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Microsoft CEO Steve Ballmer is under pressure to make big changes  (Source: AFP)
Major executive shakeups continue for the world's largest OS maker

After a half decade with software giant Microsoft Corp. (MSFT) chief information officer (CIO) Tony Scott has left the company.  The departure was first revealed via an update to Mr. Scott's profile on LinkedIn Corp.'s (LNKD) titular resume site which listed his role at Microsoft as "former CIO".  The change was first noted by GeekWire, which received official confirmation from Microsoft shortly thereafter.

I. Tony Scott Steps Down

Prior to joining Microsoft in 2008, Mr. Scott has served as CIO at The Walt Disney Comp. (DIS), following executive assignments at General Motors Comp. (GM) and Bristol Myers Squibb Comp. (BMY).

Mr. Scott had been integral in pushing for heavier use of the so-called "dog-fooding" approach; a popular approach at Apple, Inc. (AAPL) and other successful software firms that involves giving test builds of upcoming products to employees to test drive prior to a full commercial rollout.  But that role was reportedly diminishing as Microsoft had moved towards consumer-facing cloud-based services like Office 365.

In a brief statement Mr. Scott commented:

My dad passed away at Easter time, so taking a little time to get my mother re-settled, get my instrument rating done (I’m a pilot), and work on a couple of other long delayed personal projects. Will go back to ‘work’ (in some form) in a few months, but right now just focusing on the above.

Tony Scott
Tony Scott, Microsoft's former CIO
Microsoft's IT product and services management vice president, Jim Dubois, will serve as the interim CIO.

II. Continuing Ballmer's "Significant Shift"

While it's unclear who will replace Mr. Scott, All Things D's Kara Swisher writes that Microsoft's Servers and Tools division president, Satya Nadella; Skype communications division president, Tony Bates; and Interactive Entertainment division president Don Mattrick will be among those that Microsoft CEO Steve Ballmer is considering.

Microsoft presidents
Microsoft's rising stars (left to right): Satya Nadella (Servers and Tools), Tony Bates (Skype), Don Mattrick (Interactive Entertainment)

Mr. Scott's departure is only the latest major shakeup in recent months at Microsoft.  In November, Windows division president Steven Sinofsky hit the road.  His position was subsequently divided between former CFO and CMO Tami Reller on the business/marketing front and by Julie Larson-Green on the software/hardware development front.

Last fall, Mr. Ballmer spoke of big changes at Microsoft commenting:

This is a significant shift, both in what we do and how we see ourselves — as a devices and services company. It impacts how we run the company, how we develop new experiences, and how we take products to market for both consumers and businesses.

The fresh focus on becoming a devices and services company (rather than merely an OS and software firm) comes amid shareholder demands for more of a return on their investment.  

III. Investors Demand Change

A subsidiary of Japanese investment house Nomura Holdings, Inc. (TYO:8604), Nomura Equity Research, has been tracking the dispute.  Its analyst Rick Sherlund in a research note pushed Microsoft's management to sell the Xbox unit (a cash-neutral unit, according to reports) and the Bing search product (a major money loser).

Xbox One
Some investors want Microsoft to sell its Xbox unit.

Disruptive investor David Einhorn has tried to push for Mr. Ballmer's resignation and similar big shakeups since early 2011.  However, with only 0.11 percent of shares (at the time) and with Microsoft posting a very strong fiscal 2011 his cries fell mostly on deaf ears.

David Einhorn
David Einhorn (Greenlight Capital) wants Ballmer's resignation. [Image Source: Value Walk]

But slowing PC salescriticisms about its design direction with Windows 8, and narrowing financials have renewed the calls for change.  ValueAct Capital Parnters, a firm managed by Jeff Ubben, recently acquired approximately 1 percent of Microsoft shares (for reference CEO Ballmer owns approximately 4 percent of Microsoft shares).  Mr. Ubben has joined the push for changes, albeit stopping short of Mr. Einhorn's most draconian demands, such as Mr. Ballmer's resignation.

Thus it appears that while Mr. Ballmer's seat may be secure for now, his executive team and business strategies are slotted for some big shakeups.

Sources: LinkedIn [Tony Scott], GeekWire, All Things D

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RE: OS upgrade
By Samus on 6/3/2013 8:57:14 PM , Rating: 2
I don't like drama queen Einhorn but Balmer's time is coming to a close at MS. He's a fun guy to have a drink with, but he's losing steam as CEO and honestly, Microsoft has little in the pipeline to actually push mobile devices. Their other markets are shrinking:
1) desktop PC's, which have had disappointing sales partially due to Win8
2) XBOX, which has just recently started to break even (the division lost money and was heavily subsidized for years)
3) Bing. Really. Get rid of it. Wasting money on promoting it is just that. A waste.
4) Automotive Technology such as Sync. Ford has had a nightmare dealing with its stability issues. How hard can a climate control program that doesn't crash constantly be? And Google is 10 lightyears ahead of Microsoft in vehicle autonomy.
5)Security. You've discontinued hosted Forefront, Onecare, and a number of other corporate class products that were successful, but you didn't care to continue with it because partners threatened to sue you? You're Microsoft, since when are you threatened by anybody?

RE: OS upgrade
By Reclaimer77 on 6/4/2013 8:41:00 AM , Rating: 2
While Microsoft has been extremely profitable they have not had a growth year since Bill Gates left. That says pretty much all we need to know about Balmers performance as CEO.

RE: OS upgrade
By Labotomizer on 6/4/2013 4:29:35 PM , Rating: 2
1) Desktop PC sales are unrelated to Win 8. People can downgrade just fine and a lot of PCs on shelves still run 7. Blaming Win 8 for what was the writing on the wall is misguided.

2) Xbox, the path to the living room. That's all it was ever built to be. That's why MS entered the console arena and for no other reason. Xbox One finally gets them to their vision of Windows running on the TV, PC/Laptop/Tablet and Phone.

3) The search technology Microsoft develops through Bing has been HUGE for the rest of the company. Bing is basically an R&D arm that brings in some money to help offset the R&D costs. Simple as that.

4) Sync is actually stable, at lease the MS part of it. It's a very low level, base OS. It's also used in the Kia and Hyundai systems. Sync 1.0 was very stable and worked well. It wasn't until Ford outsourced it that it went to crap, and it has been improving. I get you want to blame MS for everything, but MyFord Touch being unstable had nothing to do with MS or Sync.

5) Well, hard to argue this one. Hosted Forefront was awesome. Onecare at least got a capable replacement with InTune, in some ways it is better. I don't know of "several other" products they've retired due to partner pressure though. It is funny they finally bundled Windows with AV built in around the same time they killed their hosted AV. Perhaps that was part of the deal, which I think is a better solution for most consumers anyway.

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