Microsoft Surface’s Failure

The sudden albeit long anticipated announcement of Microsoft CEO Steve Ballmer’s retirement has sent ripples across tech and business worlds across the globe. Since Ballmer went public with his intention to step down within the next twelve months on Friday, speculations have been rife over the decision being a fall out of the Microsoft Surface disaster instead of a voluntary choice.

Is it Retirement or is it Ouster?

The one year window for the retirement has further fueled the conjecture that Ballmer was either shown the door by the Microsoft board or was put in a tight spot where an exit was the only saving grace left for him. Experts believe that the one year window period will be used by the tech giant’s management to find a suitable candidate to fill in Ballmer’s shoes and revive the company out of its downward spiral trend as well. That Microsoft is yet to find a successor for Steve Ballmer is a clear indication that things went downhill speedily for him.

The implications were visible on the financial front too, with the company’s stock taking an instant 8 per cent leap and settling on a bullish trend with an average 7.3 per cent gain at the day’s end. A good sign some would think.

The $900 Million Microsoft Surface Fiasco

The $900 million write down on Microsoft’s Surface RT tablet is believed to have sounded the knell for Ballmer’s time in the CEO chair. His overtly passionate remarks on Surface and Windows RT coupled with an unsold stock of Surface tablets worth US $900 million brought embarrassment and loss of credibility not only to Ballmer but also to once-monopolistic tech giant Microsoft.

The consumer version of the much hyped Surface tablet uses the Windows RT operating system and an ARM processor instead of Intel’s x86, delivering a tablet in consistent with the consumer needs in present times. Microsoft managed to sell as few as 1.7 million tablets in the first two quarters. This is in sharp contrast from the sale pattern of its key competitors Microsoft was hoping to catch up with, by way of the Surface tablet – Apple iPads registers a quarterly sale of whopping 14.6 million, where as Samsung sells approximately 8.8 million tablets per quarter.

Microsoft is said to have pumped in $898 million is marketing and advertising the Surface tablet, along with Windows 8. However, the inadequate product line fetched returns of only $853 million. To get the stockpile of more than six million unsold tablets moving, the company even slashed the tablet prices by a sizable $150 per unit. Reacting to the market response to the ambitious Surface tablet, Steve Ballmer has been quoted as saying that the company produced too many of these tablets and sold too few.

Missing the Innovation Train

The Microsoft Surface tablet may have been the last nail in the coffin for Ballmer’s CEO tenure; it certainly was not his first debacle. The MP3 player Zune, Windows Vista, and Kin mobile phone are largely viewed as some of his ‘flagship failures’. In his 13 year term as CEO – he took the reins from Bill Gates in 2000 – the company has seen a series of transitions, be it restricting the organization, inducting new operating systems or launching new devices. However, none of it succeeded in giving Microsoft’s stock the much needed boost the company required.

Steve Ballmer’s tenure at Microsoft CEO can be best described as a period of eerie lull for the tech giant. Ballmer failed on every account to steer the company to a paradigm shift from a supplier of software to developer of high end gadgets and tech devices. His time in office as Microsoft CEO corresponds with a period where the world of computers underwent a sea change in terms of their usability and consumer penetration. However, the company failed to keep pace with the ensuing change.

The company struggled to sustain its dominant presence in the market as desktop computers began to be replaced by their more mobile versions. The advent of giants such as Apple and Google wiped the monopolistic slate for Windows and Intel. Both Google and Apple penetrated into the market by creating a niche in the world of laptops, tablets and smartphones. Microsoft’s dominance on software and operating system market took a huge hit, shrinking to 35 per cent in 2012 from a lion’s share of 96 per cent in 2000. Consequently, the company’s stock took a hit, flat lined and stayed level thereafter. For nearly a decade now, Microsoft has been dealing with a thermostatic stock situation set between $25 and $30.

The one off success that Ballmer managed to ride high on was the Xbox that instantly became a rage in the market. However, every other attempt on his part to transform Microsoft from a Windows and Excel company to a consumer oriented firm fell flat. Tapping on the gaming, internet calls and search markets with a view to take the company ahead of the curve was too little, too late.

Life Beyond Ballmer

Steve Ballmer’s detractors have maintained that he managed to bag and retain the job for so long owing to his proximity Bill Gates. There is no denying that he did a reasonable job in keeping profits coming from the company’s already profitable propositions and assets. However, he was not in the least the visionary the company needed at the helm given the fluid nature of the world of technology is going through in present times. The consequence is that Microsoft is no longer even viewed as a competitor to the more recent tech giants such as Google or Apple.

The choice of the next CEO will be crucial in determining the company’s relevance and global presence in the coming decade and beyond. The past decade has certainly dented the company’s market and profit share; however, a company as big as Microsoft still has more than a shot at revival. Ballmer’s successor has large shoes to fill and a humongous responsibility to transform the firm’s fortunes. Redefining the company ethos, and approaching marketing and communication strategies afresh before thinking of cutting edge products is a good start point.

Steve Ballmer’s tenure as the Microsoft CEO is marked with his continued ineptness to see the bigger picture and implement corresponding changes.