Despite layoffs, Ballmer is doing a great job
(Credit:
Microsoft)
Microsoft announced 3,000 layoffs earlier this week. The layoffs inch Microsoft closer to its goal of cutting 5,000 employees from its payroll. The company claims the layoffs are a part of broader strategy that aims at making the software giant more focused on others areas of its operation.
Whatever the logic, there's one person at the company that, over the past nine years, has performed quite admirably: Microsoft CEO Steve Ballmer.
I'll be the first to admit that Ballmer can be eccentric. He's often criticized for his outspokenness and willingness to mix it up with tech royalty (I'm looking at you, Apple). He has a tendency to open his mouth when he shouldn't. And he has embarrassed himself on a few occasions.
But when we look at his performance as a CEO from a financial perspective, I don't think even the most ardent Microsoft hater can say that he has done a poor job. Don't get me wrong, I do believe that these layoffs are a mark on his record, but when taken as a whole, Ballmer has proven to be one of the tech industry's most competent CEOs.
When Ballmer became the CEO of Microsoft in 2000, Bill Gates said it would be good for his company. He explained to reporters that Ballmer would be charged with the task of managing the huge corporation, while Gates would focus on the future of Microsoft's platforms. It worked.
Incredible growth
When Ballmer became the CEO, Microsoft had $52 billion in total assets. During that year, his company enjoyed a $9.4 billion profit.
According to its 2008 annual report, Microsoft now has almost $73 billion in assets and no debt. During its 2008 fiscal year, the software giant generated a profit of approximately $18 billion--almost double what the company made when Ballmer took over nine years ago.
But it gets better. Microsoft lost $158 million in cash the year Ballmer became CEO. Last year, the company added $4.2 billion to its coffers. That's more than enough for it to maintain its position of power in the industry and if need be, invest in companies or technologies to solidify its standing going forward.
Management effectiveness
Management effectiveness--a measure of how well CEOs and their managers are using assets, equity, and investments to run a public company--is extremely high at Microsoft. The company's average return on assets (a measurement of how efficiently management is using its assets to generate earnings) is 17.26 percent over the past five years. That figure is almost double the rest of the companies in the industry.
Microsoft's average return on equity (profit a company generates with the shareholders' invested capital) for the past five years is 26.46 percent. That figure is 10 percentage points higher than the rest of the industry.
Microsoft's return on investment--how well it's able to profit off investments it has made--is a whopping 23.53 percent. Compare that to the industry-wide figure of 15.26 percent and it once again becomes clear that from a management perspective, Microsoft is second to none.
The biggest issue (if you can call it that) with Microsoft's financial performance is that its stock price hardly moves. Since Ballmer became the company's CEO, the share price has hovered at about $20 to $30. Those looking to make a quick profit won't like that. But if you're looking for a solid, stable stock that will pay dividends, Microsoft is for you.
In fact, Microsoft's current quarterly dividends are at $0.11 per share. When it first started issuing regular dividends in 2004, the company was offering $0.08 per share. Don't let that slight increase fool you. Issuing dividends is typically a sign of a healthy company. And considering those dividends have only gone up, it's even more evidence of Microsoft's strong financial health.
The economy
I should note that the economy has hit Microsoft hard. The company's quarterly profit slipped by a little more than $1 billion year-over-year, according to its latest filing. But we can't look at that decline in a vacuum. There are are countless organizations both in the tech field and out that are incurring huge losses since the recession hit. To fault Ballmer for making only $3 billion last quarter instead of $4.4 billion is a little silly.
I could go on, but I think you get the point: in every financial metric, Microsoft has been gaining financial strength since Ballmer became the CEO. You can say what you want about who Ballmer might be as a person, but don't let the layoffs fool you. As a CEO, an executive charged with managing a company and maximizing shareholder value, he's extremely capable.
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Don Reisinger is a technology columnist who has written about everything from HDTVs to computers to Flowbee Haircut Systems. Don is a member of the CNET Blog Network, and posts at The Digital Home. He is not an employee of CNET. Disclosure.
[CNET editor's note: Objectionable material deleted]
While I dislike his style, MS has done quite well under his leadership.
And seeing how the only thing you can do is call him names while MS has reaped huge rewards, it kind of proves the point. I'm quite sure you could not say the same for yourself.
They do need to send him to charm school or something, though. Or just get him to be quiet more often.
This part I can agree with.
The rest? Not so much. On the face of it, Microsoft appears to be doing well. Behind the scenes, they have lost (and are still losing) marketshare, their initiatives outside of XBox are floundering (and even XBox is just recently and barely eking out a profit, 10 years after it was launched), they keep casting themselves into areas where it is almost a setup for failure, and he got to preside over, well, Vista....
I suspect that Ballmer's performance over the first 6 years were largely coasting on Gates' coattails and the booming dot-recovery. Now is the time where leadership gets tested, and he is doing far worse than the oft-absent Jobs, and not really doing much to insure his company's future - after all, Office and Windows are still the big two moneymakers, just like in 2000. Everything else combined is not enough growth-wise to keep the company afloat.
Windows 7 and WinMo 7 might be a change, but this is years and years after when the change should have come. Maximizing shareholder value is a duty that spans decades, and if his slowness to move these last years cost MS money in the long run (as I feel they will), then he will be remembered as someone who did NOT do his job right.
----Nintendo Wii just reach the 50 million mark so how the xBox going to sell more. Last time I checked, it was like 28 million xBox's sold. I am pro Microsoft but do not inflate numbers. It makes you look bad.
24 million Xboxes + 27.96 million Xbox 360s = 52 million sales. The big black ugly things are part of the Xbox division too.
I'm not pro-Microsoft (definitely not pro-Ballmer) but I think they did a good job with the Xbox. And unlike CDub, I back up my opinions with figures.
Although I wouldn't lump the original Xbox sales in with the Xbox 360 sales, because then you could say Nintendo has sold probably over a billion consoles between the NES, SNES, N64, GameCube, and Wii (and also remember the Game Boy and DS).
I think if anything the Xbox is their real bright spot right now since gamers still seem to be buying stuff.
In this case, count PS2 + PS3 sales from Sony, and Wii + Gamecube + N64 sales from Nintendo (all over the same rough time period as the XBoxes - 2000 - present)...
...suddenly Microsoft has cause for embarrassment.
Here's how I got there:
Sony: PS2 sales are ~ 122m over the past 400 weeks (can't get the whole 10 years in @ vgchartz for some odd reason), PS3 sales are at ~22m since its launch... comes to 144m Playstation units sold since ~2000 or so. (very rough guess, mind)
Microsoft: XBox 1st Gen sold around 24m, XBox 360 sold around 30m... comes to 54m.
Nintendo: Wii sold around ~50m, Gamecube sold around 21.5m, and the old N64 managed to eke out 5.3m - comes to 76.9m units sold.
Source. http://vgchartz.com
Sorry, but Microsoft comes in dead last when you compare various gens of console (not hand-held portables)
As for his performance as a CEO? Well maximizing shareholder profits is one thing, making customers happy is another. There's got to be a balance and IMHO Microsoft needs more balance.
The fact that the stock price of MS has been depressed and stagnant for well over 5 years, especially in light of all of the rosy numbers presented by the columnist, is a huge black mark on the record of Ballmer. He's got a company with numbers like they have and he can't promote the stock price? Come on! That is pure incompetency on that front and it hurts and mortgages MS's future.
This weakness was highlighted when MS tried to take over Yahoo and it was apparent that for a large acquisition, MS would have to borrow money to make it happen. This whole action undermined Ballmer's position as well as MS's perceived market value. It also exposed MS's sensitivity to leverage, since a lot of analysts realized that if MS ever has to borrow money, its profitability will be seriously impaired.
Unless Ballmer can get the stock price up (and raising the dividends was a fruitless effort to make this happen, btw), he will continue to be seen as a CEO who had everything in a company and could not convince the market to buy his stock.
All anyone needs to know about Ballmer can be seen in this video (his reaction to the iPhone announcement):
http://www.youtube.com/watch?v=C5oGaZIKYvo
The guy is a ******, pure and simple. Microsoft has grown in spite of Ballmer, not because of him.
To me, the term "salesman" (as in, "Ballmer is the quintessential used-car salesman") is a much worse insult, but for some reason it's not censored. Go figure.
He has been a disaster. You can love Microsoft for it's products, but you are crazy if you love it for it's performance. There is no good recent performance.
Indeed, Microsoft's stock has wallowed over the past five years (I'm a shareholder), just tracking the S&P 500; heck, Gates lost his title as Richest Man In The World. That's not the expectation that MSFT shareholders have for their formerly high-flying stock.
Microsoft remains a formidable force in high-tech riding on the strength of its legacy-focused technologies (Windows, Office), not because of Ballmer's aptitude.
The other thing is Microsoft still balances on two pillars. Office and Windows. The Zune was a joke, their hardware division has always been a joke. Their kinda sorta getting their cloud concept together. All previous attempts at consumer net services have been total jokes, and I don't even want to talk about search. They make those profits because they can leverage their monopoly status. That status is starting to crack around the edges as well. Sales aren't a good indicator because of the economy, and someone staying with an older version of windows is still a likely windows upgrade when things pick up. Market share still represents real loss even when the economy is bad, because it means someone was still motivated to change with little resources. Microsoft is loosing windows market share slowly, but steadily. Between slightly increased Linux market share, slightly more than slightly increased Mac market share, and Windows XP selling for a fraction of what MS has ever gotten for OS licenses fees before they desperately need another pillar to support their company on. Xbox may be rocking, but it's not going to come within a thousand miles of Windows revenue. Especially if their next gen of consoles has the failure rate of their current gen.
Somethings got to give, or Ballmer is going to be known as the CEO that milked the company for all it was worth in the short term and didn't have the vision for the long haul.
I didn't know that. MS optical mouse was the first really useable optical mouse on the market. Just don't tell me about those horrible contraptions Sun was shipping; those that required a mirror pad with square grid; those were frankenmice.
Ballmer said, when recalling his promotion to CEO: "I restructured the company to give more decision making power to executives, and elevated people with general management experience into positions previously held by technology focused executives." That says all
Steve Ballmer is an idiot in every sense of the word. Microsofts revenue stream is on automatic from corporations locked into the Microsoft software. The company have relatively little value. As of 11:50 am on Friday 5/8, Microsofts stock is at $20.24. The best thing that could happen is the board of directors fire this guy and put someone in that has a reals vision.
- by sargess25 May 8, 2009 10:37 AM PDT
- this is how Steve B. should be best remembered:
- Like this Reply to this comment
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(34 Comments)http://www.youtube.com/watch?v=tGvHNNOLnCk&feature=related
lol classic