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August 23, 2013 at 6:24 AM

Microsoft CEO Steve Ballmer to retire within a year [updated]

Microsoft CEO Steve Ballmer (Photo from Microsoft)

Microsoft CEO Steve Ballmer (Photo from Microsoft)

[This post has been updated with an interview with Steve Ballmer and CEO succession committee head John Thompson. The fuller text of the interview is here.

My story on Ballmer’s mixed legacy, running in the print edition of The Seattle Times Aug. 24, 2013, is here.]

Microsoft CEO Steve Ballmer is retiring within the next 12 months, the company announced today.

Ballmer, 57, will retire once a successor has been chosen.

Microsoft’s board has appointed a special committee, chaired by lead independent board member John Thompson, to choose the next CEO. The committee also includes Bill Gates, Microsoft chairman; Chuck Noski, chairman of the audit committee; and Steve Luczo, chairman of the compensation committee. The special committee is working with executive recruiting firm Heidrick & Struggles International, and will consider both external and internal candidates, according to a news release.

Ballmer said in the news release:

There is never a perfect time for this type of transition, but now is the right time. We have embarked on a new strategy with a new organization and we have an amazing Senior Leadership Team. My original thoughts on timing would have had my retirement happen in the middle of our company’s transformation to a devices and services company. We need a CEO who will be here longer term for this new direction.

Gates said that, as a member of the succession planning committee, “I’ll work closely with the other members of the board to identify a great new CEO. We’re fortunate to have Steve in his role until the new CEO assumes these duties.”

Ballmer, who has been CEO since 2000, has faced criticism for years about Microsoft’s stagnant stock price and its falling far behind of competitors such as Apple and Google in the fast-growing mobile market. More recently, calls for him to step down have come after the lukewarm reception to Windows 8, which launched last fall, and the abysmal sales of the Surface RT tablet, among the company’s first branded computing devices.

Last year, he said the company was transitioning into a devices and services company and earlier this year, started implementing a major company reorganization to reach that goal.

In recent days, there have been rumblings of more shareholder pressure for change. Activist investor ValueAct, for instance, which had disclosed earlier this year that it had purchased some $2 billion of Microsoft stock, had reportedly been talking with some Microsoft board members and large institutional shareholders about gaining a seat on Microsoft’s board.

Shortly after the company made the announcement this morning, Microsoft shares were trading at $34.60, up 6.8 percent.

I talked  this morning with Ballmer and Thompson. In the interview, Ballmer talked about his decision, mixing in some personal reflection about his life and his time with the company.

He has long said that he would retire from CEO when his youngest son went to college. That hasn’t quite happened yet — his youngest son is still in high school. But his middle son is going to college this year.

That, in part, prompted him to think that if he waited until his youngest son left for college, that that would happen in the midst of Microsoft’s big transition.

“We need to start now” to pick a new CEO, he said, “so we have a successor in place so we can lead a multi-year journey, or  I would have to sign up long enough so I don’t leave mid-stream.”

He said his decision was not prompted by ValueAct or other shareholders’ pressure for change.

Ballmer is not on the special committee that will choose his successor. But as a member of Microsoft’s 9-member board, he will have a voice — “and I’m never shy about my opinions,” He said.

“I don’t know how you would find a new CEO without” getting Ballmer’s input on the company and its workings, Thompson said.

Thompson said the board has developed a profile of what the ideal candidate would look like but said it would be “premature” to disclose any of it.

Both Ballmer and Thompson praised the company’s current senior leadership team but declined to say if there were any leading internal candidates.

Ballmer said his proudest accomplishment in his decades with the company, during which time it grew from about 30 employees and $7 million revenue to almost 100,000 employees and $78 billion revenue, was in “giving birth to the notion that people are going to use intelligent devices for their own personal usage.”

“When I joined Microsoft, my parents asked me two questions,” he said. “Number one: ‘What’s software?’  That was my dad’s question.  And my mother asked me: ‘Why would a person ever need a computer?'”

Microsoft played “an incredible role in making personal intelligent devices happen,” while also returning profits and cash to its shareholders, he said.

When asked about the stagnant Microsoft share price, Ballmer said “I’m not a stock price focused guy. I’m a person who focuses in on: Do we have the right technologies, do we have winning products, are we making money.”

His single biggest disappointment, he said, was the whole Longhorn and Windows Vista saga.

Longhorn was the codename of what became Windows Vista, which was bug-ridden at launch

“What we really did is we took an incredibly talented team of engineers and we tied them up for a long period of time, only to ship a product that was probably, net, a step back, not a step forward,” Ballmer said. “We had people tied up working on something that didn’t matter when they could’ve been working on defining the future.That was, to me, the biggest mistake. You can’t let your development team work on the wrong stuff.”

“I’d write Longhorn down as my single biggest disappointment,” he said, adding that “some of the challenges we have today” stem from those years.

Ballmer, who is married and has three sons, said he intends to stay in the Seattle area after retiring.

Beyond that, he hasn’t made any plans yet, he said.

“I always knew I’d want to have one more chapter of my life beyond Microsoft,” he said. “I think anybody who actually knows me knows I’m pretty all-consumed by my family and Microsoft.  Other than the fact I like playing golf every now and then, I don’t have other passions.  But maybe that’s precisely why I say I wanted another chapter in my life — to get to experience something that’s not just those two things. … I relish the opportunity while I have my health, my energy.”

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