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AuthorITies: Redmond Watch


July 26, 1999

Is Brain Drain Hurting Microsoft?

By Stuart J. Johnston

N athan Myhrvold, Microsoft's chief technical officer, left the company June 30 for a year's sabbatical--part of which he will spend in Montana hunting the T-Rex, a long-extinct dinosaur. It remains an open question as to whether Myhrvold will actually return when his year is up. A few months earlier, his younger brother, Cameron, also left the company.

The Myhrvold brothers are just the latest in a stream of Microsoft employees--both executives and staff--who have paid their dues of working 18-hour days and now are off to spend some of the cash from their lucrative stock options. Indeed, with the possible exception of an Internet "dot com" firm or two, Microsoft has been probably the greatest wealth creation machine we have seen in the second half of the 20th century.

So it's not too surprising that, nearly 25 years after its founding, many now-fabulously wealthy employees are deciding to take some time off, watch their kids grow up, and enjoy the fruits of having labored in Microsoft's fabled "velvet sweatshop."

In light of all the departures, many pundits are predicting that the brain drain will mortally wound the company. But my advice is don't bet your retirement on that--it's a bad assumption.

True, the list of people who have left altogether or taken extended leaves is long and reads like a "Who's Who" of key company executives. Chris Peters, the VP who was largely responsible for the early success of Microsoft Word, is polishing his bowling game in a play for the pros. Brad Silverberg, credited by many as one of the key forces behind Windows 95 and Microsoft's sudden turnaround in the Internet market, remains on sabbatical. Pete Higgins, who had presided over the company's dominance of the desktop applications suite market and later tried to turn around the Microsoft Network, is also taking time off. Two of the latest departures include Steve Perlman, the founder of WebTV, who only lasted a couple of years after Microsoft bought out his company, and Sam Jadallah, the VP who masterminded Microsoft's successful pitch to recruit more than 300,000 small resellers to its DirectAccess program.

Retirement parties for employees who have put in their time and now have all the stock options they need for a comfortable life have become commonplace, according to Microsoft sources.

But watch the players at the top. Steve Ballmer, long the guy who pushed the company's competitive agenda, was promoted to president a year ago and shows no signs of letting up. Though Bill Gates is spending more time focusing on the company's vision and products, he is still CEO and chairman. And the rest of the varsity team--Jim Allchin, Paul Maritz, Bob Muglia, Brad Chase--are all proven first-string players with long track records at the company. And even relative Microsoft newcomers such as Paul Gross have accomplishments that go back to the founding of the PC software industry.

We're not seeing any shake-up at the top, and we're not seeing any weakening in the company's sales and earnings, though when a company is bringing in $20 billion or so a year, every percentage point of growth is harder to achieve.

After spending 25 years always trying to hire the most talented and most driven professionals, Microsoft is still overstocked with tons of talent that any other company would kill for. The company has plenty of people waiting to advance. And at least so far, there is no shortage of fresh, bright college graduates waiting in line for a chance to participate in the Microsoft lottery.

So when you hear some pundit begin to count Microsoft out, wait for the whole count. Many have claimed in the past that the company had lost its edge and would soon go the way of the T-Rex that Nathan Myhrvold is hunting. Just look at what happened when all the wags chortled that Microsoft had "missed the Internet." In light of the dinosaur analogy, Microsoft looks to me to be more like the mammals that survived the great extinction than a long-gone reptile.


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