Microsoft's 2014 makeover: It's all up to the next boss

The world waits for Microsoft to reveal the successor to CEO Steve Ballmer. That's when the hard decisions start.

Microsoft
Microsoft

Somebody's got to be up for this job.

Months after Steve Ballmer announced plans to step down as chief executive, Microsoft heads into 2014 still searching for the right candidate. In the last few months of 2013, several names of rumored CEOs-in-waiting got bandied about -- Ford CEO Alan Mulally and Microsoft's VP of its cloud-and-enterprise group, Satya Nadella -- often mentioned as the front-runners. (Mulally has since indicated he plans to remain in Detroit.)

This latest episode in executive handicapping falls under the heading of "those who talk don't know and those who know aren't talking." But this is what we do know: Microsoft plans to make its selection known sometime early in 2014, and at that point, the close scrutiny begins.

The new boss will be walking into a job where there's lots to celebrate and lots to worry about -- not the least being a company still seeking to figure out its place in a post-PC world. Perhaps the most pressing question facing Microsoft's next CEO will be whether it's worth keeping its different pieces together or recasting the company with fewer lines of business.

One school of thought suggests that Microsoft is simply too big to compete with slicker, faster-moving companies born in the Internet era. If the next CEO buys into that worldview, he or she may decide to sell off the Xbox and Bing businesses, as Nomura Equity Research's Rick Sherlund has argued, as part of a scenario in which Microsoft sells Bing either to Facebook or Yahoo while shopping the Xbox business around to a consumer electronics company where it would make a better fit.

That's the Wall Street view, at least. Nothing new there as the Street has been down on Bing for quite some time. The online services division, the corporate organization where Bing resides, lost $1.3 billion last year. The year before, it lost $8.1 billion. But with Microsoft integrating its search technology into nearly all of its software and hardware as a service, it's also possible that the new boss may decide, like Ballmer, that there's a nice strategic fit here. After all, there are still good arguments for keeping Xbox -- not the least being that it's a leading brand in a growth area with terrific upside. So why jettison a business just as it's realizing its potential?

Obviously, Microsoft's management will have to sort through competing visions of the future, but this isn't a tear-down situation. The company's in fairly good shape, and there's nothing forcing the new boss to make a hasty decision.

For all the darts tossed its way by kibbitzers, Microsoft's bread-and-butter business of Windows and Office still continues to pay the bills and that affords the company boffins plenty of time to think up how to best deal with tech's new world order. Also, Windows Azure, the company's cloud platform, rates as an unqualified success, pulling in more than a billion dollars each quarter.

Microsoft headquarters, Attkisson piece
Microsoft headquarters in Redmond, Wash. CBS

Still, the countdown will start once the baton officially gets passed from Ballmer. The new CEO will be charged with working out where to point Microsoft in a world increasingly dominated by tablets and software which resides on the cloud. The final statistics won't be ready until early next year, but they're expected to show a further decline in PC sales in the fourth quarter of 2013. That trend's not going to reverse, a troubling harbinger for the company's cash cow Windows monopoly.

Another challenge: Can Microsoft foster the sort of app ecosystem that Google and Apple have so successfully created? The bold decision to buy Nokia's device business opens a more direct front of competition against its two chief rivals. But jumping into the phone hardware business, a market where Microsoft has had uneven success, presents the new CEO with a fait accompli.

Now it will be up to the new boss to figure out how to make this latest division work with the rest of a newly inherited tech conglomerate.

Big questions and no easy immediate answers. Then again, that's why whoever gets this plum job is going to get the big bucks to figure out the answers.

 

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