Steve Ballmer's New Life With the Clippers

Steve Ballmer's new life as an NBA owner

Steve Ballmer's New Life With the Clippers
The ex-Microsoft CEO starts anew as owner of the Los Angeles Clippers, the NBA's most expensive team (Photograph by Jeff Minton for Bloomberg Businessweek)
Photograph by Jeff Minton for Bloomberg Businessweek

Last December, Steve Ballmer found himself in a highly unusual situation: He had time on his hands. It was disconcerting. He was the chief executive of Microsoft, waiting for the company’s board to name a successor, and he didn’t want to take on anything major that would get in the new guy’s way. So he stayed home and binge-watched TV. He plowed through 100 episodes of The Good Wife in about two weeks. “My kids teased me about it mercilessly,” he says. “They said, ‘Dad, how’s the wife?’ ” He watched mostly in bed—on a Microsoft Surface, of course—and says he wasn’t depressed. “ ‘Depressed’ makes it sound like something bad. It was more like, ‘Wow, this is weird. I have nothing to worry about right this minute.’ ”

He’s saying this in October, while sitting in a tiny office at Stanford Graduate School of Business, where he teaches classes a couple of days a week. The funk is long gone. Dressed in khakis and a bright green polo shirt, he’s pacing around, gesticulating emphatically, poking me in the shoulder—hard—as he talks about life after Microsoft.

What gets him most excited is basketball. He’s a huge hoops fan who always wanted to be a coach. At Microsoft he used to crash his bulk into employees in pre-work pickup games. (Ballmer says he’s reduced to playing H-O-R-S-E after the arch in one foot dropped.) For years he wanted to buy a National Basketball Association team and made unsuccessful runs at franchises in Seattle and Sacramento.

Over the spring and summer, he got another chance when the Los Angeles Clippers suddenly came into play. The gossip site TMZ released a recording of team owner Donald Sterling chastising his mistress for hanging out with black people and bringing them to games. As outrage at Sterling’s bigotry swelled, one of Ballmer’s sons called and counseled him to get ready. “ ‘This thing is going to sell, Dad. It really is,’ ” Ballmer recalls his son saying.

Behind this week’s cover
Behind this week’s cover
Photograph by Jeff Minton for Bloomberg Businessweek

Ballmer bought the Clippers for $2 billion, almost four times as much as the record set a few months earlier, when the Milwaukee Bucks went for $550 million. For that money, he gets a team on the upswing with two of the game’s most marketable stars—power forward Blake Griffin and point guard Chris Paul. At least as important as that, Ballmer gets a clean break from his former job.

He was either No. 1 or No. 2 at Microsoft for most of its existence, but it was never his creation. When Microsoft co-founder Bill Gates handed him the reins in 2000, the company’s stock was at an inflated dot-com-bubble high of $58 per share. Gates was the richest man in the world and the personification of U.S. technological prowess. Even if Ballmer made all the right moves, he may never have escaped from Gates’s shadow—and he didn’t make all the right moves. Microsoft shares plummeted as soon as Ballmer took over and never made it above $40 a share until March of this year, after he was gone. (Even Ballmer has to be happy about the market’s reaction, though: He’s the company’s largest shareholder, owning 333 million shares to Gates’s 298 million, and the 30 percent stock pop after his exit added more than $3 billion to his wealth.)

As the owner of the Clippers, Ballmer will have no problem outshining his predecessor; all he has to do is not be racist. From there, things get more difficult. Turning the team into a consistent NBA powerhouse and winning a championship will require as much luck as managerial brilliance. Ballmer will have to tap into his ample analytical skills while tempering the impulses that got him into trouble. Microsoft on his watch missed multiple technology shifts and tried to catch up by spending massively on marketing and splashy acquisitions. That’s a tough way to win in the software trade, and mathematically impossible in a business with a salary cap.

May 30 (Bloomberg) -- Donald Sterling’s approval wasn’t needed as his wife completed the $2 billion sale of the Los Angeles Clippers to former Microsoft Chief Executive Officer Steve Ballmer. Bloomberg Businessweek’s Brendan Greeley speaks on Bloomberg Television's “Bloomberg Surveillance.” (Source: Bloomberg)

“You’ve got to decide whether you need to do Version 2.1, or do you need to just blow it up and do a whole renamed product or a Version 3,” Ballmer says of the Clippers. “I think the basic theory is that we’re close.” He’s already decided to spend as much as a few million on equipment and technology for the team, and he knows what he expects from the players: “We have to work with blood and guts and hard-core commitment and good character on and off the court. You have to be all in.” Ballmer plans to live by the same ethos and to follow the advice of Mark Cuban, a fellow tech billionaire and owner of the Dallas Mavericks: “He told me, ‘Don’t feel like you have to be muted. Just be yourself.’ ”
Sterling, a lawyer turned real estate magnate, was a miser of an owner, and his teams were mostly awful. From the 1980s through the early ’90s, the Clippers posted a winning record just once out of 14 seasons. Practices were held at a local YMCA that had no showers, says Tom Tolbert, who joined the team in 1993. Game days weren’t much better. “The arena didn’t have any soap or shampoo in the shower,” says Tolbert, now a sports radio host in San Francisco. “We had to use hand towels to dry off.” At a golf tournament, Sterling paraded Tolbert before sponsors and squeezed the player’s arms to show off his muscles. “You’re big and strong,” Sterling told him. “You’ll be able to compete with the blacks.”

As few fans as the Clippers attracted in those days, Sterling still made money. He cashed in on TV deals, sponsorships, group sales, and leaguewide revenue-sharing agreements. Instead of taking risks on big, long-term contracts, the Clippers would usually draft a star and keep him until free agency, then let him go to a higher bidder.

The Clippers’ fortunes started to change in 2008 when, in an uncharacteristically positive move by Sterling, the team got its own $60 million, 42,000-square-foot training facility. In 2009 the Clippers had the first pick in the NBA draft and took Griffin, a power forward from Oklahoma; the next year they landed Paul in a trade, arguably the best point guard in the league. In June 2013 the team cut a deal with the Boston Celtics—the Clippers would get Doc Rivers, who coached the Celtics to a championship, in exchange for a first-round draft pick.

At the time, neither the Clippers nor their future owner could imagine what was about to hit them. Although tensions between Ballmer and Microsoft’s board were nearing a breaking point, after 34 years at the company, Ballmer thought he’d hang around for a couple more years at least. During his 14 years as CEO, revenue and profits both tripled. But Microsoft missed the mobile revolution completely and committed numerous product blunders (Zune music player, Vista operating system, Kin smartphone). In August 2013, Microsoft’s board, chaired by Gates, announced it was parting ways with Ballmer, who would remain CEO until a successor could be found.

For a while, Ballmer kept his schedule filled. He completed the acquisition of Nokia’s device business and orchestrated an internal reorganization. “I couldn’t start my new life because I didn’t think it would look respectful to Microsoft to be working on 28 new things,” he says. “But if I stayed at the office, I would generate new work. It’s just what I do. So I took some time off.” When Microsoft finally settled on company veteran Satya Nadella as the next CEO, Ballmer was free to stop watching TV and get on with his life. He went to golf school. He took Hebrew lessons at a synagogue. He started teaching at Stanford. And he received an e-mail from an Allen & Co. banker, giving him a heads-up that the Milwaukee Bucks were for sale.

The Bucks didn’t seem like much of a prize, until Ballmer realized that Milwaukee was closer to Seattle than all but seven other NBA cities. He flew there and took a six-hour chauffeured tour of the city. “I can tell you the suburbs and where they are,” he says. “I can tell you where the malls are. I can tell you who’s good in high school basketball. I can tell you where I would have lived. I went to a game, flew home, and figured out what it was going to feel like to fly home after a game that ended at 10, 10:30 at night.”

Not long after that visit, while Ballmer was still contemplating a regular commute to Wisconsin, TMZ dropped the Sterling tapes, and the Clippers were in play. Once Ballmer decided to buy the team, he moved fast. The Clippers were in the playoffs, so he rerouted his plane from a golf trip in Arizona and rushed to a game in L.A. to get his face out there. He reached out to Michael Eisner, the former CEO of Walt Disney, who has season tickets next to Donald’s wife, Shelly Sterling. He called Cuban and Paul Allen, the Microsoft co-founder and owner of the Portland Trail Blazers, for advice. Cuban figured that Ballmer’s bombastic style would “be no big deal” in today’s NBA. “But it would have been hysterical to watch the old-school owners react to him 25 years ago,” he says.

Ballmer compiled spreadsheets to value the team. Then he met with Shelly Sterling. “I had five offers typed up and ready to hand to her—poom!—depending on what it seemed like she was interested in,” he says. He must have picked the right one. Shelly went to court against her husband, who sought to block the sale, and soon the deal was done.
The Clippers have made the playoffs three years running and won their division in the last two seasons. But even with things going in the right direction, it’s hard to argue that they’re worth as much as Ballmer paid. According to a Bank of America estimate, the Clippers had revenue of $165 million last year. Their local TV ratings are still weak, and their brand is tainted with the Sterling scandal. Ballmer, though, calculated that the chance to buy a team in a prized market such as New York or L.A. would rarely come up and found statistics that showed the Clippers were growing in popularity against the Lakers with younger fans. “You can go anywhere in the world and, for better or worse, people know who the Clippers are now,” he says.

Earlier this month, the NBA renewed its vows with ESPN and TNT for $24 billion over nine years. This TV deal will generate $2.7 billion per year, up from the current $930 million, and makes what Ballmer paid seem less crazy. He figures the Clippers investment will match or outperform a Standard & Poor’s 500-stock index fund, but says that’s not even the real point. “The community of Los Angeles wants this story to end well,” he says, speaking with his famous vocal tic, emphasizing words and sentence fragments in a raised voice. “I want to be an enabler of that fine story being written.”

Ballmer’s outsize profile and largesse have led to soaring expectations in Clipper country. His first major act as owner was to sign Rivers to a five-year, $50 million contract and elevate him to president of basketball operations, making Rivers the rare coach who also has total control over personnel moves. Rivers’s contract wasn’t due to expire for a couple of years, prompting critics to wonder why Ballmer felt the need to work out an extension so soon. While known as a great coach and motivator, Rivers is unproven when it comes to conducting trades and negotiating deals.

Neil Olshey, the general manager who built most of the current roster, decamped to Portland two years ago. The team missed out on the LeBron James-Chris Bosh-Carmelo Anthony sweepstakes this summer. And DeAndre Jordan, the defensive heart and soul of the team, becomes an unrestricted free agent at the end of this year. If the Clippers decide to re-sign Jordan, it will use up most of the salary cap space and limit the team’s ability to act in 2016, when James and others become free agents again. This means the Clippers must figure out how much they believe in their existing core this year. And they’ll need to reach at least the Western Conference finals to improve on last year’s results.

If there was one plus to Sterling as an owner, it was that he wasn’t a George Steinbrenner-type micromanager. He didn’t pretend to know more about the sport than his executives did or try to meddle with their deals. Ballmer’s hands-on style can be as overpowering as his rhetoric; this is a man who has compared rival products to cancer and often yelled his critics into submission. Whether he has the patience to let Rivers and the coaching staff do their jobs won’t really be apparent until he has been through a draft or two and becomes emotionally invested in players. “The one issue you don’t worry about is the ownership,” Rivers says. “We’ve ended up with cachet and cash. And I think Steve’s going to allow me to do my job. It’s the only way it’s going to work.”

Ballmer has already brought one of his favorite Microsoft management tools to the team: mission statements. He and Rivers have come up with something called the Clipper Credo. It’s a one-page document full of corporate-inspirational language about teamwork and integrity. “It doesn’t say we’re going to win,” Ballmer says. “At the end it says, ‘We will not disappoint.’ ” In typical Microsoft fashion, the Clippers polled 1,000 people in Los Angeles about the Credo, which may get released at some point. “It polled well, as authentic and important with the audience,” Ballmer says. “We’ve got to walk that walk. We’ve got to walk it on the court. We’ve got to walk it off the court. We’ve got to walk it in community.”

Unsurprisingly, Ballmer wants technology to play a vital role in rebranding the Clippers. On a recent afternoon at the team’s practice facility, its superstar point guard, Paul, stands in front of a green screen, recording promotional videos to be played throughout the season. About a dozen production people are packed into the space, telling Paul to square his shoulders or talk slower and more emphatically. When it comes time to record the Clippers spot to promote its smartphone app, Paul hesitates. He’s holding an iPhone 6. “I don’t want to get in trouble for that,” he says. “Not me.” I happen to be the only person in the room with a Windows Phone, a yellow Nokia Lumia, which Paul borrows for the shoot.

Jeff Minton for Bloomberg Businessweek

Without going into the specifics, Ballmer talks about how Paul’s videos will be part of a much-expanded entertainment play, and he’s working on ideas around feeding data and images to spectators’ phones. “Some people think we feel cheesy,” Ballmer says. “We’re going to change that. We’re going to try to make the in-game vibe more intense. We need it to feel really classy and hard-core. I want people to think, ‘Yeah, I’ve really been through something.’ ”

Paul and his teammates hope some perks are coming the players’ way, too. “You know,” he says, “there are only a few teams in the league that have their own plane.”
A few weeks before the start of the regular season, the Clippers hold a media day just for Ballmer at the practice facility. Sterling never held such an event and only popped into the practice facility once a year, while Ballmer has an already well-used office. Reporters are falling all over themselves to get in with the big guy. Camera crews are scattered throughout the gym. Signs taped to the padded walls remind the media of the tight schedule—“3:00 to 3:10 KTLA,” “3:20 to 3:30 CBS,” “4:00 to 4:05 LA Times.”

Ballmer looks comfortable. He went through countless marketing junkets like this one while running Microsoft. For three hours, he bats away criticisms that he overpaid for the team: “We will make good money.” He dismisses the suggestion that he’s trying to usurp the Lakers as L.A.’s favorite franchise: “We want to be the best team, not just around here but in all of the NBA.” And he frequently explains the origins of his booming, exuberant manner: “I was shy as a kid but just as intense. As I got older and more confident, it started to come out in this bubbly way. I like getting enthusiastic. Poom!” The cameramen wince and yank out their earpieces.

A sports anchor from one of the local TV stations chats with his crew as he waits his turn to interview Ballmer. He mentions Microsoft’s huge miss in mobile and its policy of pushing out employees that fail to hit performance metrics while sparing the CEO. Then the guy’s time slot arrives, and it’s all smiles. Someone on the Clippers public-relations staff tosses Ballmer a towel. He mops the sheen off his bald head. Mid-interview, he sees out of the corner of his eye that his PR man is about to kick over a can of Diet Coke sitting on the practice floor. “No! No! No! No! That’s not going to happen today. Throw it out! I can’t afford to take the risk of stickiness.”

Running a basketball team might seem insufficiently challenging for someone of Ballmer’s energy and intellect. Then again, his dominant traits—the boosterism, the nutty salesmanship—could serve him well. Even his two-setting conversational style, toggling between calm and exclamatory, will probably go over fine, basketball being a sport that accommodates such excitable characters as Cuban and Dick Vitale.

“There’s no more perfect owner than Steve,” says Scott McNealy, the former CEO of Sun Microsystems, who grew up with Ballmer in Detroit and battled him for years in the tech industry. “He’ll do moneyball. He’ll do rah-rah. He’ll do investment. He’ll be the most passionate owner. He will live and die with the fans.”

He’ll be among them, anyway. No skybox for Ballmer: He bought out season ticket holders who had courtside seats on the baseline. Near the end of the media day, someone mentions that Bill Cosby might like to see a game. “Tell Bill to reach out,” Ballmer says. “He can come sit with me. I really like it under the basket!”

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