Is Steve Ballmer the Sole Reason for Microsoft's Decline?

On Thursday Microsoft announced its quarterly results. It missed expectations by 2 cents per share. To those who don't follow the stock market closely this seems like nothing, but there has been a game played on Wall Street for years called "managing expectations". In this game the company always passed information to analysts in such a way as to ensure that when the actual numbers came in they were above what the analysts predicted. Consistently. Microsoft, during the boom, was the acknowledged master--if not the inventor--of this game, and its stock repeatedly shot up as a result. For Microsoft to miss expectations, knowing full well that this is the game they are playing, was completely catastrophic. For the shareholders that is, the widows and orphans. $32 billion dollars in shareholder value evaporated yesterday, never to be seen again. The CEO will undoubtedly get the usual golden parachute. When they finally get around to canning him. Don't hold your breath.

There was also the small matter of the $2.4 billion that was "missing", or as one analyst said, "the numbers didn't add up". Evidently Microsoft elected to hide this money, money that it plans to use as a war chest to attack Google, within the profitable Windows division's budget. Why does Microsoft always have the passion to "kill" its competitors (Steve Ballmer's term) rather than to build great products? In principle, I favor the idea that Microsoft is going to use the money to build greatness; in practice the market believes that Microsoft will spend its way into further losses like the X-Box and stockholders are voting with their feet. Ominously, Friday's stupendous drop in shareholder value was accomplished with the highest one-day volume recorded in years. Old stockmarket hands will always tell you to "follow the volume". Rising volume on a declining price is the worst thing that can happen. Stockholders beware.

You might think that this would cause a shakeup within Microsoft, as Steve Ballmer and his team have just lost more money in one day for stockholders than Enron managed during its entire crooked fiasco. A shakeup, one might think, should be the least he should expect. Would jailtime be too good for him? But no, according to the Mini-Msft blog, it's business as usual, and Steve's only comment was "The reaction to yesterday’s news is a lesson that the entire leadership team at Microsoft will learn from." I'm sure he's learning it real hard. The employees meanwhile are dispirited and discouraged. Read the blog. The investors are probably right to jump ship.

So, after the ongoing Vista saga, with its continually missed shipping dates, its several rewrites, and its missing features, and with the X-Box continuing to lose $100 per box sold, isn't it time to ask just exactly what it is that Steve Ballmer has added to Microsoft?

People assert that Microsoft has become as toothless and hidebound as IBM. I fear something considerably worse. Has Microsoft under Steve Ballmer become GM?