The criticism still rattled Ballmer. Microsoft's board backed him, and the company has done well financially. Einhorn actually recommends the stock. But, as the saying goes, past financial performance is no guarantee of future results. (And my colleague Constantine von Hoffman wonders how good his judgment is, as Einhorn wants to become the junior partner of Mets majority owner Fred Wilpon, who has managed to lose revenue in the baseball franchise faster than an ice cream cone melts on Fifth Avenue in mid-August.)
Microsoft has been remarkably consistent in its strategic stumbles. Up until now, Windows and Office sales have been strong enough to weather any tempest. That's no longer true, and Ballmer has long run out of time to prove his bets. It's time to let someone else make the big decisions.
Can't buy them love
The market has long punished Microsoft. The company outperforms the S&P 500, and yet the stock trades at a 34 percent discount compared to the price-earnings ratio of the average company in that index. Microsoft just can't win.
Maybe that's one reason why Einhorn compared Ballmer to the Peanuts character Charlie Brown. Neither can lead his team to victory. Ballmer has bet wrong on virtually every tech hot spot of the last ten years. Search? Even though the company has improved its position, Google (GOOG) is still the undisputed market leader. Mobile? Microsoft used to sell a popular smartphone operating system and then got blown out of the water, first by Apple (AAPL) and then by Google. Tablets? Apple's iPad redefined the category, Google is pushing to make Android a standard choice, and Microsoft still lags behind without an equivalent product.
They're a PC
For decades, the problem has been clear: Microsoft has been addicted to its old cash cows, Windows and Office, and its culture quashes anyone who threatens the status quo. Ballmer is squarely responsible. Maybe he couldn't have anticipated the growth of mobile or the strength that Google would gain from search, which would fuel its ability to attack Microsoft on the operating system front. How could Ballmer have known that consumers would take to tablets -- something Microsoft had long tried to promote -- once someone demonstrated a model that worked the way they wanted?
But Ballmer could have stopped Microsoft from killing its own innovation and dismissing trends that suggested the company was no longer the king of the technical world. And he didn't. He's made some attempts of late, like supporting the rewrite of the mobile operating system now called Windows Phone. But it was too little, too late. He tried shaking up Microsoft management, putting engineers in place of people with sales and marketing backgrounds. That didn't address the problem of letting the core businesses smother new areas Microsoft needed to explore.
It might be too late for the company to pull out of the pattern it's in. However, if there is a chance, then the same person who put the company into this fix over a period of a decade isn't the one to rescue it.
- Windows 8: Microsoft's Strategy Still Wears Blinders
- Microsoft Saved by Office and Games. Yup, Games
- Ballmer Shakes Up Microsoft Management the Wrong Way
- Microsoft Needs More Traitors