"Ballmer must go", lead investor tells conference(dealbook.nytimes.com)
dealbook.nytimes.com
"Ballmer must go", lead investor tells conference
http://dealbook.nytimes.com/2011/05/25/ballmer-must-go-einhorn-says/
9 comments
It doesn't matter how much money they make, it's their potential for making more money in the future. It's not about their current business or where they are sliding.
The market hasn't seen that potential in Microsoft in 10 years, pretty much corresponding with when Ballmer took control.
MSFT: http://www.google.com//finance?chdnp=1&chdd=1&chds=1...
IBM: http://www.google.com//finance?chdnp=1&chdd=1&chds=1...
The market hasn't seen that potential in Microsoft in 10 years, pretty much corresponding with when Ballmer took control.
MSFT: http://www.google.com//finance?chdnp=1&chdd=1&chds=1...
IBM: http://www.google.com//finance?chdnp=1&chdd=1&chds=1...
You're correct in saying that Jobs isn't criticized for missing enterprise software. He is criticized for trying to break into it and doing a terrible job of it though. Remember the XServe? Fortunately, he had the good sense to can that eventually.
Unfortunately, MS doesn't seem to be as introspective. I agree that it's best to see MS focus on their enterprise products. That requires them to... well... focus on their enterprise products rather than continuing their half-assed attempts to make consumer products.
Unfortunately, MS doesn't seem to be as introspective. I agree that it's best to see MS focus on their enterprise products. That requires them to... well... focus on their enterprise products rather than continuing their half-assed attempts to make consumer products.
Everything Microsoft does is about the domination of Windows and Office. These are their big moneymakers and they don't want to give them up. Are you sure that a royalty of $50 for practically every single PC manufactured in copyright-observing nations is worth less than their enterprise software? What about everyone that goes out and spends $100+ on a copy of Office? Those are some big markets and I'm not sure their value is so diminutive.
Additionally, such a platform allows tight integration of things like .NET, attracting developers to Windows' platform and allowing MS to sell dev tools and servers. Would .NET be worth less if Microsoft's desktop share were diminished? Almost definitely, imo.
Please don't underestimate the value of desktop dominance.
Additionally, such a platform allows tight integration of things like .NET, attracting developers to Windows' platform and allowing MS to sell dev tools and servers. Would .NET be worth less if Microsoft's desktop share were diminished? Almost definitely, imo.
Please don't underestimate the value of desktop dominance.
[deleted]
Well, Jobs is not criticized for failing to break into enterprise software because he has had outrageously, unprecedentedly, massive success breaking into other markets. Failure is perfectly tolerable when you are good at something. Ballmer is an all around failure, and there are thousands of better candidates for his position.
I should hope to be such a failure. He served as the development manager for the original MS Windows, one of the greatest business franchises of all times. During his tenure as CEO he's taken what was already a mega-cap company and more than doubled their net income and tripled revenue.
Over ten years that's not stupendously amazing.
And clearly the market seems blase - if you improve your top and bottom line and your valuation gets cut in half, that generally means investors don't think your future is all that bright.
And clearly the market seems blase - if you improve your top and bottom line and your valuation gets cut in half, that generally means investors don't think your future is all that bright.
> If they make most of their cash from enterprise, is it reasonable to criticise him for missing the phone/tablet revolution? I mean, we don't criticise jobs for missing the enterprise software market.
Apple is a very focused company that competes in a few select markets (rare for tech giants). Enterprise is not one of them. You can't criticize Steve Jobs for not succeeding in the enterprise market any more than you can criticize him for not succeeding in the search engine/online advertising market. Enterprise has never been a core part of their business.
Microsoft has been trying, and failing, for 10 years to create a market for their tablets. Another company created that market. It's been 18 months since the iPad was announced. Google, RIM, and HP all have operating systems appropriate to compete in the tablet market. Microsoft still has nothing.
Ballmer mocked the iPhone when it was introduced. Apparently he genuinely believed what he was saying, because instead of mocking the iPhone publicly but scrambling to bring Windows Mobile up to what would clearly be the new standard for smartphones, he let three years pass before Microsoft released a credible competitor. Meanwhile the smartphone industry exploded and as of now is dominated by other companies.
In these two crucial markets that are part of Microsoft's core business, Microsoft has been incompetent. At what point is it appropriate for the board to hold the leadership accountable?
Apple is a very focused company that competes in a few select markets (rare for tech giants). Enterprise is not one of them. You can't criticize Steve Jobs for not succeeding in the enterprise market any more than you can criticize him for not succeeding in the search engine/online advertising market. Enterprise has never been a core part of their business.
Microsoft has been trying, and failing, for 10 years to create a market for their tablets. Another company created that market. It's been 18 months since the iPad was announced. Google, RIM, and HP all have operating systems appropriate to compete in the tablet market. Microsoft still has nothing.
Ballmer mocked the iPhone when it was introduced. Apparently he genuinely believed what he was saying, because instead of mocking the iPhone publicly but scrambling to bring Windows Mobile up to what would clearly be the new standard for smartphones, he let three years pass before Microsoft released a credible competitor. Meanwhile the smartphone industry exploded and as of now is dominated by other companies.
In these two crucial markets that are part of Microsoft's core business, Microsoft has been incompetent. At what point is it appropriate for the board to hold the leadership accountable?
It would be suicidal to focus on enterprise products. Their enterprise products only exist as continuations and tie-ins to their desktop products. Exchange exists to enable Outlook. Sharepoint exists to enable Office collaboration. Without control of the end-user environment, their advantage in the server space evaporates.
Who in his right mind would pick Exchange or Sharepoint alone?
Who in his right mind would pick Exchange or Sharepoint alone?
Paul Thurrott has a relevant blog post: http://www.winsupersite.com/article/commentary/microsoft-fix...
This whole thread gave me an idea:
How about Microsoft focus exclusively on enterprise and enable all these consumer devices to work seamlessly with their enterprise software? I don't believe Ballmer can do that.
How about Microsoft focus exclusively on enterprise and enable all these consumer devices to work seamlessly with their enterprise software? I don't believe Ballmer can do that.
Pfft - rather skewed definition of interesting there. Enterprise stuff is everything I get stuff done with, wheareas my phone/tablet is purely recreational.
"his children were not allowed to use Google or iPods"
I find this to be the most interesting point the article makes. Perhaps the reason why Balmer has failed as CEO is because he does not use Google. Could your search engine of choice has any effect on the quality of your decisions?
I find this to be the most interesting point the article makes. Perhaps the reason why Balmer has failed as CEO is because he does not use Google. Could your search engine of choice has any effect on the quality of your decisions?
I doubt that there is any correlation between search engine and decision quality; the more logical (at least to me) conclusion from that sentence is that he is actively avoiding understanding competing products.
Perhaps he should focus on making products that convince his children to switch from Google/Apple products instead of banning them outright. They might be a good barometer.
This reminds me of the Broadway show producer who let his 10-year old kid watch new productions to gauge whether he should stage them or not. The idea was that the average audience has the same level of intellect as a 10-year old kid, and when the kid liked something, the general audience would too.
Related, but not the same, is the monkey which throws darts at a poster on the wall to decide which stock to buy. Who needs financial analysts?
Related, but not the same, is the monkey which throws darts at a poster on the wall to decide which stock to buy. Who needs financial analysts?
That's a good observation. Why does he even need to ban Google/Apple products if the Microsoft ones are that good?
I can't stand Ballmer but I don't think he's going anywhere soon. Some quick math says that Ballmer and Gates own about a third of Microsoft combined. It'd be very hard to push either of them out against their combined will.
And while I'm sympathetic to the notion that anyone would be better than Ballmer, it really is hard to find a good CEO.
And while I'm sympathetic to the notion that anyone would be better than Ballmer, it really is hard to find a good CEO.
> Some quick math says that Ballmer and Gates own about a third of Microsoft combined.
Incorrect. They own about 6.7%. See http://news.ycombinator.com/item?id=2587008
Incorrect. They own about 6.7%. See http://news.ycombinator.com/item?id=2587008
Also incorrect. They own about 10.7%. See the comment on the comment you link to.
That's pretty fascinating. I just assumed that the majority of their net wealth was in the form of MSFT shares. I'm now very curious what the other 2/3s of their net worth is held in.
You can see them steadily selling off shares here: http://www.sec.gov/cgi-bin/own-disp?action=getissuer&CIK...
You can see them steadily selling off shares here: http://www.sec.gov/cgi-bin/own-disp?action=getissuer&CIK...
It's very common for executives to sell shares on a regular (non-secret) schedule to avoid claims of insider trading or false news about "Bill Gates selling stock; MSFT must be in trouble!"
As a big investor in $MSFT, I'm not saying I don't agree with Mr. Einhorn, but read the final paragraph:
"Mr. Einhorn’s calls at the Ira Sohn conference Conference a year ago, however, have not panned out, as Zero Hedge noted earlier on Wednesday. Going short Moody’s and McGraw-Hill, while going long African Barrick Gold, would have meant double-digit declines."
"Mr. Einhorn’s calls at the Ira Sohn conference Conference a year ago, however, have not panned out, as Zero Hedge noted earlier on Wednesday. Going short Moody’s and McGraw-Hill, while going long African Barrick Gold, would have meant double-digit declines."
What would be the upside if Ballmer quit? 10% pop? I wish a corporate raider would take on Microsoft with the intent of distributing the cash hoard to stockholders and divesting all the money-losing operations - could be a double!
> "What would be the upside if Ballmer quit?"
A CEO that knows WTF he's doing in the consumer space? Ballmer has proven that he handles the enterprise products just fine, but if MS wants any hope of hanging onto consumer products (consumer Windows, electronics, mobile, gaming, etc) I'd get rid of Ballmer and write J Allard a blank check to come back.
A CEO that knows WTF he's doing in the consumer space? Ballmer has proven that he handles the enterprise products just fine, but if MS wants any hope of hanging onto consumer products (consumer Windows, electronics, mobile, gaming, etc) I'd get rid of Ballmer and write J Allard a blank check to come back.
they have lost so much good talent during the Ballmer battle years - Allard, Ozzie et al. They could have made a great team with a good CEO, instead we got Ballmer getting rid of them all to strengthen his own position
If that's really the case (and not just that Ozzie was, say, impractical) then that's the best reason I've heard yet to get rid of him.
A guy who will fire talent to make himself secure is a huge liability.
A guy who will fire talent to make himself secure is a huge liability.
I'm not sure if Ballmer is actively removing talent, but I'm willing to believe that he's simply created an environment so hostile to aggressive fast-moving types of people (the exact sort you need to work fast and catch up from behind in the consumer space), that they'll flee of their own accord.
IMO the loss of Allard (and consequently now, Pioneer Studios) is the worst mistake MS has made in the field of consumer products.
IMO the loss of Allard (and consequently now, Pioneer Studios) is the worst mistake MS has made in the field of consumer products.
Spolsky had an "architecture astronaut" critique in part about how Ozzie keeps blowing years rewriting Notes: http://joelonsoftware.com/items/2008/05/01.html
Rereading that article, I had forgotten about this part:
"because synchronizing files is just not a killer application. I'm sorry. It seems like it should be. But it's not."
"because synchronizing files is just not a killer application. I'm sorry. It seems like it should be. But it's not."
I read that same bit again. Kudos to Dropbox - I would have agreed with that statement if Dropbox hadn't existed
That's because Microsoft is not familiar with the single most important principle when designing consumer products ... simplicity and exclusion.
Dropbox is useful because it's in essence a simple product. Every time Microsoft designs something, it has to include everything but the kitchen sink.
Dropbox is useful because it's in essence a simple product. Every time Microsoft designs something, it has to include everything but the kitchen sink.
Remember though, Ballmer is the single largest shareholder of MSFT that is still actively involved with the company. He's pretty secure, and has a tremendous amount of skin in the game. He's also not an idiot.
Nobody doubts his motivation.
People doubt his talent and his cluefulness level.
People doubt his talent and his cluefulness level.
Precisely. Perhaps most famously his total failure to foresee the successes of iPad, iPhone and then iPad. Ballmer laughing these devices off rather than seeing the future in them was painful to watch.
Another tangential favorite is when Mossberg asked Ballmer about the, at the time, new fangled "post PC" devices at the All Things Digital interview. Clueless is a very apt description.
Another tangential favorite is when Mossberg asked Ballmer about the, at the time, new fangled "post PC" devices at the All Things Digital interview. Clueless is a very apt description.
Not only did he miss the wave of the future - we all do, sometimes. The problem here is that he missed the wave of the future - twice! (iPhone, then iPad) - while the entire rest of the world rightly recognized them as game-changers.
This guy is completely out of touch with consumer reality.
I'm not sure what kind of logic would cause a CEO to look at throngs of millions of people, lined up to buy the most hyped, most-published consumer electronics device ever produced. Then completely dismiss it altogether.
I've said this before, and I'll say it again. Maybe leave Ballmer in place for the enterprise products, but they need to give everything consumer-related to Allard and give him carte blanche and the entire MS fortune to do what he wants. There's a man who has a pulse on consumer products. He might be the closest thing to Jony Ive or Steve Jobs that MS has ever seen.
This guy is completely out of touch with consumer reality.
I'm not sure what kind of logic would cause a CEO to look at throngs of millions of people, lined up to buy the most hyped, most-published consumer electronics device ever produced. Then completely dismiss it altogether.
I've said this before, and I'll say it again. Maybe leave Ballmer in place for the enterprise products, but they need to give everything consumer-related to Allard and give him carte blanche and the entire MS fortune to do what he wants. There's a man who has a pulse on consumer products. He might be the closest thing to Jony Ive or Steve Jobs that MS has ever seen.
"Ballmer has proven that he handles the enterprise products just fine"
He can milk the Office cash cow, but has he really driven innovation in the enterprise? Amazon is considered a pioneer of enterprise cloud computing, yet they started as an online retailer, not a platform/infrastructure provider.
He can milk the Office cash cow, but has he really driven innovation in the enterprise? Amazon is considered a pioneer of enterprise cloud computing, yet they started as an online retailer, not a platform/infrastructure provider.
The leadership at MS needs serious re-work if they want to maintain their position in the enterprise. Their cash cow is Windows OS and based on what we've seen with their push for HTML5 at conferences like MIX over proprietary hooks into their OS like WPF and Silverlight will just eventually decimate their hold on the money making enterprise world.
Apple's enterprise hold last quarter grew 66%. This should scare Microsoft.
Our company has now pretty much set their sights on developing in HTML5 for internal line of business apps which used to be heavily desktop Windows based applications. This will eventually lead to less reliance on Windows and Microsoft, which is a good thing for the company but a terrible blow for Microsoft.
Apple seems to get it as to how to grow their business and keep the competitor from cannibalizing it. Apple has been downplaying HTML5 support in Safari/Webkit and almost purposefuly leaving things broken. This is a smart move on Apple's part in my opinion.
I've been mostly a loyal MS supporter but with the way things are going I'm strongly considering moving over from Windows to coding Apple apps and learning Objective C despite how nice C# coding is.
There's still time and hope to see if they change things around and announce something good at PDC in September, otherwise say goodbye to stagnant Microsoft.
Apple's enterprise hold last quarter grew 66%. This should scare Microsoft.
Our company has now pretty much set their sights on developing in HTML5 for internal line of business apps which used to be heavily desktop Windows based applications. This will eventually lead to less reliance on Windows and Microsoft, which is a good thing for the company but a terrible blow for Microsoft.
Apple seems to get it as to how to grow their business and keep the competitor from cannibalizing it. Apple has been downplaying HTML5 support in Safari/Webkit and almost purposefuly leaving things broken. This is a smart move on Apple's part in my opinion.
I've been mostly a loyal MS supporter but with the way things are going I'm strongly considering moving over from Windows to coding Apple apps and learning Objective C despite how nice C# coding is.
There's still time and hope to see if they change things around and announce something good at PDC in September, otherwise say goodbye to stagnant Microsoft.
The title is slightly misleading, I thought this guy or his hedge fund owned a major piece of MSFT but the article makes no such mention.
Hu?
Mr. Einhorn, a long-time Microsoft shareholder, said at the Ira Sohn Conference that the company had floundered under Mr. Ballmer’s stewardship, missing major opportunities in establishing tablet products to compete with Apple and wasting money on ill-conceived mergers and acquisitions.
Second paragraph. Emphasis added
Mr. Einhorn, a long-time Microsoft shareholder, said at the Ira Sohn Conference that the company had floundered under Mr. Ballmer’s stewardship, missing major opportunities in establishing tablet products to compete with Apple and wasting money on ill-conceived mergers and acquisitions.
Second paragraph. Emphasis added
It says he's a long time shareholder, but the title here on HN says "lead investor", which indeed makes it sound like he owns a big chunk of the whole thing.
He's the lead investor for the hedge fund
I'm not sure why you're being downvoted, since you're correct. I guess it's because you didn't provide any supporting information. Here it is:
http://www.businessweek.com/news/2011-05-26/greenlight-s-ein...
> Greenlight Capital Inc. President David Einhorn called for Microsoft Corp.’s board to replace Chief Executive Officer Steve Ballmer, saying the software maker suffers from “Charlie Brown management."
Einhorn is the president of Greenlight capital, a hedge fund.
> Greenlight, a New York-based hedge fund, added 1.39 million Microsoft shares last quarter, for a total of 9.07 million, according to a filing. The stake is worth $230.2 million. Microsoft’s shares have underperformed the S&P 500 in four of the past five quarters.
Also from this article:
> Ballmer is the company’s second-biggest shareholder -- with more than 333 million shares, or almost 4 percent. Co-founder and Chairman Bill Gates owns more than 561 million shares, or a 6.7 percent stake, according to Bloomberg data.
So Bill Gates + Steve Ballmer don't own 33%, as has been stated elsewhere, but "only" 6.7 percent of this $200bn company.
http://www.businessweek.com/news/2011-05-26/greenlight-s-ein...
> Greenlight Capital Inc. President David Einhorn called for Microsoft Corp.’s board to replace Chief Executive Officer Steve Ballmer, saying the software maker suffers from “Charlie Brown management."
Einhorn is the president of Greenlight capital, a hedge fund.
> Greenlight, a New York-based hedge fund, added 1.39 million Microsoft shares last quarter, for a total of 9.07 million, according to a filing. The stake is worth $230.2 million. Microsoft’s shares have underperformed the S&P 500 in four of the past five quarters.
Also from this article:
> Ballmer is the company’s second-biggest shareholder -- with more than 333 million shares, or almost 4 percent. Co-founder and Chairman Bill Gates owns more than 561 million shares, or a 6.7 percent stake, according to Bloomberg data.
So Bill Gates + Steve Ballmer don't own 33%, as has been stated elsewhere, but "only" 6.7 percent of this $200bn company.
333 million shares = 4.0% for Ballmer
561 million shares = 6.7% for Gates
So the combined total is:
894 million shares = 10.7% for Gates + BallmerThanks for the support!
I guess I thought the first line of the linked article (the one this whole post is about) was sufficient:
David Einhorn, the head of the hedge fund Greenlight Capital
I suspect that many thought that "lead investor" meant that he is personally a lead investor in Microsoft. English has plenty of room for everyone to be right there (but you are correct - I'd have preferred people to explain their downvotes). I didn't write the title, though.
I guess I thought the first line of the linked article (the one this whole post is about) was sufficient:
David Einhorn, the head of the hedge fund Greenlight Capital
I suspect that many thought that "lead investor" meant that he is personally a lead investor in Microsoft. English has plenty of room for everyone to be right there (but you are correct - I'd have preferred people to explain their downvotes). I didn't write the title, though.
I think a mod edited the title because when I submitted it didn't say 'lead'
Although he has not brought a lot of growth to MS I do believe MS is at a point where a lot of growth can be achieved. MS's issue has been it has a lot of inertia with it and moves too slowly , but moves in the right direction. The Xbox , Kinect for Xbox 360 , IE 9 , Win 7 , WP7 & Azure have all been steps in the right direction.
Ballmer has done nothing for shareholders, and that's ultimately his job, regardless of how much money they make. It's unconscionable that they've been able to pull in the kinds of profits they have, and still done nothing with their stock over the past 5 years.
There's one man to lead this company, there always has been. Bill needs to stop curing the world and get back to pushing the boundaries of technology.
Unless a billion buys immortality, Bill G is still mortal so whether he's six feet under or off curing the world doesn't change the fact that Microsoft, for the moment, is completely rudderless. If there is only one man to lead a company that means it is dead meat because tomorrow is not a guarantee and the investors know this. This is why Apple is working to codify what makes Apple, Apple.
Agreed, entropy is inevitable, and a transition is required. However leaving Steve 'crazy' Ballmer in charge while you 'walk the earth' is a less than stella plan.
* Who would you replace him with?
* How much money do they make from enterprise vs consumer stuff?
* If they make most of their cash from enterprise, is it reasonable to criticise him for missing the phone/tablet revolution? I mean, we don't criticise jobs for missing the enterprise software market.
Just some thoughts. Maybe they're simply drifting into becoming another IBM: all enterprise stuff, nothing interesting but certainly money to be made.