[1]New York: When Steve Ballmer took over as CEO in January 2000, Microsoft was the titan of tech and the world’s most valuable company. My, how things have changed.
In the 13 years since Bill Gates handed over the CEO spot, the technology landscape has seen seismic shifts. The Internet bubble popped, erasing paper fortunes built on dot.com companies.
Apple’s iPods, iPhones and iPads became ubiquitous. Google became a verb. And Facebook turned social networking into something you do by yourself, instead of surrounded by people at happy hour. The years have been less kind to Microsoft. “Complacency and a lack of innovation caught up to them,” said Yun Kim, an analyst at Janney Capital Markets. “It’s their inability to stay relevant beyond the PC.”
When Ballmer became CEO, Microsoft had a market value of $604 billion. That heft meant it accounted for nearly five percent of the Standard & Poor’s 500 index, according to Howard Silverblatt, an analyst at S&P Dow Jones Indices.
Now, Microsoft’s market value is $269 billion, less than half of its value when Ballmer came to power. It makes up less than two per cent of the S&P 500. When Microsoft announced on Friday that Ballmer would step down within the next year, the company’s shares shot up as much as nine per cent shortly after the markets opened. They came within two dollars of their 52-week high.
Microsoft rose $2.36, or seven per cent, to close at $34.75.
Under Gates, Microsoft dominated the software industry throughout the 1990s, and the company’s soaring stock had far-reaching effects. Newly minted “Microsoft millionaires” left to launch tech companies, venture-capital firms and charities. Paul Allen, a boyhood buddy of Gates’ who co-founded the company, bought the Seattle Seahawks and the Portland Trailblazers, and opened a pop-culture museum. Gates used his billions to launch the Bill & Melinda Gates Foundation, which has influenced national and international policy on health and education.
But under Ballmer, Microsoft’s stock has been a dud, losing 44 per cent during his tenure. Still, dividend payments have compensated for some of the slump. An investment of $1,000 in January 2000 would now be worth just $767 after reinvesting dividends, according to data from FactSet. The same investment in Apple would be worth $20,120.
From the beginning, Ballmer faced some daunting challenges. Months after he landed his new job, the Internet bubble burst. By the end of the year, Microsoft had slipped from being the most valuable company in the S&P 500 to seventh place. Microsoft’s decline came not simply because it failed to keep up with technology, but because its technology was tied to the personal computer. And smartphones and tablet computers have pushed the PC aside.
When Microsoft tried to launch innovative products, its timing was off, said Ted Schadler, an industry analyst at Forrester. It created software for smartphones and tablet computers years ago that failed to catch on.
That’s not to say Microsoft has run out of options. Its software, including Windows and Office, is still popular in businesses large and small. About 70 per cent of business email is still sent on Microsoft software, Schadler says. Microsoft Enterprise, which helps big companies operate databases, is popular, too. And the company’s Xbox game consul has been a hit with consumers.
Next: Here’s a look at the ups and downs of Ballmer’s 13-year tenure
Here’s a look at the ups and downs of Ballmer’s 13-year tenure
l 1980: Ballmer joins the company co-founded by Bill Gates and Paul Allen in 1975.l July 21, 1998: Widely seen as the successor to chairman and longtime friend Gates, Ballmer is named president of the software company. He’d previously led Microsoft’s sales and marketing.l Sept. 23, 1999: Ballmer warns that technology stocks are overvalued, including those of his own company, in public remarks that help accelerate a sharp sell-off on Wall Street. He blames a “gold rush” mentality for the stock price increases.l Jan. 13, 2000: Gates promotes Ballmer to CEO of Microsoft while staying on as chairman and chief software architect.l Nov. 15, 2001: MS releases its Xbox video game system, one of the company’s most successful products.l March 26, 2004: At a conference for online advertisers, Ballmer says Microsoft’s biggest mistake was failing to develop its own search engine, which caused it to fall behind rivals Google and Yahoo in the space.l May 4, 2006: Ballmer says MSN Search, Microsoft’s search engine, is gaining steam against rivals, but still trails Google and Yahoo.l November 13, 2006: MS launches the Zune music player, its answer to Apple’s iPod. The company discontinues the Zune five years later, in 2011.l Feb. 1, 2008: MS makes unsolicited offer to buy Yahoo for $44.6 billion. Microsoft withdraws its offer months later due to resistance from Yahoo.l April 12, 2010: MS unveils the Kin phone, an attempt to compete with Apple’s iPhone. The phone was discontinued two months later.l May 10, 2011: MS announces it will buy Internet phone service Skype for $8.5 billion.l Oct. 25, 2012: MS holds a launch event in New York for Windows 8, a major overhaul of its ubiquitous computer operating system.l May 7, 2013: MS says it will retool Windows 8 to address complaints and confusion. Microsoft also discloses that it has sold more than 100 million Windows 8 licenses.l July 11, 2013: Ballmer announces a sweeping restructuring of the company to cope with the quickening pace of technological change and competitive challenges presented by Apple and Google.l July 18, 2013: MS books a $900 million write-down for slashing the price of its Surface RT tablet. Its revenue and earnings come short of Wall Street forecasts in the April-June quarter.l Aug. 23, 2013: MS says Ballmer will retire in the next 12 months after 33 years with the company.
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