Windows 8 stains Ballmer's legacy

Over-optimistic predictions of Windows 8's success led to CEO's downfall

Microsoft CEO Steve Ballmer survived the flop that was Windows Vista, but he wasn't able to do the same after the disappointment of Windows 8.

"Last year, Ballmer said Windows 8 would be his defining moment," said Patrick Moorhead of Moor Insights & Strategy. "Now, this has caught up with him. Windows 8 is the primary reason why he's retiring, specifically Windows RT. There's been a lack of progress on Windows Phone, but the forcing function was clearly the write-down of the Surface RT."

From Moorhead's perspective, it was that write-down, a $900 million charge against earnings to account for excess inventory of the company's Surface RT tablet, that precipitated Ballmer's retirement, in large part because the overstock was a blatant indicator of the magnitude of his misjudgment about how customers would react to the newest Windows.

And Windows 8 may be the thing that people remember about Ballmer, said another analyst, whether that's fair or not.

"Any evaluation of Ballmer can't start in 2007 or 2008," argued David Cearley of Gartner Friday. "His legacy is the totality of Microsoft. But inevitably, a CEO is judged by what the company looked like when he left. [And] Microsoft has struggled to reinvent itself."

The problems Ballmer recently faced were greater than just the Surface tablet or the tile-based, touch-first Windows RT operating system that powers it. Windows 8's failure to spark a surge in PC sales also played a big part.

Ballmer weathered Windows Vista, the delayed follow-on to Windows XP that was widely derided as a mess. But it wasn't Windows 8's poor numbers, by some metrics even poorer than Vista's, that brought down Ballmer: It was his unrealistic predictions of its success that did him in.

Ballmer, known as an enthusiastic promoter of Microsoft and an overly-optimistic salesman by trade and inclination, was, to use a phrase he coined multiple times in his career, "all in" on Windows 8.

"I think with the addition of Windows 8, with these incredible new form factors that are tablets and PCs, I think we're going to see a lot of growth and vitality and explosion in the PC market," said Ballmer last October at the company's BUILD developers conference. "I guarantee you, this will be the best opportunity software developers will see as hundreds of millions of new machines go out with the potential of billions and billions of new applications being sold."

Ballmer made those predictions even though PC shipments had fallen year-over-year in the quarter before. They then continued to contract in the next four quarters and show no short-term sign of recovery. According to estimates by researchers at IDC and Gartner, PC shipments will decline in 2013 at more than double the rate of 2012.

The dismal results so far for Windows 8 and Windows RT -- together, they accounted for 5.4% of all operating systems used to go online in July -- have put a spotlight on Microsoft's inability to capitalize on the quick-growing tablet market, a fault Windows 8 was supposed to quickly correct.

"It's clear that the problems of Windows 8, Windows RT were not addressed in a short enough timeframe," said Moorhead, referring to Microsoft waiting until May to admit that the first iteration had been a miss and it would release the Windows 8.1 course correction this year. "The result was a PC market that didn't get back to Windows 7 levels."

Even the recast of Windows with Windows 8.1, while generally applauded by analysts, may be too little too late to repair the damage. Lenovo, the Chinese PC maker that last quarter was the world's largest, recently struck a deal with an American company, SweetLabs, to bundle the latter's Start button and Start menu replacements on all its computers, essentially a vote of no confidence in Windows 8.1's marketability without third-party tweaks.

It didn't help Ballmer's cause that the company for the first time competed with its traditional computer-making partners by launching its own line of hardware, the Surface RT last October and the Surface Pro this past February. "That infuriated their biggest customers," said Moorhead. "The OEMs have all divorced themselves from Windows RT."

But in July, when Ballmer unveiled a company-wide reorganization, he seemed to put even more emphasis on Microsoft's plans to compete with its OEMs.

Ballmer doesn't see Windows 8 the way his critics do. In the few interviews Ballmer granted Friday, it was the earlier Vista he rated as his greatest disappointment, not the new Windows 8. "I would say probably the thing I regret most is the, what shall I call it, the loopedy-loo that we did that was sort of Longhorn to Vista," Ballmer told long-time Microsoft watcher Mary Jo Foley of ZDNet.

But Ballmer would not be the first casualty of a botched operating system at Microsoft.

Steven Sinofsky, a polarizing executive who ran the Windows unit during development of both Windows 7 and Windows 8, was ousted from the company last November just weeks after the launch of the latter. Some analysts made a direct connection between Sinofsky's abrupt departure and a realization within the company that the Windows 8 strategy had been misguided.

In 2006, Jim Allchin, a 17-year veteran who had been responsible for Windows Vista, announced his retirement the day the operating system shipped to enterprises. Other Vista hands, including the head of Windows product marketing and lead of the Windows Core group, were also shown the door.

Ballmer's successes and failures extended far beyond Windows 8, as even critics have acknowledged. Microsoft's revenue tripled in his 13 years at the helm and its profit more than doubled. He oversaw the creation of new $1 billion businesses within the company, like Azure; the creation of the Xbox and the formation of a powerful entertainment unit; and the debut of Office 365, the first major software-as-a-service (SaaS) from the company.

"That's what a lot of people miss. Microsoft will remain strong and remain in place," said Cearley.

"You have to say what Ballmer was good at," said Moorhead. "He was good at diversifying a company from PC-centric to an enterprise software company. Through organic growth and acquisition, he did a good job insulating the company from the failures of Windows. He has to be commended for that."

But Windows 8? That may be what people remember about the Ballmer era.

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, on Google+ or subscribe to Gregg's RSS feed. His email address is gkeizer@computerworld.com.

See more by Gregg Keizer on Computerworld.com.

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This story, "Windows 8 stains Ballmer's legacy" was originally published by Computerworld.

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