Steve Ballmer’s Legacy as Microsoft CEO: 10 Highs and Lows

By Don Reisinger

When Ballmer was officially named Microsoft CEO in January 2000, he was decidedly overshadowed by founder Bill Gates, who took on the role as the company’s chief software architect. For years, many wondered if Gates would step down and give Ballmer a chance to lead the company. But after Gates departed in 2006, Ballmer showed that he was capable of running one of the IT industry’s most successful companies.

There was a time when it looked like Microsoft wouldn’t stray far from its core enterprise application and PC operating system business. Under Ballmer, however, the company changed that by popularizing the Xbox game console, especially in North America and Europe. Now the U.S. company leads the gaming industry that was historically dominated by Japanese companies.

While for most of its history Microsoft never built PCs in competition with its PC OEM partners, it has always been in the hardware business at least in a small way with PC accessories such as the Microsoft Mouse. But under Ballmer, things have changed considerably. Not only did Microsoft market Xbox game consoles and the Surface tablets, but Ballmer recently announced a major restructuring that will see the company focus more on “a family of devices” and enterprise services that go far beyond its focus on Windows and Office. If Microsoft keeps following Ballmer’s vision, the company will launch “devices and services that people love and businesses need,” he said in his shareholder letter.

Profitability was never an issue under Ballmer. In fact, Microsoft watched its profit soar with him at the helm—rising 215 percent to $23 billion. And Microsoft’s revenue jumped to $70 billion, up from the $25 billion it earned before his promotion to CEO. From a financial perspective, Ballmer was quite effective.

One of Ballmer’s biggest issues over the years has been his interaction with investors. During the first half of his tenure, he was viewed by some shareholders as the man Bill Gates hand-picked to run the day-to-day operations while the founder actually kept the company on course. More recently, Ballmer was criticized by investors, like David Einhorn, who argued that his inability to get Microsoft’s stock price to move made him an ineffective leader. Working with shareholders has never been easy for Ballmer.

When Ballmer leaves Microsoft’s C-suite, he will retire as a man who—from search, to online advertising to mobile software and to mobile devices—couldn’t figure out how to beat Google. Instead, Google has consistently beaten Microsoft to these important new markets. This made Google the glamour growth investment of the new millennium, while Microsoft looked stodgy by comparison despite its huge revenue and profits.

Windows Vista was a mess. As soon as it launched worldwide in January 2007, users revolted. Consumers said the operating system’s design changes and User Account Control were awful, and businesses complained of productivity losses. However, Ballmer was able to lead Microsoft through those several years of nagging trouble in its core PC operating system by launching Windows 7. Say what you will about Windows Vista, but it certainly didn’t kill Microsoft’s Windows business as some had predicted.

When Gates was still running Microsoft, the company was in the midst of antitrust proceedings, facing heavy fines and regulatory scrutiny at home and abroad along with claims that it was an evil monopoly. While Ballmer didn’t turn that perception around overnight, he worked to demonstrate that the company would work within the limits set by regulators. As a result, Microsoft is facing somewhat less regulatory scrutiny and perhaps less of a reputation as an evil business empire.

The writing was on the wall for Ballmer after Microsoft faced two major crises in the past year. First, PC users turned their backs on Windows 8 because they disliked major changes to the user interface and because they were still quite happy with Windows 7 or even Windows XP. Then Ballmer had to deal with poor sales of Microsoft’s heavily promoted Surface tablets. Microsoft captured only single-digit market shares with the tablets. Worse yet, Microsoft took a $900 million write-down on unsold Surface RT tablets. These were one-two punches Ballmer couldn’t recover from.

Ballmer’s swan song to investors was less an admission that his time has come and gone than a desire to make shareholders realize that he did a lot of good for the software company. His crying on-stage at his last employee annual went beyond nostalgia or a profound love for the company he helped build for the past 33 years. Ballmer simply wasn’t ready to go.