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Tuesday
Sep032013

Well done Steve Ballmer

 

Steve Ballmer did everything right. Mostly.

There has been much criticism of Steve Ballmer’s track record in charge of Microsoft since his decision to retire. Almost all of that emanating from institutional shareholders expressing their concerns after Steve Ballmer decided he had had enough of them. A pity so few of them did not have the mettle to engage in a dialogue earlier. The voices of a few activist institutions or individuals providing a rallying point for those who cannot speak without incitement does not mean that the voices are correct.

The main and apparently sole concern of the activist voices has been that Microsoft was slow to react to the market shifts away from PCs and towards mobile devices. Speed of reaction is of course a relative measure. How quickly have bankers reacted to the new market and government expectations of them? How well have hedge funds done in meeting the need for a speedy transition to transparency and better governance?

Steve Ballmer and Bill Gates have led the growth of one of the world’s most innovative and successful companies. Since becoming Chief Executive, Steve Ballmer has led sales growth of 300%, a 200% growth in net income, and a 16% increase in total annual profit growth.  In the same period, the company has become the dominant force in business computing, with Windows Server, and Windows desktop being the product of choice for most SMEs . Microsoft’s Business Division and its Server Division are each larger and more important to the company than Windows desktop or mobile devices.  Microsoft continues to invest $10bn annually in research and development, and has one of the strongest balance sheets ever. These achievements represent one of the best business performances by any company leader in recent years.

Steve Ballmer has also begun to tackle the company’s long-standing silo mentality. By removing the separate structures and uncoordinated activities of divisions within the same company, Steve Ballmer is following some of the good advice probably given to him by Jack Welch: create a simpler company, and run it as one. The only way to do that effectively is to provide the Chief Executive with a more central role, which is exactly what Steve Ballmer planned to do only weeks before the announcement of his retirement. His decision to simplify and centralise was another good decision, which many other companies would benefit from copying.

Now, after his decision to retire from the environment inhabited by corporate investors comes the announcement of one his best moves yet, albeit a little late, the acquisition by Microsoft of Nokia. How’s that for a move into mobile devices?

So what did not go so well? The share price. That and the dividend stream are the only things some shareholders are interested in, often to the detriment of a company’s overall well-being and prospects. Many institutional shareholders are represented by people with no experience whatsoever of actually running a business of any type. Their experience is in observing, analysing and gambling on the success or failure of the efforts of others. They advise without ever having done.

Well done Steve Ballmer. You did a great job running the business.

 

 

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