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Why Bill Gates should step down from Microsoft

October 03, 2013 08:06 IST

Why Bill Gates should step down from Microsoft

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Robert Cyran in New York

Maybe Bill Gates should follow Steve Ballmer out of Microsoft. Allowing Ballmer to buy Nokia's smartphone business as he exits will saddle his replacement with a flawed strategy.

The company's founder and chairman bears some responsibility for this and other missteps.

With under 5 per cent of the shares - scarcely more than Ballmer owns - Gates matters more to his charitable foundation than to Microsoft these days.

In a sense, it's sacrilegious to suggest Gates and the software behemoth he started part ways.

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Image: Microsoft Chairman Bill Gates
Photographs: Rick Wilking/Reuters

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He understands technology like few others and has demonstrated the acumen to create a huge business, now worth some $270 billion.

With about $12.4 billion of stock, he is also still the biggest single shareholder and, given the long personal association, he surely cares about Microsoft's future.

Yet his many talents don't include effectiveness as chairman. Under his leadership, Microsoft's board left Ballmer in place too long.

Now that the CEO is to retire within a year, Gates doesn't have a replacement ready, an important task for any chairman.

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Image: Outgoing Microsoft Chief Executive Steve Ballmer
Photographs: Reuters

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The board let Ballmer waste money chasing consumer markets and hardware, with the company's online services business losing $12 billion over the past three years alone.

Directors also just sanctioned the purchase of Nokia's smartphone operations for $7.2 billion, locking Ballmer's successor into manufacturing devices - hardly a Microsoft strength to date.

True, during the last decade of Ballmer's 13-year tenure the maturing company has returned more than $180 billion to investors, far more than any of its technology peers. Profit has also risen sharply.

Despite this and Ballmer's passion, evident at Microsoft's annual investor meeting last week, shareholders just don't seem to believe in the company's strategy, developed with Ballmer and Gates in charge.

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Photographs: Reuters

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Over 10 years, Microsoft shares are barely higher. By comparison, with the odd exception like Hewlett-Packard, the likes of Apple, Google, Oracle and IBM have recorded big gains. The Nasdaq index has roughly doubled.

Gates' primary interest also arguably lies elsewhere these days. He stopped working full-time at Microsoft five years ago.

The $38 billion endowment of his charitable foundation dwarfs his Microsoft holding. Improving education and preventing disease worldwide may also seem more compelling these days than deciding whether a sprawling company should build tablet computers.

Ballmer's belated departure offers Gates a window of opportunity. The world might be better off with his full attention on the foundation - and so would Microsoft's investors.

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.


Image: Bill Gates
Photographs: Reuters

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