Why Steve Ballmer will resign from Microsoft in 2010

Microsoft's value has been falling because it is obvious that software commoditization threatens their revenues. Windows and Office isn't packed with growth potential. No amount of "vision" or "leadership" will defy fate.<p>Many products launched during Ballmer's tenure have been successful. More importantly, Microsoft has been able to move away from their core business.<p>* Sharepoint (A billion dollar product and a multi-billion dollar industry.)<p>* Axapta (purchased)<p>* Great Plains (purchased)<p>* Solomon (purchased)<p>* Xbox/Xbox 360<p>* BizTalk<p>* .NET (An application stack to compete with J2EE, unthinkable in 1999.)<p>----<p>During the same period, a number of Microsoft products went from minor items to major contenders in their industries.<p>* MS SQL was a Sybase clone in 1999; in 2009 it's a price/performance champ.<p>* Exchange was only used in "Microsoft shops" in 1999. Today it's the de facto standard.

Ballmer's not exactly a visionary:<p>In a post from June [<a href="http://thenextweb.com/2009/06/02/web-death-google" rel="nofollow">http://thenextweb.com/2009/06/02/web-death-google</a>] Boris relates a famous story about a meeting between Yahoo and Microsoft which took place when Yahoo was still a small start-up:<p>"Yahoo was growing at neck-breaking speed and David Filo and Jerry Yang were invited to Redmond to talk about working together.<p>"The meeting turned into a disappointment when Steve Ballmer joined the conversation and gave his opinion on the future of search engines. According to Ballmer Search Engines were a temporary solution to a temporary problem. Ballmer claimed that 'within a few years there will only be a handful of websites left. People will use their Favorites to navigate to those destination sites and nobody will need a Search engine except for a few students and professors.'"<p>Oops.

This is a situation where numbers can mislead. Microsoft may very well be down 53% since Ballmer took over in January 2000 but do they mention that the Nasdaq, a tech industry bell weather, is down 50% overall for that same time period?<p>(ref: <a href="http://finance.yahoo.com/q/hp?s=%5EIXIC&#38;a=00&#38;b=1&#38;c=2000&#38;d=09&#38;e=6&#38;f=2009&#38;g=d&#38;z=66&#38;y=2442" rel="nofollow">http://finance.yahoo.com/q/hp?s=%5EIXIC&#38;a=00&#38;b=1&#38...</a>)

My biggest problem with Ballmer is that he seems defined by what he hates as opposed to what he loves.<p>Also, his tendency to enter markets for no other reason then to have a product in every market is painful. The Zune is a great example. What the heck did it bring to Microsoft?

Dismissing the tripling of Microsoft's net income just because PC sales almost tripled as well seems a bit, for want of a better word, simplistic.

If Microsoft were smart, they'd use the free cash flow that they throw off to outright buy businesses in areas outside of tech that are run by really bright people. Imagine Microsoft going conglomerate. With the right capital allocation they could be an awesome company.<p>Unfortunately, they probably lack such visionary ideas and will end up throwing good money after bad while their FCF gradually declines as they're made irrelevant. A slow and sad death.<p>Look at Henry Singleton as a bright leader of a tech company who allocated capital well enough to grow shareholder value by expanding into non-tech areas like insurance.

2 ways to have $1 billion:<p>1. Start with a game changing idea in a rapidly evolving market. Assemble a great team. Execute flawlessly. Take advantage of every opportunity. Minimize mistakes. Get a little lucky.<p>2. Be Steve Ballmer and start out with $2 billion.

It sounds like Yahoo was still in its infancy. Just to play Devil's Advocate, could Ballmer have talked down the role of search engines to get the Jerry et al. to concede Yahoo or its technology at a cheaper price?

My personal reasons why he will resign or be forced out:<p>He has significantly underperformed compared to the market.<p>Stephen Sinofsky has shown how valuable he is to the company during the Win7 reorg, and will be elevated to CEO by popular demand.

Comparisons of stock prices circa 1999 to stock prices 2009 are pretty ridiculous.