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2HRS2GO: Microsoft&#039s new Internet boss has blemished record

Rick Belluzzo's latest career move is either the ultimate validation or repudiation of the information technology industry's ideas of meritocracy.

If the stories are true -- and I'll assume they are, since ZDNet News posted one -- Belluzzo left Silicon Graphics Inc. (NYSE: SGI) to assume a post as head of Microsoft's Internet operations. In one sense it's classic thinking for the IT industry, where you aren't considered a veteran until you've had at least a few setbacks.

Unfortunately, that usually applies to young entrepreneurs, not someone with more than two decades of experience at huge corporations. Which is why Belluzzo's hiring demonstrates that Microsoft doesn't quite conform to the meritocratic ideal promoted by Bill Gates.



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Although there are plenty of savvy, energetic, visionary media and Web types around, Microsoft apparently will go with an old-fashioned hardware guy. Hiring someone from another field isn't necessarily a bad thing -- witness former credit card and tobacco executive Lou Gerstner's work at IBM. But those managers usually had success in their previous fields; Gerstner pared the fat at RJR Nabisco and whipped its financials into shape to meet the exacting standards of owner Kohlberg Kravis Roberts.

Belluzzo's latest performance has been less impressive. When he took over Silicon Graphics 19 months ago, some observers thought Belluzzo was crazy to leave a 22-year tenure at Hewlett Packard Co. (NYSE: HWP) for SGI's listing ship, especially since he was viewed as a possible heir to Lew Platt's HP throne. Given HP's own uncertainties that led to its current restructuring plan, perhaps Belluzzo did the right thing.

Perhaps. But probably not, given his failure to turn around SGI.

Belluzzo had the right idea in trying to expand Silicon Graphics beyond the shrinking workstation field. But SGI botched both ends of the market: on the high end of computing, he foolishly thought SGI could do something with the Cray unit instead of recognizing it for the boondoggle that it was; at the low (or at least lower) end, he committed SGI to a line of Windows NT workstations.

SGI found out it wasn't good at manufacturing a product for a wider audience. Production problems plagued the start of the NT rollout and by the time they were worked out, SGI realized that workstations -- Unix, NT or otherwise -- just aren't a huge field anymore. Eight months after the NT launch, the SGI announced it was pulling out. So much for a "fundamental part of getting our growth back."

The latest plan, plotted by Belluzzo before heading for Redmond, revolves around a quartet of widely hyped, standards: Internet, Linux, Intel's Merced chip and graphics technology from nVidia. SGI is late to the game in the first area, and far from being alone in planning for the other three.

This record of leadership, along with financial performance featuring five money-losing quarters out of six, somehow qualifies Belluzzo to lead Microsoft's way on the Internet. Actually it doesn't, but the fact that Belluzzo knew a lot of people does. "He had longtime connections to Microsoft while at HP," notes today's Wall Street Journal.

Maybe Microsoft prefers to recall Belluzzo's highly-regarded tenure at HP rather than the Silicon Graphics jaunt. Maybe Gates also wanted a well-known name to inspire confidence in the Internet business.

What happened to the Microsoft's human resources ideal of hiring the best person, regardless of experience? There has to be someone out there -- even someone relatively young -- with a better grasp of the Internet than a man who didn't even make the Net a strategic centerpiece until two weeks ago.

In any case, Microsoft's Internet business could use something of a turnaround. Unfortunately, after 19 months of Belluzzo, so can SGI.

Other issues:

  • 3dfx Inc.
  • (Nasdaq: TDFX) No wonder SGI chose to go with nVidia. 3dfx got its face kicked in this quarter, despite some pundits' expectations to the contrary. But chipsets are a tough market for anyone trying to make money -- might be best to avoid it entirely as an investor and focus on higher margin businesses. Or at least broader ones.

    Broad market indices were rising strongly in the afternoon. The Nasdaq Composite Index was up 56.52 to 2776.09, the S&P 500 had risen 13.00 to 1373.22 and the Dow Jones Industrial Average had gained 65.22 to 11364.98. 22GO2hr>