The next boss of Microsoft has one big decision to make: press on with retiring chief executive Steve Ballmer’s ambitious plan to transform the software giant into a broad-based devices and services company, or jettison that idea and rally resources around its proven strength in business software.
Ballmer’s grand design - unveiled just six weeks before Friday’s surprise announcement that he would retire within a year - calls for ‘One Microsoft’ to pull together and forge a future based on hardware and cloud-based services.
But poor sales of the new Surface tablet, on top of Microsoft’s years-long failure to make money out of online search or smartphones, have cast doubt on that approach.
For years, investors have called on Microsoft to redirect cash spent on money-losing or peripheral projects to shareholders, while limiting its focus to the vastly profitable Windows, Office and server franchises.
Activist investor ValueAct Capital Management LP, whose recent lobbying of the company may have played a role in Ballmer’s decision to retire earlier than he planned, is thought to favour such an approach.
In the last two years alone, Microsoft has lost almost US$3 billion on its Bing search engine and other Internet projects, not counting a US$6 billion write-off for its failed purchase of online advertising agency aQuantive. It took a US$900 million charge for its poor-selling Surface tablet last quarter.