After 33 years at Microsoft, Steve Ballmer announced today that he plans to retire from his position as CEO within the next 12 months. The surprise exit comes 13 years after Ballmer took over from Bill Gates as Microsoft's CEO in January 2000. He may have tripled revenues and doubled profits during his reign, but Ballmer is leaving to make way for a new devices and services strategy as the company continues to battle for market share in smartphones and tablets. Ballmer won't be around to see if Microsoft can finally crack the devices and hardware it's promising, so who will be?
The timing of the departure is odd. After announcing a massive company-wide reorganization last month, Ballmer outlined a "One Microsoft" approach and shifted leadership within the company to focus on devices, software, and services. He's tried to crack hardware before, with the Kin, Zune and Surface, but the whole company is now betting on the promise that Microsoft can finally deliver unified software and devices. Ballmer is handing off this vision and risky bet to a new CEO. Instead of departing midway through the process, Ballmer is signaling a true changing of the guard at Microsoft by stepping aside to let someone else take the reins. Microsoft hasn't named a new CEO yet, but it's clear there's no immediate and obvious successor internally. If there were, Microsoft would have named that person today.
Internal speculation focused on Tony Bates and Satya Nadella
We're told that internal speculation is starting to center around Tony Bates, who leads the business development and evangelism group, and Satya Nadella, who runs the new cloud and enterprise engineering group. Bates joined Microsoft after it acquired Skype for $8.5 billion, and Nadella has worked in various divisions at Microsoft. Both have unique skills that span across different businesses. Bates has worked at Cisco previously as the GM of the company's Enterprise, Commercial and Small Business Development group. Along with his experience as CEO at Skype, a consumer-focused service, he appears to have the skills to balance Microsoft's continued spit between consumer and enterprise. Nadella's vast experience at Microsoft is key, but both choices look like long shots. Without an immediate name, it appears as though Microsoft is looking elsewhere.
An external CEO appears to be the way forward for Microsoft and its grand new vision. Although the company typically promotes from within, without an obvious Ballmer successor it looks like the board wants to see a fresh approach to running the giant company. It's a unique job and a daunting prospect for anyone external looking to apply. With over 90,000 employees and businesses that touch nearly every area of technology, Microsoft's next CEO will need a lot of outside experience and a familiarity with its business.
An external CEO looks likely
One potential external candidate is Netflix CEO Reed Hastings. After serving on Microsoft’s board for five years, Hastings announced his intention not to seek re-election back in October. "Reed has been a terrific board member, and his insights and experience have really helped guide us through a critical period of transformation for both Microsoft and the industry," said Ballmer at the time, full of praise for Hastings. The respect is mutual, as Hastings has praised Microsoft's successes and the "engaging" environment of board meetings with Bill Gates and Steve Ballmer. With a background in software and engineering, and an entrepreneurial spirit, Hastings helped co-found Netflix. His mix of business, consumer, and engineering experience makes him an obvious target. His curiously timed departure from the Microsoft board — which he said was to focus on Netflix, education work, and a way to reduce the number of boards he serves on — fueled speculation over a Netflix buyout, but perhaps it's a little more.
There's also the possibility of an Elop return. After joining Nokia as CEO in 2010, Stephen Elop has been slowly reorganizing the Finnish phone maker into a smaller company focused on Windows Phone devices. He has a background in leadership, and has previously worked at Juniper Networks, Adobe, and even at Microsoft, leading the company's business division for just over two years. After alleged talks to purchase Nokia's mobile hardware business earlier this year, an Elop return looks less likely. But once again, he has the experience Microsoft might be looking for.
No obvious successor right now
For now, there's no obvious successor that outsiders are betting on. Ballmer will retire within 12 months, but the timing of the announcement suggests Microsoft will look to replace him this year rather than next. Unlike the Gates-to-Ballmer switch, when Microsoft names its new CEO it's not likely that there will be a training or transition period. The new CEO will be dropped in, and Ballmer will retire. It’s possible that Microsoft might seek to name a CEO ahead of its upcoming earnings. Microsoft took a $900 million hit on its Surface RT in its last quarterly earnings, hindering its promise of devices and services, and there are surely challenging quarters to come that will further confirm the decline of the traditional PC. If Microsoft is anticipating a bad quarter, then a hunt for a new CEO before earnings could help ease stock concerns. A number of investors have called for Ballmer's resignation over the years, and the company's stock rocketed over 6 percent in trading today.
The hunt for the next CEO won't be easy, though. With no obvious choice and the challenge of transformation, Microsoft faces uncertain times if it wants to continue focusing directly on consumer technologies. It’s the next few years, and a new CEO, that will decide if Microsoft can use its experience in software to match Apple on hardware and Google on consumer services. If it can’t, then it faces an enterprise future that looks a lot like IBM's — selling software and services to businesses instead of directly to consumers.