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Microsoft and Steve Ballmer: How to Reverse Their Image Decline

Ever since David Einhorn, the manager of the Greenlight Capital fund (which owns 9.07 million shares of Microsoft stock) suggested that Steve Ballmer should step down as CEO of Microsoft, journalists and technology analysts have been buzzing about this issue. The fact that some are for and others are against his leaving is very telling. More telling is that those that are in favor of Ballmer staying have been lukewarm about it - saying that he is not that bad or he has a better record than other CEOs of major corporations, such as Rupert Murdock (NewsCorp), Jeffrey Immelt (GE), and John Chambers (Cisco). Irrespective of the performance of the other CEOs, should a CEO whose supporters are lukewarm in his defense run a company as big and important as Microsoft? If so, what does that say about the images of Ballmer and Microsoft?

The record does not look very good.

Writing for Reuters, Richard Beales says, "Ballmer started as CEO in January of 2000. Over the last decade Microsoft's shares have tumbled about a third..." Since the stock price took this fall, anybody that has watched the stock has seen it basically flatline - bouncing in a narrow range between $24 and $30 per share. As Tim Schiesser notes in his post, $100,000 invested in Microsoft stock 10 years ago is now worth $69,000.

When Ballmer was handed the keys, Microsoft already had two cash-cow products - Office and Windows - from which Microsoft continues to reap huge sales and profits. Since he has been in charge, Microsoft has been a follower rather than a leader in at least two very important markets - search (dominated by Google) and mobile computing (dominated by Apple, Google, and RIM). And, under his watch, Microsoft put one of these cash cows on life support with the Vista disaster.

The image looks worse.
In light of these negatives during Ballmer's reign, the image of Microsoft has slid from the dominant power it once was to an oversized, slumbering giant that follows rather than leads the market. This image decline has, in turn, caused Microsoft to continue to lose the talent they need to compete. What makes matters worse is they are losing this talent to competitors and hot new tech companies. To stem the bleeding, Microsoft was able to at least invest in Facebook and buy Skype - two moves that have been largely applauded. However, Microsoft's languishing stock price is a constant reminder that the market does not think these moves are sufficient for it to compete with more fleet-footed rivals.

Ballmer's own image hurts rather than helps.
Rather than counteract the slide, Steve Ballmer's image has made matters worse. Whether he is speaking at the CES show or at a Microsoft conference, more than a few stakeholders have been disappointed, and in some cases horrified, by the image he projects when he gives presentations. If his CEO performance metrics were better, the marketplace might look the other way. Now that David Einhorn has raised the issue that has been amplified by the media, it might be hard for Microsoft constituents to ignore it. Matt Rosoff said in a recent Business Insider post that only one person can fire Steve Ballmer, and that is Bill Gates. Perhaps this is true, but shareholders own corporations, and if enough of them become annoyed at the stock price bouncing between $24 and $30 in perpetuity, they may decide to put greater pressure on the Microsoft Board to remove Ballmer.

What does Ballmer and Microsoft need to do to improve their images?
The easy answer is to follow David Einhorn's advice. Getting a proven winner that is hungry to wake up the slumbering giant is the quickest way to inject new life into the company, improve its "stuck in neutral" image, and mobilize the forces to again conquer the tech world. Since this seems unlikely (per Matt Rosoff's post), the more interesting and challenging path is to do the following:

  1. Step up efforts to grow the stock price including paying higher dividends and doing a better job of communicating wins, such as the large return on the investment in Facebook, the acquisition of Skype, and the success of Windows 7.
  2. Make the partnership with Nokia work better than most expect it will.
  3. Seamlessly integrate Skype with other Microsoft products, without compromising the product or relations with existing Skype users.
  4. Make sure that all Ballmer presentations are better-prepared and rehearsed. Better yet, use a more skilled and credible presenter. Find talented orators at Microsoft that are able to deliver the message without the inside-out, "I love Microsoft" hubris that has been characteristic of Ballmer.
  5. Improve flagship Office and Windows products to greatly exceed, rather than meet, customer expectations, while avoiding any more Vista debacles.
  6. Hire and retain the best talent available by giving them performance incentives better than they will get elsewhere (an upward-moving stock price will be essential for this).
  7. Work more closely with hardware manufacturers that use Microsoft software to improve the integration of hardware and software.
  8. Stop taking the inside out approach where you tell the world how great your products are. Have delighted customers do it for you, but scrap those "Windows 7 was my idea" commercials that too many find hard to believe.
  9. Implement a better Marketing Information System to more quickly react to competitor moves and marketplace changes.
What do you think Microsoft and Ballmer should do to turn around their "stuck in neutral image" and languishing stock price?


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Ira Kalb is president of Kalb & Associates, an international consulting and training firm, and professor of marketing at the Marshall School of Business at University of Southern California (USC). Follow him on Twitter.
image courtesy of flickr user, eoin

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