Ballmer Aftermath Part 3 - Ballmer replacement and specifically Elop? (Spoiler alert: Elop won't become MS CEO)

So then Ballmer Aftermath part 3. This one will be short, I promise. So part 1 was impacts to Microsoft's mobile business. Part 2 in this trilogy was the impact to Nokia which had married itself to Windows Phone and Ballmer. And now Part 3, about Ballmer's successor. Can that be Elop of Nokia.

So yeah, many biz and tech writers are including Nokia CEO Stephen Elop as a potential Microsoft CEO to replace outgoing Steve Ballmer. That would have been a plausible option some time back. If Ballmer had left on his own terms, as a hero CEO of high standing, he could have selected his successor. And Ballmer clearly liked how Elop was emulating Ballmer. Elop has tried to become the 'Mini-Me' of Ballmer. Elop often has spoken more like a true Microsoftian while being Nokia CEO, than Ballmer himself.

WHAT COULDA

If the Nokia partnership for Microsoft had turned out well, with Microsoft now controlling something like 20% or 30% of the smartphone market - as was promised (Elop promised a 1-to-1 transition from Symbian to Windows Phone, would mean 33% market share just by Nokia, plus a few more points of share by HTC, Samsung and the others on top of that) - then yes, Elop would be the hero at Microsoft offices now, and incidentially, Ballmer would not be departing.

There are press stories that it was the 900 million dollars wasted in the Surface tablet launch, which was the straw that broke the camel's back, in other words ended Ballmer's tenure as Microsoft CEO. If you think 900 million dollars wasted is bad, to have a trivial gain in market share, consider Ballmer's performance with Windows smartphones.

Before Ballmer brought the Nokia partnership in with Elop, Microsoft held 5% market share in smartphones in 2010. Today, after Nokia's 33% has been wiped out in the transition, and 100% of Nokia smartphones are Windows based, what is the global market share of Windows Phone? Is it 30%? No. Is it 20%. No. Is it 10%. No. Is it even the 5% he had before this partnership launched? No. Windows Phone has 4% today. And what has this cost Microsoft so far? Microsoft has paid already more than 2.5 Billion dollars in marketing support to Nokia (plus countless more to carriers and developers) - and achieved a MINUS ONE PERCENT POINT gain, yes a one percentage point LOSS to Microsoft's smartphone share. 2.5 Billion dollars to lose you one percent in market share, I think this was another 'significant part' in why Ballmer was told to pack his bags and resign, before he is fired by Gates. Gates can read the numbers and if Surface was bad, Windows Phone was a disaster for Microsoft.

This is why Microsoft Chairman Bill Gates said in February on Charlie Rose, that Ballmer has made some mistakes, and Windows Phone is 'certainly a mistake' - in fact Gates said Microsoft's smartphone strategy had been so badly ruined by Ballmer, that it is now not even recoverable. And yes, if you spend over 2.5 Billion dollars and cannot turn 33% Nokia customers into even a few points of GAIN to Windows, but rather, Windows itself loses in that process, then yes, this is not just broken, this is unrecoverably damaged. There is no future in Windows Phone.

SO CANDIDATE ELOP

So now, lets look at Elop. Elop was Ballmer's boy. They were the BFFs, seen on world stages together. If it was up to Ballmer, Elop would now be succeeding him. And why not? Stephen Elop is an ex Microsoftian. He knows the software business. He has experience with other tech companies from before (Juniper, Adobe, etc) and now Nokia. From Elop's Nokia experience he would bring valuable hardware experience to Microsoft. Elop has been a very loyal Microsoft soldier even when running Nokia (or ruining Nokia, if you prefer). On the surface, Elop seems like an excellent candidate to run Microsoft.

So why not. First, Gates signalled clearly that Ballmer has made some mistakes. What mistake has he singled out to share in public - Windows Phone - the only Microsoft strategy element where Elop is personally involved. If Gates thinks that Ballmer messed up as CEO, and one of his biggest mistakes is Windows Phone - why on earth would Gates hire Elop - the guy who is actually responsible for that mistake? Note, Ballmer did many things right as CEO. Ballmer had many other things to worry about than the smartphone strategy. But Elop was only bothered by the handsets business (over at Nokia) and totally, utterly cocked that up.

Secondly, Gates named Ballmer to replace himself. Gates was very successful as CEO of Microsoft. Ballmer's early tenure continued that success, which arguably was built by Gates and Ballmer initially only continued Gates's plans. Then as Ballmer introduced ever more of his own items and elements, Microsoft went through ever more trouble and pain. So Gates is a smart guy and he learns fast. If Ballmer as type of CEO is the wrong guy now for Microsoft in this era, Gates will not compound that error by hiring another Ballmer-clone. Who is the most Ballmer-istic CEO out there? Elop. If Gates loved what Ballmer did, he'd want another Ballmer. If Gates was so displeased by Ballmer that he actually criticized him in public - then definitely, Gates will seek to find something more like an 'anti-Ballmer'.

So Elop is totally damaged goods. He is associated with Ballmer, a loser now in Gates's mind. Elop is totally linked with Windows Phone, one of Microsoft's costliest mistakes. Elop has shown what he can do when running a highly profitable global tech company - the moment Elop started to execute his own strategy rather than continuing the previous, profitable strategy, Nokia profits vanished and the only quarter Elop was able to produce a miniscule profit since the damage started, was when Elop sold Nokia's headquarters building to create a fake profit moment at Nokia. Gates knows how to read business results. Elop is a disasterous CEO. No matter how you spin it, if Elop created a worse damage than Toyota's crisis with the breaks, worse than New Coke was to Coca Cola or worse than BP's oil spill, yes, Elop is arguably one of the worst CEO's ever, and Gates would never hire such a bad candidate to take over and fix the damage done by Ballmer.

HERE'S A SILLY THOUGHT..

I would expect Bill Gates to learn from his Ballmer-mistake and hire someone as much as possible to be an 'Anti-Ballmer' - so if you saw Elop and Ballmer as two twins, the Evil Twins if you like, then no, Gates would not repeat that mistake by hiring a Ballmer-clone. He'll go the opposite way, get not a software guy, but a hardware guy. Not a Microsoft corporation insider, but an outsider. Not a bully but a friendly cooperative guy. Someone experienced in working through partners in a modern, collaborative environment. If Gates is bold and brave, he'd go outside of Silicon Valley and the West Coast. Especially, if Gates is taking onboard some of the commentary, that Microsoft's time as bullying the industry with a monopolistic market dominant position, is over. If that is the case, then he needs the opposite of a bully now. To give Microsoft a new, friendlier image.

Incidentially, ironically, a name well remembered on this blog, Anssi Vanjoki would be a perfect candidate for that job haha. You want someone truly competent and modern collaborative guy who understands the mobile internet future not the desktop PC past, and comes from the hardware side and is not a Microsoftie, So much not a Silicon Valley dude, he's not even North American, etc.. Wouldn't that be ironic haha..

PS - obviously I would LOVE for Elop to go run Microsoft, because that means he'd depart from his post ot Chief Extinction Officer of Nokia. But also, his strategic vision by 'call me the General' is pathetic, and his management execution is worse even than that. He would destroy Microsoft just as much as he destroyed Nokia so far. I don't want to see Microsoft destroyed, I hope to see Microsoft reborn as a modern, customer-focused company that cares about its partners and suppliers. Elop can't do that for Microsoft.

This was my part 3 of the Ballmer Aftermath Trilogy. Part 1 was about impacts to Microsoft's mobile strategy and Windows Phone. Then Part 2 was the impact to Nokia and its Windows Phone based Lumia strategy. Now I hope we soon will get to write Part 4 - Elop is Fired from Nokia....

Comments

[Werty]

@tired

"http://futures.tradingcharts.com/news/futures/DJ_MARKET_TALK__Nokia_Cash_Position_Worse_Than_It_Appears_Bernstein_202817689.html

Wow.. that was fast..."

Bernstein also estimates that Nokia will sell ~18 million Lumia smartphones this year.
Considering that H1/13 resulted in 13 million sold Lumias, the second half has to be quite bad. Around 2,5 million Lumias per quarter. Not the most likeliest scenario now is it?

Honestly, Bernstein and especially their "analyst" Pierre Ferragu has to be the worst analyst ever. Don't believe me? Just look at his track record for eg. Blackberry. Pierre is so bad it's actually quite funny and especially entertaining.

[Tester]

@Werty:

18 million Lumias almost looks like a typo. I'd think they meant 28 million which would sound more realistic.

[zlutor]

"Bernstein also estimates that Nokia will sell ~18 million Lumia smartphones this year." - most probably not valid estimation...

Nokia has sold 7+ mio in Q2, they expecting some continuous growth in the coming quarters (according to press releases)...
So, it should be ~30mio for 2013.

Expect they come up with some Android model in Q4... :-)

Anyway the rumored Asha502/503 are more interesting to me. That will be the bread and butter for Nokia here and there...

[zlutor]

I meant 'except', not 'expect'! Oooh, good, old, Fraud... :-)

[Robert Atkins]

Bill Gates must chuckle when he sees Elop's name listed as possible successor to Monkey Man.

[Werty]

@Tester

"18 million Lumias almost looks like a typo. I'd think they meant 28 million which would sound more realistic."

Nope, not a typo.
Bernstein cut Lumia 2013 sales estimate to 18.3 million units in the beginning of March. Their rating for the stock was "underperform" (still is) and price target was 1.2 € (currently 1.5 €). Check for yourself if you don't believe me.

[Steve Jobs from beyond the grave]

Arg Damnit it Tomi it's your fault that they discovered the Apple plot to burst M$ and Nokia. Because you see it was us who planted Elop in Nokia and Ballmer in charge of M$. BTW sarcasm may occur but the truth is that M$ has no plan of giving up in the fight for mobile domination.

[cursedcompany_employee_with_a_blink_of_hope]

"Stephen Elop has 5-to-1 odds to be hired as Steve Ballmer’s replacement, as per gambling operator Ladbrokes "

If this is really an option it shows that from an MS (or Gates) point of view he did the right thing. He has to be seen succesful in some point.

You can not take the worst manager in the history of capitalism to lead your stumbling company if he did not succed in another agenda.

That would pretty much prove that the destroying of the free OS (from outside of the US) was the main point to install Elop and other things (3rd ecosystem BS talk) would just have been a nice secondary.

And it is the only thing he "succeded" in.

I do not buy it but I would pay that he leaves NOKIA.

[AndThisWillBeToo]

@Werty
> Check for yourself if you don't believe me.

Thanks, I checked. The 18.3M is forecast of Lumia 920 (one single high end model) sales for full year 2013. So it is actually most likely too high but tells nothing of Nokia total volumes as Nokia sells 5-, 6-, 7- and 8-series too.

[zlutor]

@AndThisWillBeToo : "The 18.3M is forecast of Lumia 920" - I think it is too high...

It is told the vast majority of Lumia sells is L520, total Lumia sales for 2013 ~30mio, so...

[Tomi T Ahonen]

About Nokia Lumia estimates 2013..

Now that the Symbian transition phase is over and the Lumia 'bottom' has been hit, more-or-less, assuming no disaster news between now and end of year (such as terminating Windows Phone by either party or Nokia announging a parallel OS), we should see Lumia sales end the year in the 30M - 35M range, giving Nokia between 3% and 3.5% market share for the year. That assumes a strong Christmas Quarter for Nokia in parallel with the industry's seasonal sales pattern. A bad model release by Nokia, or hot model by rivals, or any negative announcements about Lumia/Windows Phone end, would depress those levels.

Tomi Ahonen :-)

[nexus lumia]

@tomi t ahonen

$200 nexus 4.
google just lower the price of nexus 4.

[foo]

> Stephen Elop has 5-to-1 odds to be hired as Steve Ballmer’s replacement,
> as per gambling operator Ladbrokes

I'm flabbergasted that so many people still believe that Elop was a good, or even reasonable CEO.

From the burning platform memo forward he made a series of dumb (or criminal) decisions that destroyed Nokia's future.

I hope Tomi will compile all his articles about Elop and release a book that will put the things in the right place.

I'm sure this book will become a best-seller in the business schools, since it showcases what a good CEO shouldn't do in several occasions: he shouldn't criticize his own products; he shouldn't pre-announce the death of his cash cow before he has a new one; he shouldn't make a strategic decision without a contigency plan; he shouldn't give strategic control of a core product to another company; and so on.

The title of the book? "Elop Effect, or how a delusional CEO destroyed one of the most admired companies in the world".

[AndThisWillBeToo]

@CN
It seems that I misread it: they use sales of 920 as basis for their 18M forecast but imply it's total Nokia sales.
We both better get a bookmark from Bernstein so we have link to hand out when Tomi says nobody expected as poor Lumia sales as he did. ;)

[winter]

Why is Elop so popular?

When asked,the Russians wanted to vote Stalin the "best" Russian of all times. Either Louis XIV or Napoleon is the "best" French leader in popular French believe. Both have killed more French than anyone else.

It seems that to become popular as a leader, you have to cause destruction on unprecidented scales.

Elop does fill that position in the world of business.

[logic001]

Nokia really needs to consider Sailfish. Yes of course its high risk and may only work as a secondary OS however I feel this needs to be supported where possible. Okay we all know mobile is the future. Within a couple of years it(actually most are already now) will be in our phones, communication devices, TVs, Cars, Transport, Robotics and healthcare, embedded in households. Therefore its easy to conclude that Computers / Mobile will be a major and increasing part of our daily life. Given such I feel it is highly dangerous that all the key OS are American controlled. Their influence on our daily lives will become just too great to allow one country have a monopoly on such. I therefore feel it is essential that at least one European OS is developed.

[Simon]

@logic001: "Nokia really needs to consider Sailfish"

I would be really surprised if the payments (both past and future) from Microsoft were not dependent on Nokia exclusively using Windows Phone on any smartphones that it sells.

[zlutor]

@logic001: "I therefore feel it is essential that at least one European OS is developed." - there was an initiative for that some years ago (based on Symbian).

http://pulse2.com/2010/11/02/symbian-receives-e22-million-from-initiative-sponsored-by-european-commission/

An yes, I also think there should be something out of the (direct) reach of USA government. They have proved they use all of their possibilities to track anything and everything...

In ideal case that mobile OS should be (fully) open source - that is not the case with Sailfish at the moment (part of UI code is closed) but they are planning to open it up...

[Winter]

@zlutor
"In ideal case that mobile OS should be (fully) open source"

What exactly is wrong with Android?

http://www.cyanogenmod.org/

[zlutor]

@Winter: "I also think there should be something out of the (direct) reach of USA government."

And I prefer OSs developed by Finish companies... :-)

Otherwise, nothing... :-)