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Ballmer forced out after $900M Surface RT debacle

Gregg Keizer | Aug. 26, 2013
Major miscalculation and ensuing financial blow precipitated board's decision to push out the Microsoft CEO, argues analyst.

Steve Ballmer was forced out of his CEO chair by Microsoft's board of directors, who hit the roof when the company took a $900 million write-off to account for an oversupply of the firm's struggling Surface RT tablet, an analyst argued today.

"He was definitely pushed out by the board," said Patrick Moorhead, principal analyst with Moor Insights & Strategy, in an interview Friday. "They either drove him out, or put him in a situation where he felt he had to leave to save face."

The biggest clue that Ballmer was pushed and didn't leave of his own free will was the 12-month timetable Microsoft said it would use to find a CEO successor. "Typically, a board will be working behind the scenes for a replacement, but they've given themselves 12 months," said Moorhead. "I think this went down very quickly."

Microsoft announced Ballmer's retirement earlier Friday.

Ballmer, who has been CEO since 2000 and at Microsoft since 1980, will remain CEO until his successor is selected. In a statement, the board indicated that could take as long as 12 months. It has drafted a committee to oversee the selection process; co-founder, former CEO and current chairman Bill Gates will serve on the committee.

In his email to Microsoft workers, Ballmer seemed to hint that the retirement was not his idea, but that he was falling on his sword. "This is an emotional and difficult thing for me to do. I take this step in the best interests of the company I love," he wrote.

Later Friday morning, Ballmer told Mary Jo Foley of ZDNet that he had been thinking of retirement for some time — true, as he'd informally named 2018 as the likely date five years ago — but that his thinking had "intensified really over the last couple, two, two and a half months."

Moorhead had a different timeline.

"What could have precipitated the quick move?" Moorhead asked, then answered his own question. "It was the $900 million write-down. That caught the attention of the board, and based on Ballmer's over-enthusiastic public commentary on Windows RT and Surface RT, they lost a lot of credibility. So did Ballmer. How can you be that far off what consumers want? Was it that you're not listening to your team? Was it because the team was afraid to give him advice? Was it because the team saw a different reality? Or was it that the team lacked the skill set to anticipate the failure?"

Whatever the reason, it ultimately led to Ballmer being blamed. "The buck stopped with Ballmer," said Moorhead.

Microsoft announced the write-off in mid-July during its second-quarter earnings call with Wall Street. But the company would have known weeks before that it would have to declare the charge-against-earnings. And the board, too, would have known about the massive hit.


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