The Steve Ballmer era at Microsoft (NASDAQ:MSFT) is coming to an end.
Shares of the software giant opened nearly 9% higher on Friday after Ballmer announced that he would be stepping down within the next few months after a suitable replacement is found.
It's never flattering for any departing CEO to see a stock move higher on news like this. The implication is that Ballmer held Microsoft back. However, investors cheering the potential upside of what a new set of eyes can bring to the plodding tech bellwether are missing the point.
Ballmer wasn't the sandbag. Microsoft is the sandbag.
The days of Mr. Softy as the software powerhouse are done, and that's something that even the company itself seems to be conceding. There are three references in the brief press release describing Ballmer's decision to make the "transformation" of Microsoft into a "devices and services" company.
The days of fat margins pushing Windows operating system upgrades to desktop users are toast. Google's (NASDAQ:GOOGL) Android is the future. Bulls will rightfully argue that Microsoft makes money off of Android through patent licensing deals, but it will never be as much as it used to make when it was the one calling the shots.
The migration won't be easy, but it will be necessary. Microsoft has thrown billions at mobile, yet it still commands only about 4% of the smartphone and tablet markets. There's little that a new CEO can do to change that.
Yes, the new CEO will have one of the bigger war chests at his disposal, but Apple (NASDAQ:AAPL) has even more money and even the class act of Cupertino has struggled to keep pace with Google.
How is a new CEO going to restore Microsoft to its former glory? Is it going to hop into a tricked out DeLorean and go back in time?
Microsoft had a great run, but the days of a closed operating system dominating a thriving market are over. This is a problem for both Apple and Microsoft, but it's more glaring for Ballmer's company since it used to be on top of the world.
A new CEO can't change the evolving marketplace. A new voice at the helm can't halt the movement.
Chipotle makes great burritos, but the day that someone sets up shop next door and starts giving away food it's going to be hard for Chipotle to sustain and much less grow its business. That's reality, and -- let's be frank -- Microsoft is no Chipotle.
Unless Microsoft can get ahead of a new product category before anybody else, we're done here as far as operating systems go. There will be money to be made in devices in services, but largely when Microsoft swallows its pride and starts putting out Android devices of its own.
Don't laugh. See if that doesn't happen in three to five years.
You'll disagree, but let's play things out.
Close your eyes. Picture your ideal candidate to replace Ballmer. It's a nice snapshot, but tell me how Microsoft will be more relevant in the future than it is now?
Ballmer wasn't a bad CEO, and history will vindicate him. It's not the player. It's the cards that are being dealt.
Microsoft's next CEO can't change the future, no matter what that shiny DeLorean in the shopping mall parking lot may have you believe.