While we were surprised at the timing (or at least the announcement), it’s pretty clear that Microsoft knew Steve Ballmer was going to be retiring soon. Not necessarily in the next 12 months, as was announced, but certainly within the next three years, after his youngest child began college.  Because he said that several times.

But, there is no replacement candidate. Which led at least two “pundits” to declare that Microsoft pushed Ballmer out. I don’t buy that scenario at all. Because if they wanted to push him out- he’d be gone already.

Anyone looking at Microsoft and Steve Ballmer over the past dozen years or so recognizes that Steve has tremendous enthusiasm. One that might have caused some of the stronger potential candidates to leave- and because the wait to succeed him was taking too long, besides. And, Steve, like his predecessor (and prime Microsoft founder [Steve was among those founding employees]), Bill Gates, has the ability to maneuver with five balls twirling in the air.

When I heard about the Microsoft reorganization in July, I wondered why Steve was doing it; my initial hypothesis was that he was trying to amass more power for himself. After all, Microsoft has always had its various business groups vying against one another.  It meant that not all the programs meshed perfectly (Windows 7 and Office, for example). Which was vastly different from when Windows 95 first came out.  But, that (W95) was a radical change from the DOS operating system; Microsoft needed everything to mesh perfectly to induce folks to switch to their new graphical interface.  But, once that change was completed (post ’95’ introduction’), the Office and Platform (operating system) teams no longer maintained close coordination. (One could say their decision to not work together was a means to keep the regulators at bay, given the massive market share Microsoft maintained in the marketplace.)

Now, we realize that the July reorganization was to bring some coherence to management. Bill Gates had developed the Microsoft culture, one which Steve Ballmer maintained as his successor.  They were steeped in this culture and could keep  the company moving forward.

Now, many know that Microsoft has the best tablet out there.  But, it does not have a clue what to do with it.    Microsoft has the best office platform out there- but does not know where it needs to bring that software.  Microsoft has the best server platform, with the same underlying problem.

Microsoft is going to have to bring in some great leader/manager- one who will need all their horses pulling on the same team to insure that- when the direction is changed, and you can bet it will be- there are not twelve different routes taken. Divisional warfare had to go by the wayside.  So, that to Ballmer coalescing the groups and their control in his July reorganization, the new leader has a shot at reaching great heights, harnessing the knowledge and power of the +100,000 Microsoft employees.

It’s rumored that Steve has been examining internal and external candidates over the last 1.5- 2 y. It is pretty clear that the leader will have to understand consumers and the new technologies that appeal to them (i.e., mobile apps) and a track record of being able to transform company cultures.

The new CEO will have to choose whether Microsoft will be a device or services company. If devices, it will have to build on the Surface, the XBox, newly acquired Nokia telephones,  and a slew of new devices to generate revenue. If services, then ubiquity across platforms is a critical consideration; Microsoft will have to build upon its massive presence in applications. Or, will the new CEO try to do more of the same- with devices and services both foremost for Microsoft?

It’s not going to be easy. After all, besides the large employee base, the firm generates about $ 75 billion in revenue, with some $ 17 billion in profits. Over the past dozen years or so, it has acquired some 150 companies- with most of them involving small purchase prices for the firm. (But, Yammer cost $ 1.2 billion, Skype scooped up $ 8.5 billion and aQuantive involved $ 6 billion, and now Nokia for some $ 7.2 billion- so size was not really a detriment.) Microsoft still has some $ 75 billion in cash and short-term investments, so acquisitions are not necessarily off the table, still.

But, it’s my supposition that additional acquisitions will wait. Until the culture is redefined and redeployed among the staff. And, each change made will be verified against its culture.

And, picking the right CEO?  Is that not what seems to be the change that was big at Yahoo?  It could be the ex-Microsoft executive at Nokia (Stephen Elop).  But, the truth is that Microsoft needs a great product guy/gal to insure the product vision builds on the base that exists…

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