/ “Google’s Not a Real Company. It’s a House of Cards.” Part 2

The person who uttered these absurd and presumptuous words is none other than Steve Ballmer, the CEO of Microsoft. An excellent article, written by Kurt Eichenwald, appeared in the August issue of Vanity Fair magazine entitled, Microsoft’s Lost Decade. Interviewing former and current Microsoft executives, the author finds the blame directed at Ballmer as the man who has led the company astray.

A new hard-charging CEO at Microsoft

Sixteen days later, Bill Gates handed off the CEO reins to Ballmer, a boisterous, loud individual who ran the business side of Microsoft. “I was stunned when Bill announced that he was stepping aside to become ‘chief software architect’ in January 2000, with Steve Ballmer succeeding him as CEO,” recalls Paul Allen, one of the founders of Microsoft. Put differently, an employee with a background in deal-making, finance and product marketing had replaced a software-and-technological genius.

The music stopped and a bureaucracy took hold. The days of shoulder-to-shoulder teams fighting to beat the world were over. “We were designing software by committee,” says a former Microsoft engineer. “Things were moving too slowly. There were too many meetings.”

By 2002, the by-product of bureaucracy–brutal corporate politics–had reared its head at Microsoft. Specifically, a management system called “stack ranking” of employees and six-month reviews resulted in employees planning their days around their reviews, rather than focusing on the development of innovative products. In the end, the stack-ranking system crippled the ability to innovate at Microsoft.

Years passed. Finally, on November 14, 2006, Microsoft introduced its music player, called Zune. Fifty-four days later, Steve Jobs unveiled the iPhone: a mobile phone, music player and camera. Zune was blown away. Even worse, Apple’s iPod music player, which was released in 2001, was still around for customers who didn’t want a phone. And, by 2009 it had an astonishing 71% of the market.

Hitting a wall and becoming unglued

In addition, Microsoft faced a challenge from Google, because it was snagging so many designers. One met with Ballmer and told him that he had accepted an offer from Google. Whereupon Ballmer threw a chair against the wall and yelled, “I’m going to bury Eric Schmidt (the CEO)–I’ve done it before and I’ll do it again. I’m going to kill Google.” (Profanity deleted for this blog.)

Then Bing came on the scene. Cue the evil laughter and organ music. In May, 2009, Ballmer unveiled “Bing”, the search engine that was developed to compete with Google. It was no contest. Managers spent their days studying Google and telling the employees working on Bing to match whatever their competitor brought out. To date, Bing has lost $6 billion for Microsoft; add in the earlier search products and the amount of money poured into this effort rises to almost $10 billion.

When Apple introduced the iPhone, Steve Ballmer laughed. “No chance that the iPhone is going to get any significant market share,” he said. He also pooh-poohed the iPad when it came out in 2010, and it has been busting down the barn doors ever since, selling more than 55 million units. As for Google, Ballmer’s predictions were equally off base. In 2005 he proclaimed, “Google’s not a real company. It’s a house of cards.”

UPDATE: The New York Post reported on July 30, 2012 that Apple has just sold its 250 millionth iPhone. The article, by Garett Sloane, goes on to say “that’s a stunning number for a product–not as ubiquitous as hamburgers or as iconic as baseball–but a handheld computer that, at $600 a pop, has generated billions of dollars in sales for Apple, helping it become the world’s most valuable company.”

 

 

 

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