Microsoft CEO Ballmer to retire, as Windows Phone struggles continue

Microsoft (NASDAQ:MSFT) CEO Steve Ballmer will retire within the next 12 months as soon as a successor has been chosen, bringing to an end a 13-year reign at the top of Microsoft in which the company has grown revenues but struggled to make the transition to mobile computing, as rivals Google (NASDAQ:GOOG) and Apple (NASDAQ:AAPL) have surpassed it in smartphones.

Microsoft ceo steve ballmer

Ballmer

"There is never a perfect time for this type of transition, but now is the right time," Ballmer said in a statement. "We have embarked on a new strategy with a new organization and we have an amazing Senior Leadership Team. My original thoughts on timing would have had my retirement happen in the middle of our company's transformation to a devices and services company. We need a CEO who will be here longer term for this new direction."

Microsoft's stock was up nearly 7 percent in morning trading following the announcement. Immediately, speculation turned to who might succeed Ballmer as CEO, with most of the focus on internal Microsoft candidates.

"This is an emotional and difficult thing for me to do. I take this step in the best interests of the company I love; it is the thing outside of my family and closest friends that matters to me most," Ballmer wrote in a memo to employees, which was reported by multiple media outlets. "Microsoft has all its best days ahead. Know you are part of the best team in the industry and have the right technology assets. We cannot and will not miss a beat in these transitions. I am focused and driving hard and know I can count on all of you to do the same. Let's do ourselves proud."

As Ballmer notes in the memo, Microsoft has grown into a $78 billion company with more than 100,000 employees. Yet that growth has also made the firm somewhat unwieldy, something Ballmer sought to address last month when Microsoft cut the number of its business units to four.

Windows Phone has been one of the biggest recent gambles Microsoft has made under Ballmer. The company replaced its aging Windows Mobile smartphone operating system with Windows Phone in 2010. Windows Phone sports a new, tile-based user interface and a focus on personalization, moving away from the old Windows Mobile to better compete with smartphones running Google's Android and Apple's iPhone. The first Windows Phone devices were introduced in the fall of 2010, and the company has made successive software updates, but thus far the platform has struggled to gain market share. And, though its application catalogue has grown to 170,000, it remains far behind Android and iOS in terms of apps, and still lacks some top apps, such as Instagram.

Although HTC, Samsung Electronics and others have built Windows Phone devices, Nokia (NYSE:NOK) remains the loudest and strongest supporter of Windows Phone. Terry Myerson, the corporate vice president of Microsoft's Windows Phone division, said in April that Microsoft has no current plans to build its own Windows Phone smartphone and would only do so if partners like Nokia and HTC are not making the most of the platform and addressing the market. Myerson was given responsibility of the company's Windows and Xbox operating systems in an executive shakeup announced last month.

Sales of smartphones running Windows Phone operating system outpaced BlackBerry (NASDAQ:BBRY) device sales for the first time ever during the second quarter of 2013, research firm Gartner recently reported. However, Microsoft's global smartphone market share is still paltry, at 3.3. percent in the second quarter, according to Gartner, up from 2.6 percent in the year-ago quarter.

A recent report from The Verge, citing unnamed sources, said Microsoft is working on the so-called Windows Phone Blue update, expected in early 2014--and rumors say the major upgrade will bring a notification center, enhanced multitasking and improvements to built-in applications, among other improvements.

For more:
- see this release
- see this ZDNet article
- see this AllThingsD article
- see this WSJ article (sub. req.)
- see this WSJ blog post (sub. req.)
- see this Bloomberg article

Related Articles:
Is HTC giving up on Windows Phone?
Gartner: Windows Phone sales eclipse BlackBerry for first time in Q2
Nokia exec frustrated with pace of Windows Phone software updates
Microsoft scrambles to quell a Windows Phone user insurrection
Nokia's 7.4M Lumia shipments in Q2 miss estimates, Elop cuts more jobs
Report: Microsoft plan to buy Nokia's phone biz fell apart

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