Microsoft Loses a Big One

When I said that Microsoft (NASDAQ: MSFT  ) wanted to be the next Apple (NASDAQ: AAPL  ) , this isn't quite what I had in mind.

Two weeks to the day after the iPhone maker announced that it's mobile software exec Scott Forstall is on his way out in a major executive iShake-up, Mr. Softy is following suit with a shake-up of its own. Microsoft announced that Steven Sinofsky, the head of the all-important Windows and Windows Live division, is leaving. Unlike Forstall, who's staying on until next year as an "advisor," Sinofsky's departure is effective immediately.

Who's Sinofsky?
Sinofsky had been with Microsoft for over two decades, joining the company in 1989. Throughout his career at the software giant, he worked his way up through the business division, helping design Office 95 and Office 97. He was named the president of the Windows and Windows Live division in 2009, a big responsibility, as it's one of Microsoft's three primary cash cows along with servers and business.

He has also been the most public face of Windows 8, which represents the company's brave new world of computing. Sinofsky has been touting the new Surface tablet at every opportunity, even riding one as a skateboard to show its durability in a marketing stunt. That's what makes news of his departure so notable, since the new platform was launched just two weeks ago and its biggest champion is now stepping down.

Ultimatums never work
It appears that the real reason for his abrupt departure stems primarily from political issues, as opposed to product related ones. Windows 8 and Surface have just gotten started, and the early performance of these launches isn't the culprit.

Like Forstall, Sinofsky had earned himself a reputation that he wasn't particularly easy to work with or for, sometimes clashing with other high-level execs. Also like Forstall, industry watchers had even named Sinofsky as a potential candidate for CEO one day. Sinofsky was known to exert his control over projects while trying to hinder any other Microsoft product that could potentially overshadow Windows. Not quite what I'd call a team player.

Business Insider even hypothesizes that Sinofsky wanted Steve Ballmer's job, figuring he should inherit the company after Windows 8 launched. Sinofsky reportedly presented Ballmer with an ultimatum: acknowledge him as the next CEO or he would quit. Guess which one played out.

Two heads are better than one?
Assuming Sinofsky's responsibilities are Julie Larson-Green and Tami Reller, both of whom will now report directly to Ballmer.

Larson-Green, who is approaching her two-decade anniversary with Microsoft, will lead Windows software and hardware engineering. All of the Windows engineering teams will report directly to Larson-Green. Reller has been CFO and CMO of the Windows business, a role she will maintain while assuming more responsibility over the Windows segment. Reller will be in charge of the broader strategy around Windows, including Surface and other "partner devices."

Two heads have rolled
Sinofsky's most recent Form 4 shows he's still the proud owner of nearly 1.2 million shares, so he still very much has a vested interest in the success of Windows 8 and Microsoft. Sinofsky attempted to address some of the speculation surrounding his sudden departure, saying it's simply a "personal and private choice."

That means two of the top software honchos in the industry are floating around out there in the job market, although Forstall probably won't officially begin his job search until next year when his transition is complete.

Blame it on Ballmer
I've never been a fan of Steve Ballmer. Microsoft has long needed a new CEO, one that isn't stuck in the past. While Sinofsky's leadership style didn't play well with others, he still delivered where it counts. Losing Sinofsky is certainly a blow to Microsoft at one of the most pivotal times in the company's history. If Windows 8 ends up failing spectacularly, some of that backlash will probably now fall on Ballmer's shoulders.

It's been a frustrating path for Microsoft investors, who've watched the company fail to capitalize on the incredible growth in mobile over the past decade. However, with the release of its own tablet, along with the widely anticipated Windows 8 operating system, the company is looking to make a splash in this booming market. In this brand-new premium report on Microsoft, our analyst explains that while the opportunity is huge, the challenges are many. He's also providing regular updates as key events occur, so make sure to claim a copy of this report now by clicking here.


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