Under CEO Steve Ballmer, Microsoft has endured years of investor criticism as the rise of mobile devices and Internet services eroded the influence of the personal computer-era kingpin.
An era is ending at Microsoft[4] Corp.
The software giant said Chief Executive Steve Ballmer, a central figure at the company for more than three decades, has decided to retire within the next 12 months. The surprise announcement Friday follows a broad reorganization that had appeared to solidify his power at Microsoft as head of a new team of leaders.
Mr. Ballmer, who is 57 years old, will depart after a successor has been chosen, the company said. Its board has appointed a special committee—including Chairman Bill Gates[5] —that will consider both external and internal candidates.
Microsoft shares jumped after the announcement, trading up 7% at $34.78 late Friday afternoon.
The announcement follows years of criticism about the waning growth and influence of Microsoft, a key force in the personal-computer era whose power was once so great that U.S. government regulators sought to break up the company. But Microsoft has failed to keep pace in a new era of technology, as PC sales have ebbed and growth has shifted to makers of mobile devices like Apple Inc. and Web services like Google[6] Inc.
Mr. Ballmer, who took the reins from Mr. Gates in January 2000, has responded to the changes in a variety of ways recently, including overhauling its Windows software to be better used with touch commands and introducing a Microsoft-designed tablet computer called Surface.
More broadly, Mr. Ballmer has attempted in the past year to remake the company's overarching strategy, changing its identity to become a provider of devices and services. Software, in his new formulation, is a means to deliver new offerings to customers rather than Microsoft's underlying mission. A new management structure announced in July, which abandoned autonomous product groups, was expected to speed the transition.
But the shifts haven't helped the company's growth much yet, though its longtime businesses continue to produce plenty of profit. Microsoft posted a $900 million write-off on the Surface in the quarter ended in June on revenue and net income that missed analyst expectations.
"There is never a perfect time for this type of transition, but now is the right time," said Mr. Ballmer said Friday in a memo to Microsoft employees.
He added that his "original thoughts on timing would have had my retirement happen in the middle of our company's transformation," but said the company now needs a CEO who "will be here longer term for this new direction."
Microsoft said the search committee will be chaired by lead independent board director John Thompson, a longtime International Business Machines Corp. executive who later led Symantec Corp. and now heads a Silicon Valley startup.
"The board is committed to the effective transformation of Microsoft to a successful devices and services company," Mr. Thompson said in prepared remarks. "As this work continues, we are focused on selecting a new CEO to work with the company's senior leadership team to chart the company's course and execute on it in a highly competitive industry."
The reorganization elevated the profile of some established players in Microsoft's management ranks, but pointed to no single front-runner to succeed Mr. Ballmer.
Some analysts Friday urged Microsoft to bring in fresh talent from outside the company to show investors it is willing to change. "If they choose from the inside, it shows an optic that they won't change anything—it's the same old-same old," said Patrick Moorhead, an analyst with Moor Insights & Strategy.
The company has lost some senior executives whose names sometimes pop up as potential CEO candidates. But some recruiters think the company should avoid those possibilities.
Microsoft should do "something out of the box," said Jim Bethmann, head of the technology practice at recruiters Caldwell Partners International in Dallas, such as executives with backgrounds in fields such as cloud services, social mobility or data analytics. "This move frankly is an opportunity for them to change the game a little bit,"
Colin W. Gillis, a BGC Partners analyst who covers Microsoft, said he expects more weakness in Microsoft's current quarter and suggested Mr. Ballmer's retirement was prompted by multiple inputs and possibly accelerated by weakness at the end of the company's recently ended fiscal year.
The Redmond, Wash., company, first known for computer languages and then the DOS operating system, helped ignite another era of PC growth with the Windows software that became a mainstay of personal computers along with chips from Intel Corp.
Microsoft branched into application software, including word processing and spreadsheets, and then a range of programs used to help run corporate back-office functions. After the Internet emerged in the 1990s, the company became a dominant force in Web browser software and gradually built online services.
Mr. Ballmer noted that Microsoft has grown from a $7.5 million company to nearly $78 billion in annual revenue since he joined, and has grown from employing just over 30 people to almost 100,000.
Mr. Ballmer, a sales specialist with a booming voice, met Mr. Gates when they were both Harvard University students. He earned a bachelor's degree in mathematics and economics there and worked for two years at Procter & Gamble Co. before joining Microsoft in 1980.
Along the way, Mr. Ballmer led several Microsoft divisions, including operations, operating-systems development, and sales and support. In July 1998, he was promoted to president, a role that gave him day-to-day responsibility for running Microsoft.
Mr. Ballmer had some successes during his tenure, including the building of Microsoft's Xbox videogame business, and such major acquisitions as its $8.5 billion acquisition of the Web communications service Skype. But there were also major missteps, including a Windows version called Vista that was a costly flop.
Mr. Gates, who co-founded Microsoft with Paul Allen, two years later gave up the CEO job after a long-running antitrust trial that painted him as a central figure in Microsoft's harsh actions toward competitors. (The company was convicted of some antitrust violations, but avoided a government-ordered breakup). Mr. Gates remains chairman, though he has focused his efforts in recent years on philanthropic activities.
Both men remain major shareholders, with Mr. Ballmer holding about 4% of Microsoft's shares as of its last proxy statement in October. That stake is worth about $11.5 billion at Microsoft's current stock price.
"I cherish my Microsoft ownership, and look forward to continuing as one of Microsoft's largest owners," Mr. Ballmer wrote.
Mr. Ballmer called the decision to retire an emotional one. "I take this step in the best interests of the company I love," he said. "It is the thing outside of my family and closest friends that matters to me most."
—Saabira Chaudhuri, Ian Sherr and Joann S. Lublin contributed to this article.
Write to Don Clark at don.clark@wsj.com[7] and Shira Ovide at shira.ovide@wsj.com[8]
References
- ^ DON CLARK (topics.wsj.com)
- ^ SHIRA OVIDE (topics.wsj.com)
- ^ CONNECT (online.wsj.com)
- ^ Microsoft (online.wsj.com)
- ^ Bill Gates (topics.wsj.com)
- ^ Google (online.wsj.com)
- ^ don.clark@wsj.com (online.wsj.com)
- ^ shira.ovide@wsj.com (online.wsj.com)
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