“What Ballmer’s departure tells us is that perception is important in this market — especially Microsoft’s not being perceived as an innovator, not being perceived as sexy,” said David Cearley, a Gartner analyst.
Refining the innovations of others was an effective strategy for Microsoft in earlier eras. Under Gates, Microsoft created the Windows operating system by mimicking the graphical interface first popularized by Apple’s Macintosh computers. Microsoft’s Web browser, Internet Explorer, was inspired by earlier competitor Netscape Navigator.
Those successes were so total that Microsoft’s market dominance — and its ruthless tactics against competitors — eventually provoked a historic showdown with the Justice Department’s antitrust division. That led to a federal judge ruling in 2000 that the company was “an abusive monopoly.”
Ballmer, although long in Microsoft’s top ranks, brought a different approach when he took over the company from Gates that year, leading efforts to repair relations with the U.S. government and other technology companies. By some accounts, Microsoft became less ruthless but also less opportunistic in spotting and exploiting markets.
His era — which is to end officially when Microsoft finds a replacement, expected in the next 12 months — has had several notable successes, not the least of which has been the continued profitability of the company’s core Windows and Office software products. The company has developed a massive stockpile of cash, giving it leverage to move into any business it targets.
Ballmer also oversaw the development of Microsoft’s Azure, a major player in the growing cloud-computing industry, and the development of the popular Xbox gaming system. Xbox developed with relatively little oversight from Microsoft’s top executives, allowing its designers to challenge Sony’s popular PlayStation 2 and to embrace the idea of making a gaming console a wider entertainment device, as Xbox did through its partnership with Netflix.
Under Ballmer, Microsoft also acquired Skype, giving the company a foothold in the fast-
changing telecommunications industry.
Microsoft’s successes have been notable for avoiding direct challenges to the main sources of the company’s profits, the Windows operating system and Office software suite. Product ideas that threatened to disrupt those businesses were quashed over the years by executives determined to protect their lucrative turf.
One idea developed in 2000, about the time Ballmer took over the company, would have offered users Web-based programs for handling documents — a part of the market long cornered by Microsoft Office. As the launch date approached, senior executives quietly killed it, said James Grimmelmann, a former Microsoft developer who worked on the project. He is now a law professor at the University of Maryland.
“Every piece of the turf was owned by some powerful business group that made it really hard to launch something profoundly innovative,” said Grimmelmann, who left Microsoft in 2001.
A similar product was launched in 2005 — by Google.
Grimmelmann said the ongoing tension within Microsoft is exemplified by the company’s latest computer operating system, Windows 8. It offers users both a traditional interface and a newer one that is inspired by the touch-screen technology that has powered the growth of smartphones and other mobile devices. Many consumers, however, have balked at Windows 8, finding the operating system confusing. A simplified update is due soon.
“By not removing the old interface,” Grimmelmann said, “they guaranteed the failure of the new one.”
Hayley Tsukayama contributed to this report.