Microsoft Must be Terrified by Penney Lesson, MIller SaysAlexandria Baca
Microsoft Corp. directors seeking a new chief executive officer to reinvigorate the software maker should be mindful of the lesson of J.C. Penney Co., said Steve Miller, who spent his career helping hobbled companies survive.
“What must terrify them is the example, say, of J.C. Penney,” Miller, the chairman of American International Group Inc., told Bloomberg Television’s Stephanie Ruhle and Erik Schatzker in an interview today. “They decided they needed to change, they brought in Ron Johnson, did a radical shift in their whole strategy, and it was a complete failure.”
J.C. Penney hired Johnson from Apple Inc., where he turned the iPad maker’s stores into a lucrative retail empire. At J.C. Penney, Johnson scaled back discounts and sought to transform the department-store chain into collections of boutiques. The company replaced Johnson with former CEO Mike Ullman in April.
Microsoft, the largest software maker, has been considering outsiders for the CEO post. Its list of candidates has included Ford Motor Co. CEO Alan Mulally and Qualcomm Inc. Chief Operating Officer Steve Mollenkopf, according to people familiar with the matter. Mollenkopf was removed from the running today when Qualcomm named him CEO. Microsoft is replacing Steve Ballmer who took over as CEO in 2000 from Bill Gates.
“Only two people ever led this company, and they’re both sitting on the board of directors,” Miller said. “The new person coming in is going to have a big challenge. Just, if they’re going to change the direction at all, it’s probably going to be contentious within that boardroom.”
Miller became AIG chairman in 2010 and worked with CEO Robert Benmosche to help repay the insurer’s U.S. bailout He titled his autobiography “The Turnaround Kid,” and previously oversaw the bankruptcy of auto-parts supplier Delphi Corp. and helped Chrysler Corp. return to profitability after taking government loans in 1980.
He has been a director since the 1990s at Symantec Corp., the maker of security software that was led for a decade by John Thompson, 64, the Microsoft director who is leading the search committee to replace Ballmer.
“I think the best candidate for that position is John Thompson himself, because of what I saw him do at Symantec,” Miller said.
Microsoft is going through its biggest transition in decades, seeking a new leader while it adopts a new corporate structure focused on devices and services. The Redmond, Washington-based company is also buying Nokia Oyj’s handset unit as it adapts to a technology landscape where consumers and businesses favor mobile devices and Web-delivered software.
“Microsoft has a tremendous platform, but the technology business changes so fast, and companies that two years ago were great are all of the sudden on the skids. And if you don’t get ahead of that curve, you know, you could see Microsoft going down fast.”
At AIG, Miller said the board’s succession planning intensified after Benmosche announced in 2010 that he has cancer. Benmosche, 69, has “the energy of a 30-year-old,” Miller said.
“How much longer he wants to work, I’m not sure,” Miller said. “We’re doing a lot of discussions about how would you ever find a successor for Bob Benmosche.”
The U.S. wound down its rescue of AIG last year. The government’s proceeds from sales of stocks and bonds related to the bailout exceeded the cost by more than $22 billion, a profit that Miller said helps justify Benmosche’s compensation, which was $10.5 million last year.
Benmosche was hired in August 2009, after the three prior CEOs oversaw a cumulative loss of about $150 billion in market value. AIG rose 0.6 percent to $49.73 at 4 p.m. today in New York, compared with a close of $22.74 the last trading day before Benmosche took over.
“Look at the value he’s created,” Miller said. “I think what he got compared to the value he delivered is still a bargain for all of America.”
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