History shows that no matter who gets the nod, some of the commentariat will cry foul
No matter who Microsoft names as its third-ever chief executive early in 2014, the pick will trigger comments from experts and technology leaders who will question the sanity of the board, the person who took the job or — throwing caution to the wind — everyone involved.
That’s just how it works. CEO choices cannot please everyone, especially ones like Microsoft’s, not when there are as many opinions on the causes of the giant’s problems — and predicted solutions — as there are people armed with a keyboard or a finger able to touch a tablet.
“Let’s face it, the current business model doesn’t work, and you can’t tweak it to improve it,” said Kimball Brown, an analyst with Dataquest.
But Brown wasn’t talking about Microsoft, or even commenting in the present: That quote came from a July 11, 1997, piece in the New York Times about Apple, which had just tossed out its latest CEO, Gil Amelio, and was looking for a replacement.
The man who stepped into the role, eight weeks later as interim chief executive, then as permanent CEO two-and-a-half years down the road, was co-founder Steve Jobs. And everyone knows how that turned out.
Microsoft will announce the replacement for departing CEO Steve Ballmer early in the new year, perhaps in its first weeks, before the board welcomes — one can assume begrudgingly — the representative of an activist investor at the table.
Candidate names have circulated since Ballmer, 57, abruptly announced his retirement in August, citing a conflict between his previous plans to yield the office and the transformation of Microsoft from a seller of packaged software to a purveyor of mobile devices and online services. Ballmer has denied that he was ousted, but comments given by John Thompson, the director leading the CEO search, to the Wall Street Journal in November hinted that pressure had been put on Ballmer to step up his game or step aside.
Those names, all backed by anonymous sources, have included Ford Motor CEO Alan Mulally, former Nokia CEO Stephen Elop, current Microsoft executives like Tony Bates and Satya Nadella, and others.
But no matter who the board names, whether one of those four, any of the more than 100 that Thompson claimed had been identified as potential candidates, the “several dozen” who were interviewed, perhaps a true dark horse out of nowhere, or even a returning Bill Gates — as far-fetched as that sounds — the choice won’t please all. Even if the pick is, in hindsight years down the line, absolutely brilliant.
Wall Street, for instance, has bet big on Mulally, lauding him for his business and organizational acumen, a reputation that rests largely on the turnaround he engineered at Ford. If Microsoft’s next CEO is not Mulally, there’s a good chance financial analysts will punish the company — and its stock — by dismissing the selection as insufficiently daring, simply a swap for a Ballmer wannabee, or lacking top-dog experience managing a company of Microsoft’s size and breadth.
Earlier this month, one analyst — Israel Hernandez of MKM Partners — predicted that Microsoft’s share price would droop to the low 30s if Mulally wasn’t The Guy.
There’s evidence that Hernandez and other like-minded analysts are right. In early December, when Ford board member Edsel Ford II said Mulally would stay at the car company, Microsoft’s stock stumbled, losing 2.4% of its value that day. As of Friday, it was down 4.2% from the price before Ford’s remark.
Others will question the selection of an outsider. Although those critics may acknowledge that Microsoft needs fresh blood, they will argue even louder that the technology- and engineering-driven company cannot be managed by someone who lacks direct experience in its eccentricities and its disparate parts, and who may have trouble gaining confidence of the troops.
None of those opinions are guaranteed to be correct.
Many questioned the choice of Louis Gerstner as IBM’s CEO in April 1993, for example, largely because he came from RJR Nabisco and American Express — not exactly technology hotbeds — and had no experience running a tech company, much less one the size of IBM, then a corporation with a mailbag of problems.
And the naysayers pointed out Gerstner lacked the “vision thing,” the pixie dust assumed as a prerequisite for any tech CEO and a characteristic many deem critical in Microsoft’s next leader. Gerstner, who years later was credited with bringing IBM back from the brink and transforming it into a profitable services vendor, acknowledged his lack of “vision” early on.
“The last thing the company needs is a vision,” Gerstner said at a press conference in July 1993, when he announced massive layoffs and an $8 billion charge against earnings. “It needs a series of tough-minded, market driven strategies for its businesses, and that’s what we’re working on.”
And insiders haven’t always worked out.
In 1992, Digital Equipment Corp. named Robert Palmer as the CEO successor to co-founder Ken Olsen. Palmer, then a seven-year veteran of DEC, had been praised by analysts for his success driving the company’s Alpha architecture and resulting processors. But Palmer couldn’t salvage the company. Within four years, DEC had disappeared, sold at a fire sale price to Compaq. And Palmer got the blame.
“Bob Palmer was the wrong CEO for the times,” said Peter DeLisi, currently a consultant, but someone who spent 16 years at DEC, in a September interview with Computerworld.
Even the people who pick Microsoft’s next CEO could be proved dead wrong in retrospect. It’s not like that hasn’t happened before.
“Leo is a strategic thinker with a passion for technology, wide-reaching global experience and proven operational discipline — exactly what we were looking for in a CEO,” said Hewlett-Packard director Robert Ryan in a September 2010 news release announcing the hiring of Leo Apotheker as HP’s new CEO.
Apotheker was gone in less than a year, fired after a string of disastrous moves — including an announcement that HP might sell off its PC business — that reduced the venerable company’s valuation by 40% in just 11 months.
At the time of Apotheker’s hiring, commentators were split, with some calling the choice “idiotic,” while others said the former SAP CEO was the right move. “I get the feeling he is a brilliant leader,” MySQL founder Marten Mickos told Fortune.
“HP needed a tech leader, someone who has run a billion-dollar business, someone who has a global perspective and a software perspective to help the company get more into the software business, and there aren’t too many people like that walking the street,” said Ray Wang, a partner with technology consulting company Altimeter Group, on news of Apotheker’s appointment.
On paper, Apotheker may have checked off those boxes, but once in the chair, he unraveled HP to such a degree that it has yet to recover.
And don’t expect the judgments to stop when Microsoft presents its new CEO. Advice for the hire (or promotion) will flood the Web, with analysts, bloggers, pundits — and yes, reporters — chiming in with free, and at times free-from-reality, suggestions or, from the most aggressive, demands for this move or that change, this sell-off or that regime purge.
Those post-appointment opinions may prove as far off the mark as the criticisms of Microsoft’s choice.
“They should create Macintosh Inc. as a company that sells software and designs hardware for other companies to make,” recommended Brown of Dataquest in 1997, describing his vision for Apple after it bounced Amelio.
Whoops.
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