Steve Ballmer’s time as Microsoft CEO is controversial. While he divides opinion, few argue that he helmed the company through its most difficult period. His solution for many of the industry pressures was to make Microsoft a hardware company focused on mobile. Ballmer now says that decision ultimately led to a breaking of his relationship with Bill Gates.
As Microsoft’s 30th employee, Ballmer was part of the Redmond furniture and a right hand to company founder Gates. Indeed, the pair enjoyed a brother-like relationship. When Gates stepped down as CEO in 2000, Ballmer was an obvious candidate to replace him.
Steve Ballmer had big plans for Microsoft, but it would not be until 2006 that he could start moving the company in the direction he wanted. Gates had retained the day-to-day running of the company as Chief Software Architect. He ultimately relinquished that position in 2006, giving Ballmer autonomy within Microsoft.
What happened over the next eight years is up for debate. What is clear is that Ballmer steered Microsoft to become a hardware company. Sure, software would be a big piece of the company’s vision, but Ballmer saw Microsoft as a hardware brand moving forward. Changing a company built on software was a huge undertaking and a dangerous decision.
Microsoft had missed numerous hardware trends and was entering the market as a newcomer. A giant company yes, but one with little experience making devices. However, Ballmer was convinced the future for the company depended on cracking the mobile hardware market. He had seen Apple do it, so why not Microsoft?
The drive towards hardware included Windows Phone. It was a company shift that was ultimately doomed to fail as Microsoft’s could not recover lost ground. Ballmer says his relationship with Bill Gates declined as the company struggled in its mobile hardware ambitions. However, the former CEO still points to the company’s reluctance early on as the reasons why mobile hardware failed.
“We were late in phones,” Ballmer says in an interview with Bloomberg. He admits, Gates and the board were opposed to hardware and continued to be until Ballmer departed in 2014.
“There was a fundamental disagreement about how important it was to be in the hardware business. I had pushed Surface. The board had been a little — little reluctant in supporting it. And then things came to a climax around what to do about the phone business,” Ballmer explained.
“Towards the end, that was a bit more difficult than not, particularly with the strategic direction change and you know, the stock price isn’t going anywhere, so the rest of the board felt pressure — despite the fact that profits were going up — so I think you had kind of a combustible situation.”
“I would have moved into the hardware business faster and recognized that what we had in the PC, where there was a separation of chips, systems and software, wasn’t largely gonna reproduce itself in the mobile world,” he said.
After Steve Ballmer
It is hard to see how Microsoft could have grown hardware enough to carry the company, even if Ballmer’s wish of building devices earlier had been realized. His continued push towards Microsoft as a hardware company continued until as late as 2014, before he departed the company. At that point, it was clear Microsoft was not going to become a major player in the mobile hardware business.
Ballmer sanctioned the multi-billion dollar deal to buy Nokia’s Lumia division. It was an acquisition that failed spectacularly and less than two years after the deal, Microsoft retired its mobile hardware and sold the Nokia feature phone business.
Two facts are perhaps most telling. Firstly, when Ballmer stepped down in 2014, he left Microsoft completely. This is rare for someone who has been with a company for three decades. Yes, he cites commitments to sports ownership (Ballmer bought an NBA franchise, the LA Clippers, for $2 billion) as a reason for his departure. However, it really speaks of the division between him and Gates. Steve Ballmer admits the pair “Kinda drifted apart”.
Since Ballmer left the company, new CEO Satya Nadella has taken Microsoft in a completely different direction. He has put the focus back on software and providing services, with an emphasis on the cloud. Windows has been revamped and once again underpins Microsoft’s services, despite continued failings in mobile.
More significantly, the turnaround has worked and Microsoft is thriving again. Interestingly, over the last two yes, hardware has also become a success for Microsoft. The Surface line of products is selling well and has helped to create a new category of devices. The Xbox division continues to be important for the company, and is now tied into Microsoft’s software.