Must-know: Why is Microsoft’s search for a new CEO taking so long?
Searching for a new CEO
Six months after CEO Steve Ballmer announced his intention to retire, Microsoft has yet to name a suitable successor for the post. Under Ballmer, who became the CEO in 2000, Microsoft more than tripled its revenue and doubled its profits. But the company has also struggled in recent years to compete with Google and Apple in the mobile space, and new product offerings such as the Windows Phone and Surface tablets have failed to gain popularity among consumers. Ballmer was also criticized for not driving faster innovation at Microsoft and missing out on many market opportunities in the sector. Microsoft came in late on the tablet scene, as customers were already loyal to other brands. In July, Microsoft’s share price fell 11%—the biggest decline in four years—after the company reported disappointing results on the back of weak demand for its Windows system, and a $900 million write-down on unsold tablets.
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According to recent media reports, Microsoft has narrowed its list of potential CEO candidates, which includes the company’s executive vice president, Tony Bates, and cloud-computing chief Satya Nadella. The other names include Ericsson AB chief executive Hans Vestberg and Ford’s CEO, Alan Mulally, who recently ended the speculations by saying he had no plans to leave Ford. An unconfirmed Bloomberg report also noted that candidates are concerned about the independence of the role, as Ballmer and Microsoft’s co-founder Bill Gates are still influential with their presence on the company’s board. An unconfirmed report in Reuters last year stated that some Microsoft investors were lobbying the board for Bill Gates to step down as chairman of the software company. The latest news reports indicated that Steve Ballmer is to resign from the board once the new CEO is appointed.
Analysts have widely speculated that activist shareholder ValueAct Capital Management is behind the shakeup at the company last year. In April 2013, Jeffrey Ubben’s hedge fund disclosed a $2 billion position in Microsoft, amounting to 0.8% of the company’s shares. Days after Ballmer made his announcement in August, ValueAct president Mason Morfit was offered a board seat by Microsoft in a cooperation agreement signed between the software company and ValueAct. Reports claimed that as part of the bargain, ValueAct had agreed not to engage in a proxy battle or criticize the company or its executives.