'also [ran]' company but their time in the limelight (publicly and to investors) will never return if they don't break out of their current ways including kingdom building and other such silliness. I am not convinced that hardware can save Microsoft... too little too late as there are far too many players that are better at it, and faster."

Respondents were divided on what type of leader Microsoft should seek with 41.4 percent favoring an outside tech visionary in the mold of Steve Jobs and 38.8 percent preferring a turnaround expert such as Lou Gerstner, credited with bringing IBM back from the brink in the 1990s, despite coming from outside the technology industry.

Microsoft's next CEO has one thing going for him or her: A vast majority (69.2 percent), say the company will remain a key provider of enterprise software and services. But a healthy one in four (26.2 percent) say Microsoft will become a less influential player over time, while 4.2 percent believe the company will become marginal. And while a return by Gates is extremely unlikely, 9.2 percent believe only he can save Microsoft. Absent of that happening, one reader said, "They need to find someone who is a technology first person like Gates was, not a marketing-first person as Ballmer is."

Time will tell how history treats Ballmer's tenure but for now, many respondents believe Microsoft needs a leader with more vision and less bluster. "Under [Ballmer's] leadership Microsoft has deeply hurt [its] reputation with IT professionals like [me]," opined one critic. "They need someone with enterprise IT vision who understands that driving wedges with IT professionals gives us the freedom to think past our fears of moving our shops to other products."

Posted by Jeffrey Schwartz on 09/09/2013 at 2:19 PM


comments powered by Disqus

Subscribe on YouTube