Microsoft stock surges on CEO announcement
NEW YORK – Microsoft CEO Steve Ballmer, who helped Bill Gates transform the company from a tiny startup into the world’s most valuable business, announced plans Friday to retire sometime in the next year – a move that presents another challenge to the tech giant as it struggles to move beyond the era of the personal computer.
Microsoft and other companies that thrived in the PC business have been scrambling to win back consumers who increasingly prefer smartphones and tablets.
Detractors say Ballmer contributed to the situation by not taking early threats from Apple and Google seriously enough. He consistently pooh-poohed Google as a one-trick company and in 2007 declared: “No chance that the iPhone is going to get any significant market share.”
Ballmer’s jeers proved premature. Google quickly made important inroads in Internet video, online maps, email and mobile computing. Those successes contributed to the damage that Apple’s iPhone and iPad did to Microsoft and its partners in the PC market.
Although it derives some three-quarters of its revenue from sales of software and services to businesses, Microsoft has failed to capture the imagination of consumers who have become more enamored with mobile gadgets.
Response to the newest version of its flagship Windows operating system, Windows 8, has been lukewarm.
When Ballmer took the helm in January 2000, the company was worth more than $601 billion. Today, its value is less than half that amount, at nearly $270 billion.
“There is never a perfect time for this type of transition, but now is the right time,” Ballmer, 57, said in a statement. He planned to stay on until a replacement is found. Microsoft said the search committee would include Gates.
After the news broke, Microsoft’s stock shot up as much as 9 percent and later came within $2 of a 52-week high.
Ballmer’s announcement comes less than two months after the company unveiled a sweeping reorganization of its business in an attempt to catch up with Apple and Google.
In his statement, Ballmer noted that Microsoft is moving in a new direction and needs a CEO who will be there for the longer term.
Microsoft, he added, “has all its best days ahead.”
Though investors cheered the news on Friday, BGC financial analyst Colin Gillis cautioned that it could be a “tough 12 months” for the company.
The obvious successor – former Windows head Steven Sinofsky – got booted by Ballmer, he said.
Sinofsky left the company last year shortly after the launch of Windows 8. He recently announced that he joined the venture capital firm Andreessen Horowitz.
Veteran executive Julie Larson-Green, the head of Microsoft’s devices and studios engineering group, has been floated as a potential successor. She was promoted to her most recent position in July, after being tapped in November to lead all Windows software and hardware engineering.
Although the company said Friday that it will consider both internal and external candidates, some analysts are betting that the company’s next leader will come from outside.
Gates turned over the reins to Ballmer in January 2000 in what was considered to be a surprise move, because Ballmer had been considered more of a numbers and sales specialist, not a technology specialist.
The CEO change came just a few weeks after Microsoft’s stock hit a record high of nearly $60, on a split-adjusted basis.
Janney Capital Markets analyst Yun Kim said investors shouldn’t get too excited, because the company itself won’t change overnight.
Kim said the new CEO faces the “daunting task” of making Windows relevant amid the continued consumer shift away from PCs.
Ted Schadler, an analyst at Forrester, said that while some may try to write its obituary, Microsoft still has some reliable cash cows. Its software, like Windows and Office, is still popular. So is Microsoft Enterprise, which helps big companies run databases, and the Xbox gaming system. Schadler noted that about 70 percent of business email is still sent on Microsoft software.
Part of Microsoft’s downfall stemmed from the bursting of a technology bubble that helped inflate the company’s stock just before Ballmer took over.
But Microsoft also fell out of favor because many investors concluded that it was more interested in protecting its Windows franchise than in coming up with new ideas and products to enter promising new markets.
Microsoft shares rose $2.36, or more than 7 percent, to close at $34.75. Over the past 52 weeks, the company’s shares have traded between $26.26 and $36.43.
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