Will Microsoft's Next CEO Ditch Ballmer's Plan?

As Microsoft board closes in on a new CEO, the company's long-term strategy remains hazy.

Outgoing Microsoft CEO Steve Ballmer decided to retire after realizing the company's transformation would move faster under fresh leadership. When he announced his conclusion to the rest of the Microsoft board, other members accepted it without debate.

That's the story documented in a series of articles published Friday in The Wall Street Journal (subscription required). The articles affirm that Ballmer made the decision himself, rather than being asked to leave, and that both the CEO and the board recognize that Microsoft is playing from behind in crucial areas, such as mobile technology and Internet-based services.

What's not clear, and what's arguably of most interest to Microsoft's customers and investors: In choosing a new CEO, does the selection committee want someone who can accelerate the reorganization plan Ballmer has laid out, or does it want someone unafraid to institute radical changes?

In a sense, radical change is already happening, regardless of the company's future intent. Microsoft's revenue streams have already shifted, with more growth potential evident in its cloud and enterprise services than its traditional cash cow, Windows. That Microsoft's identity can no longer be tied to PC operating systems is quite clear. It's also acknowledged in Ballmer's reorganization plan, which abandons the silos that once divided the company and encourages teams to collaborate in building an ecosystem of unified and mutually reinforcing products.

But some influential shareholders are skeptical of Ballmer's ambition to compete with Apple and Google for consumers. Microsoft's decision to build its own devices has been especially contentious, especially after the company announced a nearly $1 billion writedown on unsold inventory.

Microsoft remains enormously profitable, but Ballmer admitted in interviews following his retirement declaration that the company might have missed the shift toward mobile devices, because too many resources were tied up in developing Windows Vista. Some shareholders no doubt look at the billions Microsoft has lost on Bing and wonder if the resources might be better spent on promising enterprise cloud products.

[ Want to make the most of Windows 8.1 on a desktop PC? Read Windows 8.1 Desktop PC Installs: 8 Tips. ]

Despite this uncertainty, Microsoft has advanced Ballmer's agenda ever since the CEO announced his retirement plans. Examples range from its purchase of Nokia's device business to the elimination of its notorious stack-ranking employee evaluation system.

The Microsoft board has implied that it wants more of the same under new leadership -- only faster. John Thompson, the board member in charge of the CEO selection committee, indicated shortly after Ballmer's announcement that the reorganization plan would continue as planned. He reiterated support for Ballmer's vision by telling the WSJ that the board wasn't concerned about Ballmer's plan -- only the speed at which he could execute it.

As evidence, the WSJ noted that Microsoft executive vice president Qi Lu was surprised when Ballmer rejected a 56-page report. He told Lu the revision could be no longer than three pages if it were to foster collaboration. Such exchanges evidently convinced Ballmer that, because he had instilled the company's outdated management culture, it would take someone else to instill a simpler, more team-oriented one.

But Reuters reported in early October that some investors are concerned about Microsoft chairman and founder Bill Gates's influence on the CEO selection process. They reportedly fear he will block radical changes that might become necessary as the reorganization evolves. If shareholder discontent escalates, Microsoft will need to respond.

Numerous reports claim former Nokia CEO Stephen Elop is a front runner for Ballmer's job. His selection could certainly appeal to Ballmer's dissenters. Coming from Nokia, he'd be unlikely to shut down Microsoft's device efforts, but as a CEO, he's shown a willingness to rock the boat; for example, he dumped Nokia's Symbian mobile OS in favor of Windows Phone. Citing people familiar with his thinking, Bloomberg reported this month that Elop would consider selling off Microsoft's Bing and Xbox businesses, and that he would focus on making Office a cross-platform success, including on Androids tablets and iPads.

But Bloomberg and others have also reiterated that Ford CEO Alan Mulally could be the board's top choice. Ballmer told the WSJ that Mulally helped him develop Microsoft's reorganization plan, which relies on some of the same principles that have helped Mulally turn Ford around. It's not clear if Mulally thinks Microsoft should shed businesses, but he at least represents the attitude, if not the strategy, to which Ballmer's plan aspires.

Where does this leave the CEO search? In all likelihood, Microsoft's board still doesn't know what it wants in the long term. Even if it has settled on a preferred candidate, that person probably can't know, either. The wheels of Microsoft's consumer-oriented machine are in motion, and it won't be clear for at least a few months which ones have traction.

It will mean one thing if Surface sales are poor, Windows 8.1 adoption is modest, and the Xbox One is soundly outsold by the PlayStation 4. But if any of these ventures succeeds, the outlook will be quite different. An enterprise focus won't help Microsoft stave off consumerization, at least not completely. But if the company can take over the living room, become a legitimate presence in the tablet market, or even make Bing a popular platform for mobile developers, the rewards could be substantial. The consumer experiment can't go on forever unless it proves its worth. Some aspects of it are surely destined for shutdown, but it's too early to say which aspects should go, let alone whether entire product categories, such as Bing, should be abandoned.

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