Can Microsoft After Ballmer Stave Off Competition?

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Aug. 23 (Bloomberg) -- Wedge Partners' Brian Blair and Bloomberg's Anurag Rana discuss Steve Ballmer stepping down as Microsoft's CEO on Bloomberg Television's "Street Smart." (Source: Bloomberg)

For the company -- new man at the helm, new possibilities for the company.

The question is who?

I want to start with you.

Kind of harsh.

He says he is retiring.

The stock rallies 6%, 7%, 8%. what is going on?

The last few years have not been great under his leadership.

People are excited because there is an opportunity for somebody else to take over the helm and take microsoft in a new direction.

We know microsoft has been in decline to we know that pc's and desktops continue to decline -- we know microsoft has been in decline.

We know that pc's and desktops and the need to be in decline.

Some of these areas still have opportunities to grow.

Maybe somebody who is not tied to the legacy pc side.

You said pretty much all day that you believe that it should be somebody from the outside to take over from ballmer.


I firmly believe that.

Because the dna of the company needs to be changed from an innovation point of view.

It is more the enterprise area that needs to be focused on.

Why enterprise?

The database business is doing well.

On top of that, they have long- standing relationships with all enterprises.

They have agreements to sell pc's to these different companies.

That is accurate.

They are entrenched on the pc side.

The opportunity is to grab some of the consumer in a meaningful way.

There are about 1.4 billion smart phones sold each year globally.

There is an opportunity for a third player to come in the tying -- come in behind android and apple.

Is there?

Only about 50% of the world's phones are smart you there is a big jump ball out there -- are smart.

There is a big jump ball out there.

Apple will gain share away from android.

There is still this jump ball.

Microsoft has started offering, via nokia, sub-$200 smartphones.

If they can grab the consumer in that way and go after the gaming market in a meaningful way and maybe attach himself to some of these high-growth areas, there is real -- attach themselves to some of these high-growth areas, there is real opportunity for them to grow again.

We need a tiebreaker.

They need to focus.

Focus is the answer.

Both are so important.

Enterprises where they have had such success and made such money -- enterprise is where they have had such success and made such money.

What we have seen in the corporate environment is that ceo walk -- the ceo walks in and says i want this on my corporate network.

I don't care if it's not microsoft.

That's what we call the beginning of the wire would be -- of byod, bring your own device.

It is such a difficult company to manage.

Under steve ballmer, you have this business that grew tremendously.

He took over during the dot- com era, but the business went from $25 billion a year to $75 billion a year.

Free cash flow on an annual basis grew tremendously during his time at the company, but so did the headcount at the company.

It nearly tripled.

The company grew a lot.

When companies like 3com just went away.

We were talking about when steve ballmer took over, worldcom was one of the giants.

Your most critical point is byod.

Microsoft has to go over the -- after the consumer aggressively.

People are bringing their tablets and smartphones into the workplace.

If they are going to hold onto the enterprise customer, they have to do it where the customer is making choices, not where the i.t. manager is making choices, but what the consumer is doing.

They tried that with surface, but it does not appear to be working, at least relative to the ipad.

But there is still an opportunity.

We are still only a few years into the tablet market.

Smartphones are still a big $700 million jump ball.

Wasn't that something that ballmer was staking his reputation on?

It was never going to be a high-volume opportunity.

I think they have to chase the -- high-profile, but not high- volume.

When we look at what he did, he missed -- under his time at microsoft, he kept the company a live grew it quite a bit.

Some of the biggest trends in computing were completely missed , right in microsoft's wheelhouse.

Virtualization, companies like salesforce.


Microsoft -- there is no reason they have -- should have missed that trend.

He was a caretaker rather than an innovator.

But he really did grow the business substantially.

On the enterprise side, for consumers, you did not see it as much.

But in enterprise, if you are in i.t. and technology business, you know how important microsoft is.

When there was a poll of the most important companies of cloud vendors in the world, salesforce came out on top and microsoft came out number two.

Not all of us are aware that because it is not consumer focused.

One of the things that cory talked about was the growth in revenue.

The valuation dropped tremendously during that 10 years.

It is not about looking at your -- what you are generating the last 10 years, but what you will generate for the next 12 years.

It is only growing 7%. that is the problem, right?


These -- they do not have a stronghold.

They have a presence, but not a stronghold.

This is a cash cow that will generate a lot of venue.

Even if you put one of us over there, it would still generate a lot of cash.

Apple has a lot of cash.

It has been hard for investors to get excited about apple unless there is a new product out.

New products are critical for them.

One of the big things everyone will be watching is how do the new xbox do versus the playstation?

That's only about 12% of microsoft's total revenues, but that's a battle people will be watching.

Also, how does the windows suite due on ios -- do on ios?

I don't think competitors are looking -- don't think that competitors are not licking their chops.

They will release a new playstation that is $100 less than the xbox.

They are going right into the u.s. and taking it to microsoft.

And they are talking about taking it to microsoft.

One thing that steve ballmer can hold up and say is he created this entirely new business for microsoft.

It's going to be a fierce battle.

Playstation is out in front right now.

But it is still early in the game.

This text has been automatically generated. It may not be 100% accurate.


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