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Business – Ballmer takes center stage with Windows 7

SEATTLE: Microsoft Corp Chief Executive Steve Ballmer is putting his reputation on the line with the launch of the new Windows 7 operating system on
Thursday.

The 53-year-old showman, now in his 10th year as CEO, took personal responsibility for Windows 7 after the mess of its predecessor Vista, and cannot afford another slip up.

A botched $45 billion bid for Yahoo Inc last year, which blitzed Microsoft’s stock price, left some investors questioning whether Ballmer is the right leader for the world’s largest software company. “He’s a player-friendly coach, the players love him,” said Bill Smead, chief executive of Seattle-based Smead Capital Management, whose firm holds about 340,000 Microsoft shares. “The problem is, he’s not a shareholder-friendly coach.”

Microsoft’s shares are now worth about half what they were 10 years ago, Smead noted.

Ballmer, despite his fist-pumping and high-volume leadership, has not lived up to his stated goal of creating a significant third business beyond Microsoft’s two cornerstones, Windows and the Office suite of applications, which dominate the global PC market.

Microsoft has brought out the Xbox game console, mobile phone software, the Zune digital music player and Bing search engine, but does not yet have a clear winner like Apple Inc’s iPhone or Google Inc’s search ad business. Critics say Ballmer has concentrated too much on business customers at the expense of the consumer.

“He’s so focused on corporate, and corporate is just not buying right now,” said technology analyst Rob Enderle of the Enderle Group. “Maybe the CEO they need is one with a passion for the consumer side. He hasn’t destroyed the company, but it clearly is not at the top of its game.”

OUT IN FRONT

Ballmer has been Microsoft’s CEO since 2000, but really grasped the reins last year when co-founder and Chairman Bill Gates retired from day-to-day involvement in the company. The son of a Ford Motor Co manager from Detroit, Ballmer was brought in by Gates, whom he knew from Harvard University, as Microsoft’s first business manager in 1980.

His stocky ebullience was always the foil to Gates’s quieter intensity, although it has sometimes gone too far, gaining him the nickname “Monkey Boy” after a particularly vociferous performance was captured on video.

Despite his faults, the lack of any open shareholder revolt, credible alternatives or obvious successor makes it likely Ballmer will be CEO for some time. “In the investor base, I don’t see the angry people with pitchforks out for Ballmer, at this point,” said Kim Caughey, senior analyst at Fort Pitt Capital Group, which holds Microsoft shares.

Ballmer himself seems to have no thoughts of passing the torch. “I’m 53, so whatever the long haul is for 53, I’m in it for that,” said Ballmer in a telephone interview on Monday. “I’ve got a lot of aspirations for the company. In 10 years, I see the opportunity to create a company and a culture and a body of people that are able to diversify and get into new and important areas of technology.”

HAND IT OVER

Despite some investor carping, Microsoft has a relatively good record on returning cash. It began paying a regular dividend to shareholders in 2003 and a year later handed over $32 billion in a special dividend of $3 a share.

Last fiscal year it generated more than $19 billion in cash from operations and gave almost $14 billion to shareholders in stock buybacks and dividends. It still has $31.4 billion in cash and short-term investments on its balance sheet.

Given the recession, and the fact that Microsoft is now facing a much more difficult set of competitors than a few years ago, some say Ballmer is doing as good a job as anyone. “I think he just inherited a difficult hand,” said Todd Lowenstein, a portfolio manager at Los Angeles-based HighMark Capital Management, which owns 531,000 Microsoft shares. “Gates was in a sweet spot for his tenure and Ballmer inherited a more difficult operating environment.”

He’s still the best available option, said Caughey. “They couldn’t really bring in an outsider. Steve is a good salesman and understands the customer side of the business. It’s a hard job.”

The job could get much harder if Windows 7 falls flat, though early reviews have been positive. “If Windows 7 doesn’t do as well as Microsoft hopes, it wouldn’t be fair to lay the blame on Steve Ballmer,” said Toan Tran, an analyst at Morningstar. “But obviously he’s the CEO, and the buck stops with him.”

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October 20, 2009 - Posted by | Uncategorized |

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