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Microsoft CEO to retire within next 12 months

By Scott Moritz and Sarah Frier
Bloomberg News

NEW YORK Microsoft Chief Executive Officer Steve Ballmer, who has struggled to adapt the world’s largest software maker to the shift away from personal computers and toward mobile devices, will retire after more than a decade at the helm.

Ballmer, 57, plans to step down within 12 months, Redmond, Wash.-based Microsoft said Friday in a statement. The company’s lead independent director, John Thompson, will oversee the search for his successor, heading a committee that will also include Microsoft co-founder Bill Gates.

Microsoft’s stock had its biggest gain in four years after the announcement. The company’s shares rose $2.36, or 7.3 percent, to close at $34.75 Friday.

The announcement comes six weeks after Ballmer streamlined the company’s management, spurring speculation that he was grooming successors. He cut the number of business units to four and said Windows chief Julie Larson-Green would oversee all hardware, including the Surface tablet and Xbox console and related games. Windows Phone software head Terry Myerson gained responsibility for the Windows and Xbox operating systems.

“There is never a perfect time for this type of transition, but now is the right time,” Ballmer wrote in a memo to employees Friday that was posted on Microsoft’s website. “We need a CEO who will be here longer term for this new direction.”

Ballmer took over the CEO role in 2000 from Gates, his schoolmate at Harvard University. While Ballmer had a boisterous style that made him legendary at company presentations, he largely remained in Gates’ shadow. Ballmer wasn’t seen as possessing the same vision for technology or the ability to anticipate changes in the industry, said Richard Williams, an analyst with Cross Research in Millburn, N.J.

“Ballmer was more the executive than the visionary and he missed a few turning points that visionaries wouldn’t have,” Williams said.

Microsoft has lost almost half its value under Ballmer’s leadership, and the shares haven’t closed above $50 since his first year on the job. The company’s latest computing operating system, Windows 8, also hasn’t spurred the comeback that executives sought.

“He’s become a lightning rod for frustration over Microsoft’s lack of progress in mobile and Windows 8,” Williams said.

Unlike Gates, who dropped out of Harvard to start Microsoft, Ballmer stayed in school and received a degree in applied math and economics. He then joined Microsoft in 1980.

Still, the company’s swift rise to PC software dominance in the 1980s and ’90s made Ballmer a billionaire many times over.

Lining up a successor?

The latest reorganization was seen by analysts as a signal of which executives may be poised to succeed Ballmer. Before taking charge of hardware, Larson-Green helped spearhead a radical redesign of Microsoft’s flagship operating system to create Windows 8, which was released in October.

While the new software ushered in major technological advancements, it also aroused the ire of some longtime users.

Still, Larson-Green has been a rising star at Microsoft. She joined the company in 1993 and became a vice president in the Office division in 2006.

As demand wanes for PCs, the July management shakeup sought to turn away from Microsoft’s original focus on “putting a PC on every desk in every home,” Ballmer wrote in a memo at the time. PC shipments fell about 11 percent in the second quarter, for a record fifth straight quarter of declines, according to market research firms IDC and Gartner Inc.

“Ballmer did a very good job turning Microsoft from a bloated monstrosity into a much leaner and meaner machine over the last few years,” said Microsoft investor Michael Obuchowski, a portfolio manager at North Shore Asset Management in Cold Spring Harbor, N.Y. “However, despite the improved operations and much better quality of programming, Microsoft was severely lacking a comprehensive vision that would have allowed the company to stay ahead of the trends.”

Not an easy search

Microsoft is also trying to challenge Amazon.com and Google in cloud services as more customers opt for software that’s run over the Web instead of installed on corporate machines. Cloud efforts that were scattered across several divisions were concentrated under two units in the reorganization.

Satya Nadella, head of the server business, was appointed to direct cloud and enterprise products.

Qi Lu, responsible for the Bing search engine and other Internet projects, was named to oversee Office and the Skype videoconference business and run a new applications group.

Skype president Tony Bates was put in charge of a new group for business development and acquisitions and will cultivate relationships with developers and computer makers.

Even with all those executives in the wings, there’s no heir apparent, Obuchowski said.

“This is not going to be an easy search,” he said. “The expectations are very high and I don’t think Microsoft can afford to make a mistake here. I can’t think of any obvious candidates off the top of my head.”

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