(An earlier version of this story ran online.)
About every six weeks, a small group of Microsoft (MSFT) executives gathers at a Seattle restaurant to talk strategy. The location varies, but the cast of characters tends to stay the same: Don Mattrick, the head of the division that produces the Xbox, will be there sitting alongside Qi Lu, the head of search and advertising, as well as top executives from the mobile team. “If Qi is paying, it’ll be somewhere very cheap,” Mattrick joked in an interview last year.
It may seem strange, but meeting to discuss the melding of different product lines did not take place in years past. The environment in Microsoft’s executive suite resembled something out of Game of Thrones, with division heads poaching talent from one another and thwarting attempts from other groups to collaborate on products. It was in this world that Steven Sinofsky, the president of Microsoft’s Windows division, thrived—that is, until his abrupt departure on Nov. 12, only a couple of weeks after the company’s long-in-development Windows 8 operating system was released.
To some outsiders, Sinofsky’s exit appeared borderline crazy. For much of his 23 years at Microsoft, he was the guy brought in to guide the most difficult projects. He pushed out new versions of Office at a steady clip, fixed the bug-ridden Windows Vista, and oversaw the dramatic retooling of the Windows franchise with Windows 8 and its splashy, touch-friendly interface. Nudging him out now—Sinofsky’s departure was officially portrayed as a mutual decision—looks like Microsoft and Chief Executive Officer Steve Ballmer have already delivered an unfavorable verdict on Windows 8. “All the timing is wrong,” says Wes Miller, who covers the company at the research firm Directions on Microsoft. “It’s unusual.”
On the whole, though, the market reception to Windows 8 doesn’t look like a fireable offense. While not a runaway success, it received praise from critics and a positive response from hardware makers. The real reason for Sinofsky’s departure, according to several current and former Microsoft executives who requested anonymity due to their relationships with him, comes from his status as an abrasive loner within a company trying to foster new levels of cooperation and consensus. The dinners with Mattrick, Lu, and others (which Sinofsky did not regularly attend) led to changes like the integration of Microsoft’s Bing search system in the company’s Xbox console and a Windows smartphone working as an Xbox remote control. Sinofsky preferred to operate in a fiefdom of his own making. Some of the executives say he kept Microsoft’s Surface tablet a secret from them and quashed a rival tablet project. He also blocked such projects as a version of Office for Apple’s (AAPL) iPad and Office apps for Facebook (FB), they say. One former executive describes him as a kind of Stalinesque figure—employees either agreed with him or they were purged. Sinofsky did not respond to requests for comment for this article, while Ballmer declined to comment.
Sinofsky wanted the Windows division to keep driving Microsoft, yet he didn’t seem prepared to do the grunt work to pull it off, the executives say. Windows 8 arrived with a meager selection of applications—nothing from Facebook, Dropbox, and other heavyweights. Microsoft insiders attribute this to Sinofsky’s unwillingness to reach out to partners and drum up interest. Executives from the large PC makers have complained of similar treatment. His focus seemed to be more on Microsoft’s internal operations than on building a relationship with the PC makers, says one former Hewlett-Packard (HPQ) executive.
Over the years, Sinofsky has looked nervous during product demonstrations and avoided doing interviews. Despite these shortcomings as an executive, he was often viewed by analysts as next in line for the CEO job. Few Microsoft insiders shared this opinion, though, and in recent months reports repeatedly surfaced of Sinofsky and Ballmer being at odds, to the point that Sinofsky dodged meetings with his boss or, when he did attend, ended up in a shouting match with him.
Over the past four years or so, Ballmer has tapped new division chiefs across the company. Sinofsky was the only holdover, and of late he looked more and more like an anachronism. While most people still know Microsoft as “the Windows company,” the old Windows guard no longer drives its business. The look of Microsoft’s entire software line has been led by a group that came from the mobile device division. The Xbox team has set the pace for consumer services, as evidenced last month when Microsoft unveiled its Xbox Music and Xbox Video services across phones, PCs, and gaming consoles. “The operating system these days really is all of these services,” says Jonathan Rosenberg, the general manager of strategy and research at Skype, which Microsoft acquired last year. “It’s the games, communication, and the content, and these brands and services that consumers need to love.”
Microsoft is sure to miss some of Sinofsky’s attributes. He was the fixer, and the guy who kept the trains running on time at a company that made a religion out of being late. “He would be able to tell a year in advance what day the product would ship to the customer,” says Vince Mendillo, a former Microsoft employee who spent years working with Sinofsky. “He’s a brilliant engineer who understood the customer’s articulated and unarticulated needs better than anyone else.”
Such qualities explain Sinofsky’s rise to become what amounted to second in command behind Ballmer. But they were also part of his undoing. As Mendillo points out, Sinofsky’s focus on hitting schedules sometimes meant a reluctance to chase after breakthrough innovations. Just like Ballmer, Sinofsky underestimated the threats that Apple’s iPad and iPhone posed to Microsoft, and he deserves much of the blame for Microsoft’s decline in relevance.
Sinofsky did not seem to register these failings. Instead, he tried to expand his empire beyond Windows, while alienating more and more people along the way. Ultimately, Ballmer had to decide whether to keep coddling him or to part ways. One person familiar with the situation frames it in terms of Ballmer’s lifelong dream of being a basketball coach: It’s like having a star player who’s incompatible with the team’s values and the approach needed to win. At some point, the coach has to act.