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Microsoft says CEO Ballmer to retire in 12 months


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Although the company said Friday that it will consider both internal and external candidates, some analysts are betting that the company’s next leader will come from outside.

Walter Pritchard, an analyst with Citi Investment Research, said Microsoft’s expected focus on external candidates will make it tough to predict who will become the next CEO and what direction they will take it in. He added that the search will likely take a significant amount of time, potentially the entire 12 months Ballmer has said he will stay.

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When Ballmer joined Microsoft in 1980, was populated with geeky programmers, led by Gates and the other founder, Paul Allen. Ballmer had already held a product management job at Procter & Gamble and was attending Stanford University’s graduate school of business when Gates convinced him to move to the Seattle area to whip Microsoft into shape.

Ballmer dropped out of Stanford, but only after Gates agreed to give him an 8.75 percent stake in the then-tiny startup that still hadn’t even incorporated as a company. It turned out to be one of the world’s greatest business partnerships. By late 2012, Ballmer had accumulated an estimated fortune of nearly $16 billion from his initial Microsoft stake and additional stock options he later received.

He also was instrumental in growing Microsoft from a company that had fewer than 40 employees and $12 million in annual revenue when he came aboard. In 2012, Microsoft had 94,000 employees and $74 billion in annual revenue.

When he took to the stage to extol Microsoft, Ballmer often acted more like a crazed cheerleader than the chief executive of an influential company. In one presentation that eventually became a viral sensation on the Internet, Ballmer bounded across the stage, jumping up and down while yelping and imploring the audience to stand up, before breathlessly proclaiming, "I LOVE THIS COMPANY!"

But Microsoft enjoyed its greatest success with Gates at the helm and Ballmer as his sidekick.

Gates turned over the reins to Ballmer in January 2000 in what was considered to be a surprise move, because Ballmer had been considered more of a numbers and sales specialist, not a technology specialist.

The CEO change came just a few weeks after Microsoft’s stock hit a record high of nearly $60, on a split-adjusted basis.

Janney Capital Markets analyst Yun Kim said that while the stock should get a boost from the news, investors shouldn’t get too excited, because the company itself won’t change overnight.


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Kim said the new CEO, who will likely come from outside the company, faces the "daunting task" of making Windows relevant amid the continued consumer shift away from PCs.

Ted Schadler, an analyst at Forrester, said that while some may try to write its obituary, Microsoft still has some reliable cash cows. Its software, like Windows and Office, is still popular. So is Microsoft Enterprise, which helps big companies run databases, and the Xbox gaming system. Schadler noted that about 70 percent of business email is still sent on Microsoft software.

Part of Microsoft’s downfall stemmed from the bursting of a technology bubble that helped inflate the company’s stock just before Ballmer took over.

But Microsoft also fell out of favor because many investors concluded that it was more interested in protecting its Windows franchise than coming up with new ideas and products to enter promising new markets.

By the time Ballmer took Google more seriously and began pouring money into trying to build a better Internet search engine, Microsoft already was hopelessly behind. The company’s online division lost billions of dollars without putting a serious dent into Google’s dominance of the field.

Google’s rise riled the quick-tempered Ballmer, especially when key Microsoft engineers began defecting to the then-smaller company. After one Microsoft employee met with Ballmer in November 2004 to tell him he was leaving to join Google, Ballmer threw a chair across his office, according to a sworn declaration filed in a lawsuit. Ballmer then launched into an obscenity-laced tirade In which vowed to "kill" Google.

By 2012, the iPhone was generating more revenue than Microsoft was as an entire company and giving people less reason to replace their PCs. Again, Ballmer had to scramble in an attempt to adapt and ordered a dramatic makeover of Windows so it could run on mobile devices, as well. The new system, Windows 8, borrowed many of its ideas from the software that ran the iPhone, just as Microsoft had copied some of the concepts for its early versions of Windows from Apple’s Macintosh.

Meanwhile, the iPhone’s immense popularity helped Apple overtake Microsoft as the world’s most valuable company while Ballmer was CEO.

Windows 8 proved to be Ballmer’s last stand, said analyst Patrick Moorhead of Moor Insights & Strategy.

When the operating system launched in October, Moorhead predicted that Windows 8 would be Ballmer’s "defining moment." His legacy, he added, would be looked at "as what he did or didn’t do with Windows 8." If it’s a flop, "a lot of people will be looking for Microsoft to make a change at the CEO level," Moorhead told The Associated Press back then.

Reached Friday morning, the analyst called Windows 8 "a flop."

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