What makes him powerful: Steve Ballmer has served as the chief executive of Microsoft (NASDAQ:MSFT) since 2000, but this year he has made some of his biggest bets on the company's future in two core areas: smartphones and mobile communications. Under Ballmer's leadership, Microsoft has formed partnerships with device makers including HTC, LG, Samsung and, most substantially, with Nokia (NYSE:NOK), in an attempt to bolster its Windows Phone platform. He also bought Skype for $8.5 billion, potentially placing Microsoft at the nexus of the future of mobile communications.
The Microsoft-Nokia pact, announced in February, was a blockbuster deal and was also a big bet on an ailing hardware partner. Nokia has more at stake in the partnership since it is essentially betting the future of the company on Windows Phone, but Ballmer and Microsoft also need the partnership to succeed. Many Windows Phone licensees also use Google's (NASDAQ:GOOG) Android platform, and even though Microsoft has been targeting Android licensees with patent licensing deals, Microsoft clearly needs Nokia to succeed so it can take advantage of the handset maker's global reach.
So far, Ballmer has been fairly realistic about Windows Phone's prospects: fully a year after the introduction of the platform, sales still aren't so hot. Ballmer and Microsoft are leaning on hardware partners for more marketing dollars, but the Nokia partnership will be crucial to determining if Windows Phone can gain momentum.
The addition of Nokia's Lumia 800 and Lumia 710, Nokia's first phones running Windows Phone, is likely to help the platform increase its market share by taking over some of Symbian's share of the market, according to research firm IDC. Nokia plans to introduce more models in early 2012, including a portfolio of devices for the U.S. market.
While Ballmer has been busy making sure the relationship with Nokia is going smoothly, he has also been active on the M&A front, and in May he paid $8.5 billion for peer-to-peer VoIP company Skype. Microsoft has the unique opportunity to integrate Skype's capabilities into Windows Phone devices' native hardware as well as other Microsoft services, such as Lync, Windows Live Messenger and the Xbox platform. Apple's (NASDAQ:AAPL) iOS prohibits Skype from accessing its video processor or address book, while Android also does not allow Skype to access its video processor. With Skype under its belt, Microsoft has the opportunity to capitalize on the program's popularity with its own video chat program to rival Apple's FaceTime.
There are still a lot of unanswered questions on how Microsoft will integrate Skype and how that might change Microsoft's products. However, Ballmer's bold move in scooping up Skype could pay big dividends. Already, video calling is 40 percent of Skype's traffic, and the advent of LTE and WiMAX networks creates the opportunity to provide ubiquitous mobile video calling. The Skype purchase showed that Microsoft wants to play a role in the future of IP communications, both wired and wireless.
Both the Nokia partnership and the Skype purchase show that Ballmer has been willing to place big bets on emerging platforms and technologies with an eye toward the future. Obviously, it's not clear if those bets will pay off, but Ballmer is pushing his chips into the middle. --Phil