Microsoft Running Out of Excuses

I’m wondering what excuses Microsoft will invent to explain away the fact that Apple has now surpassed Microsoft in terms of market value. The unofficial version from Microsoft, delivered over the past few years in off-the-record conversations, has basically boiled down to the notion that investors are fickle creatures who are so swept up in Apple’s hype and hysteria that they fail to see how great Microsoft still is. [NEWSWEEK has a content-sharing partnership with, a joint venture of Microsoft and NBC Universal.]

But honestly, when you look at charts like this one from The New York Times you do start to wonder how this once powerful company could have fallen so far so fast.

And it is getting harder and harder for Microsoft to keep insisting that its CEO, Steve Ballmer, is doing a great job.

Last year I wrote a column for NEWSWEEK explaining how poorly Microsoft has performed in the 10 years since Ballmer took over.

I followed up soon after that with an essay for NEWSWEEK predicting that Ballmer would be pushed out of the company in 2010.

All I did was point out the obvious. Microsoft stock has been a dud under Ballmer. The Vista operating system was a disaster. Microsoft missed pretty much every big, new important market for the past decade: Internet search (Google), digital music (Apple), social networking (Facebook). Microsoft once had a lead in mobile-phone software, and now has become an also-ran.

My prediction prompted a defense of Ballmer from Microsoft’s hometown paper, the Seattle Post-Intelligencer, which pointed out all the good things Ballmer had accomplished in his tenure as CEO.

The bigger effect was that the guy who runs PR at Microsoft called my prediction a “hatchet job,” and he basically hasn’t talked to me since it ran. This year when Microsoft had its annual super-special two-day, off-the-record event for journalists, my invitation got lost in the mail. Wah!

But seriously, what can Microsoft say now? For years they’ve been blaming the market, saying, in essence, that investors are so stupid that they can’t see how great Microsoft’s business has been doing under Ballmer.

I even once had a Microsoft spokesman defend Ballmer by saying that the big decline in Microsoft’s share price occurred in the first few months of 2000, right after Ballmer took over, and was caused by the economy, not by anything Ballmer did.

“If Steve had become CEO just a few months later, the stock wouldn’t be down, it would be flat,” was the line.

Ah, I see. The stock would be flat! Now that’s a record to be proud of.

Perhaps recognizing that something needs to be done, this week Microsoft announced that J Allard and Robbie Bach—the two “visionary”-type guys who were running the division that develops mobile phones, videogames, and other consumer-oriented products—had left the company.

Maybe I’m a cynic, but this looks a lot like the kind of thing a CEO does when he knows he’s in trouble and needs to save his own skin. By booting out some direct reports, Ballmer pushes the blame onto them, and he can portray himself to his board as a dynamic leader who makes the tough decisions needed to get things back on track.

Basically, Ballmer has bought himself some time. But it’s hard to imagine his board and his big investors will just sit around waiting while the company slides sideways into the future.