It's official: Microsoft's (NASDAQ:MSFT) CEO Steve Ballmer is leaving the company. According to a memo released on Aug. 23, Ballmer is set to retire in the next 12 months. He'll remain as CEO in the interim, helping the board of directors choose his successor.
There has been a lot of speculation about who will step in to replace Ballmer. The new CEO will be only the third in Microsoft's history, as Ballmer took over in 2000 when founder Bill Gates retired. Steven Sinofsky, former head of Windows development, was once thought to be the obvious choice but left the company last November. Sinofsky recently joined venture capital firm Andreessen Horowitz,so it's unlikely that he would come back to Microsoft now.
The post-Ballmer world
Regardless of who is chosen as the next CEO, change is coming. Within the past year, controversial changes have been made to the Windows, Office, and Xbox product lines; by the time the new CEO takes over, additional updates may be well underway. Continued development in the mobile space will also be a priority, as PC sales remain stagnant.
There are a few ways that the new CEO could try to manage the company's direction. We could see a more conservative Microsoft that tries to recapture its past glory, or possibly a more aggressive version of the company. Let's look at how CEO changes at two other companies have gone to get an idea of how Microsoft's future might play out.
The Apple approach
When Tim Cook took over as CEO of Apple (NASDAQ:AAPL) following the departure of Steve Jobs in August 2011, there was a lot of pressure on him to continue the legacy of innovation that put Apple on top. As innovation is often risky, Cook took more a conservative approach and has drawn criticism over many of the company's newer releases that seem to lack imagination.
This shift in leadership has hit the company pretty hard. After breaking the $700-per-share mark last September, Apple has dipped under $400 twice this yearand has only recently crossed $500 again.Add to that a number of legal battles, some of which have been going on since before Jobs left the company,and Cook's Apple is struggling to innovate and also to fight a gradual shift in reputation.
That conservative approach wasn't necessarily what Apple needed, but how would it work at Microsoft? Some might say that Ballmer himself was fairly conservative after taking over for Gates, so bringing in a conservative replacement could result in more of the same. Given the problems that Microsoft is facing, this isn't what the company needs.
The Yahoo! approach
When Marissa Mayer became president and CEO of Yahoo! (NASDAQ:YHOO) in July 2012, people were hopeful that she would be able to stop the company's decline. She's been fairly successful; not only has Yahoo! gone from relative obscurity to being a company that people are watching again, but it even managed to get more U.S. web traffic in July than Google, based on unique visitors.
Part of Yahoo!'s recent success has been Mayer's take-no-prisoners approach. Underperforming services have been cut to focus on the company's core businesses,while Yahoo! has expanded through high-profile acquisitions such as Tumblr.These are significant changes, given that Mayer has been with the company for only a year. But it may still take some time to see how successful she really is in keeping the company growing.
Microsoft has made its share of cuts and acquisitions in recent years, but a CEO who tries to make drastic changes might not go over well with customers. The poor reception of Windows 8 shows that massive change isn't necessarily the way to go with Microsoft's products. Instead, the CEO should focus on improving what Microsoft already has without making changes for the sake of change.
Ballmer was not well-liked in many circles. The 8.7% jump in Microsoft's stock price after his impending retirement was announced illustrates this well.Despite this, he at least acknowledged that things needed to change in Redmond if the company is going to hold on to its position in the technology world.
Whomever Ballmer and the board choose as the next CEO, the company is facing an uphill battle to become a dominant force in the industry again. The new CEO can't afford to be too conservative with Ballmer's legacy, but at the same time doesn't need to rely on acquisitions to change the company's direction. Microsoft needs to find a way to be innovative and produce products that customers want, not that they use simply because they used the previous version. Only time will tell if this is too tall an order for the new CEO to handle.
John Casteele owns shares of Apple and Microsoft. The Motley Fool recommends Apple and Yahoo!. The Motley Fool owns shares of Apple and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.