Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Cautionary Tales for Microsoft's System Refresh

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

Tunnel vision can be a serious problem. Dow Jones Industrial Average (DJINDICES: ^DJI  ) investors have had a bit of tunnel vision this summer surrounding the Federal Reserves' upcoming stimulus taper plan, but the effects haven't been long-lasting. On the other hand, when an individual company has tunnel vision, it's harder to correct without a big reshuffle.

Dow component Microsoft (NASDAQ: MSFT  ) has seen a flurry of activity this morning after CEO Steve Ballmer announced that he would retire within the next 12 months. So far the floundering tech giant is up 5.8% in trading on the news. Ballmer's exit is an unexpected one, especially since Microsoft had already announced a huge reshuffle of its organization in order to better compete with its toughest competitors.

Though Ballmer has said that his exit from the company he loves is an emotional one, it may ultimately be the best move for the tech giant's future prospects. With sales of its latest Windows operating system pegged as a big reason for the decline in sales of personal computers and seriously missed sales targets for its Surface tablet, the company may need a fresh set of eyes to direct the big overhaul.

Cautionary tales
Bill Gates has been pegged as a member of the committee that will decide Ballmer's successor -- and this is an expected yet important fact to know. There's no way that Gates will allow his brainchild to be driven by someone without extensive knowledge of the company, its market, its competitors, and its focus. There are plenty of reasons this is true, but some recent examples of companies choosing CEOs from outside their industries has given plenty of evidence against the practice.

J.C. Penney (NYSE: JCP  ) thought that it would be smart to bring in a new perspective to its flagging retail ship, so the company chose former Apple executive Ron Johnson. With Apple, he was the Senior Vice President of Retail Operations and had developed the concept of Apple stores and the Genius Bar. It's that type of innovation that J.C.Penney was looking for in order to reenergize its fleet of anchor department stores. But Johnson's tenure was a short-lived one; with only 17 months under his belt, the retailer continued to decline and he was ingloriously ousted.

Yahoo! had a similar track record of searching outside the industry for new innovations to lift its results. A series of failed CEOs, including non-tech experts from Hollywood, finance, and advertising, led the company to rethink its strategy. The result -- Marissa Mayer, a former Google executive who has turned the company around in short order. In the past six months, Yahoo! has released more products than it had in the previous five years, according to Yahoo!'s head of mobile products, Adam Cahan. And to top off Mayer's success, comScore recently reported that the site posted a higher number of unique visitors than Google did in July.

Trials ahead
It's been a tough road for Microsoft over the past few years. But it's not just the iconic tech giant that's struggling to maintain its position. The tech world has been thrown into chaos as the biggest titans invade one another's turf. At stake is the future of a trillion-dollar revolution: mobile. To find out which of these giants is set to dominate the next decade, we've created a free report called "Who Will Win the War Between the 5 Biggest Tech Stocks?" Inside, you'll find out which companies are set to dominate and give in-the-know investors an edge. To grab a copy of this report, simply click here -- it's free!

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2607606, ~/Articles/ArticleHandler.aspx, 9/29/2016 9:34:30 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 18 minutes ago Sponsored by:
DOW 18,143.45 -195.79 -1.07%
S&P 500 2,151.13 -20.24 -0.93%
NASD 5,269.15 -49.39 -0.93%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/29/2016 4:35 PM
^DJI $18143.45 Down -195.79 -1.07%
JCP $9.25 Down -0.30 -3.14%
J.C. Penney CAPS Rating: *
MSFT $57.40 Down -0.63 -1.09%
Microsoft CAPS Rating: ****