Steve Ballmer to retire as company faces needed shake-up

Microsoft has stepped into a new and uncertain era with the announcement that CEO Steve Ballmer will retire within 12 months, triggering a search for a successor to take over the software behemoth.

The announcement on Friday surprised analysts and investors and sent shares surging, reflecting belief that the company will benefit from new leadership as it tries to innovate and chase the market for smartphones and tablets.

"There is never a perfect time for this type of transition, but now is the right time," Ballmer said in a statement.

The company needed a leader who could see through its reorganisation and new strategy, he added. "My original thoughts on timing would have had my retirement happen in the middle of our company's transformation to a devices and services company. We need a CEO who will be here longer term for this new direction."

Ballmer, 57, who succeeded Bill Gates as CEO in 2000, will stay on until a successor is found. Gates, who is now chairman of the board, will be part of a small committee tasked with finding the successor. It will be chaired by John Thompson, the board's lead independent director, and consider internal and external candidates.

"I'll work closely with the other members of the board to identify a great new CEO," said Gates. "We're fortunate to have Steve in his role until the new CEO assumes these duties."

Devices chief Julie Larson-Green was tipped as the most obvious internal candidate but many analysts urged Microsoft to plump for an outsider to shake things up.

Ballmer's departure will likely draw a line under Microsoft's origins and traditional tenure. He first met Gates in 1973 when they shared a dormitory hall at Harvard university. He joined the company in 1980 – the company's 30th employee – after it landed a contract to supply an operating system to IBM and swiftly rose up the ranks.

Under Ballmer the company developed successful products like Windows XP and the Xbox 360. It grew to be worth $78bn and employ more than 100,000 people. It has more than a billion users and remains immensely profitable.

Over the past decade, however, its share price stagnated in contrast to the meteor-like performance of Apple, Google and Amazon. Once the world's most valuable company, Microsoft hemorrhaged more than half of its market value.
Critics accused Ballmer of failing to anticipate the explosive growth in tablets and smartphones and the decline of personal computers.

Some, though not all, were appeased by a 22% jump in share price this year after the company started developing and selling its own tablet-style computer.

"The stock is at a relative high at the moment. So it's better to leave on a high note rather than a low note," said Vasudev Bhandarkar, CEO of the Silicon Valley-based Caralta Corporation.

"If you look at the various revenue streams the future doesn't hold very much for the PC industry. Sales are flattening, revenue streams are under attack. Microsoft will have to reinvent itself just like it did in the internet age."

Last month Ballmer announced a sweeping reorganisation to focus more on hardware and make the company nimbler. It appeared to mimic Apple by dividing itself into functions each dedicated to a single purpose such as operating systems, devices, apps or services.

Ballmer fired Steven Sinofsky, who had run Windows and was considered to be the heir apparent, to pave the change.

Many concluded this meant the CEO would stay for the foreseeable future at the corporation's sprawling campus in Redmond, Washington.

"That's why today's news is even more surprising after Ballmer achieved such a big change for Microsoft. If his or her successor doesn't like the 'One Microsoft' vision, he'll have to do another reorganization," noted TechCrunch.

Ballmer's personal wealth is estimated at $15.2bn, which includes about 4% of Microsoft's stock. Born in Detroit, the son of a Ford motor company manager, he studied applied mathematics and economics at Harvard. He worked at Proctor & Gamble and later dropped out of Stanford's graduate school of business to join Microsoft.

Leaving was an emotional, difficult decision, he wrote in a letter to employees.

"I take this step in the best interests of the company I love; it is the thing outside of my family and closest friends that matters to me most."