Cautionary Tales for Microsoft's System Refresh

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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.

Enter...
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!


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