In: Finance
Explain why Microsoft's culture under Ballmer resulted in poor financial performance and why Microsoft's culture under Nadella generated very good financial performance.(answer in 40 sentences)
Satya Nadella’s personality is the total opposite of Steve Ballmer, which has led to a huge cultural change for the better.
STEVE BALLMER
You will never meet anyone with more passion and drive than Steve Ballmer. He is an inspirational leader, and at 6 foot 5 inches tall, and booming voice, has a sometimes intimidating presence. Steve joined Microsoft in 1980, and became CEO in January of 2000, when Microsoft’s revenue was just $20 Billion. Over the next 14 years Steve Ballmer grew revenues to an astounding $87 Billion. He increased profits by 215% to $23 Billion. Azure and Cloud revenue was already at $4.4 Billion when Steve Ballmer left as CEO. But, the stock price didn’t reflect this amazing growth, and remained stagnant for much of the decade.
SATYA NADELLA
Satya Nadella’s strengths are very different. He brought a calm, deliberate, and people centered approach that changed the culture at Microsoft, and changed the outside perception of the company. He also brought more focus to Azure “Intelligent Cloud” and to Artificial Intelligence, which captured Wall Street’s attention. In 5 years Satya grew revenues to $126 Billion, an increase of 45% in total, or about 9% per year. Yet, the stock price increased from about $40 per share to $138 per share today, an increase of 245%. So, while revenues grew only 45%, Wall Street rewarded the company with a 245% increase in stock price. That is what a change in perception can do.
So, is Satya Nadella a better CEO than Steve Ballmer?
It is too early to tell. Steve was CEO for about 14 years, and grew revenue by 215%. Satya has been CEO for a little over 5 years, and has grown revenues by 45%. But, the stock price increased an astounding 245%. Steve already started to push to the Cloud and Azure. Satya has brought more attention and focus to it.
I would say the biggest change Satya has made is in the culture, employee satisfaction, and outside perception…which has translated into a huge increase in employee morale and the stock price. Everyone at Microsoft has stock options, so the stock price increase alone would increase morale.
I don’t think anyone other than Steve Ballmer could have successfully succeeded Bill Gates. Steve was the right choice for that time. Satya was obviously the right choice to move Microsoft forward from the struggles of the 2010 decade. Both are outstanding CEOs in their own way.