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Microsoft's Ballmer challenges Vanity Fair's 'lost decade' claim

In an interview with Forbes, Microsoft's CEO takes aim at the claim in Vanity Fair magazine that the past ten years have been a "lost decade" for the software giant.

Microsoft CEO Steve Ballmer
Microsoft CEO Steve Ballmer
James Martin/CNET

Did Microsoft lose itself over the past decade? Its CEO obviously doesn't think so.

In a Forbes interview published yesterday, Steve Ballmer was asked about the recent Vanity Fair article that charged poor management and bureaucracy at Microsoft with hurting the company financially and technologically over the past ten years.

Ballmer's response?

"It's not been a lost decade for me! I mean, look, ultimately progress is measured sort of through the eyes of our users," he told Forbes. "More than our investors or our P&L [profit and loss] or anything else, it's through the eyes of our users. We have 1.3 billion people using PCs today. There was a time in the '90s when we were sure there would never be 100 million PCs sold a year. Now there will be 375 million sold this year alone. So, is it a lost decade?"

Ballmer also alluded to Microsoft's stock price, which has languished in the high 20s and low 30s over the past decade after a high of around $60 per share.

"The stock market has always had its own meter," Ballmer said. "Sometimes it's ahead of itself, sometimes it's behind itself."

The CEO also touted Windows 8, Office 15, Surface, Windows Phone, and Xbox, saying that "if we deliver exciting products and we make more money, eventually that will translate into rewards for our shareholders."

In his conversation with Forbes, the Microsoft chief tried to explain the sluggish stock price and promote new products. But he avoided any mention of the "stack ranking" system reportedly used by Microsoft to tag a certain percentage of employees as top, good, average, or poor, regardless of their actual job performance.

Noting that this system is cited by employees as "the most destructive process" at Microsoft, Vanity Fair author Kurt Eichenwald said that it's forced many workers to exit the company and "crippled Microsoft's ability to innovate."

In addition to employees who have left the company on their own, more are being thrown out of work as priorities shift. Microsoft confirmed yesterday that it slashed positions in the advertising and marketing divisions.

"I can confirm that there were job eliminations today at Microsoft," a company representative told The Wall Street Journal (subscription required) via e-mail. "I can assure you we're thinking about the exciting new opportunities that Windows 8, Xbox, and Skype present for our advertising and marketing partners."

Naturally, Ballmer needs to defend himself and his own company. But is Vanity Fair's "lost decade" claim fair and accurate?

Long dependent on its core Windows and Office products, Microsoft has been struggling to figure out how to succeed in the land of mobile. Windows and Office are still huge moneymakers. But as Ballmer acknowledged to Forbes, "if you want to continue to be great, you've got to bet on new things, big, bold bets."

Yet Microsoft's bold steps have so far failed to land on solid ground, especially given fierce competition. Windows Phone still holds only a tiny percentage of the mobile market. The highly anticipated Kin phone was quickly killed following its debut in 2010 after Microsoft spent a lot of cash making and marketing it.

And now in an attempt to appeal to mobile users yet still hang onto its PC audience, Microsoft is betting heavily on Windows 8. Designed for both tablets and traditional computers, the upcoming new OS has triggered complaints and concerns that it's trying to be all things to all people, a potential recipe for disaster.

Microsoft has certainly had its share of successes over the past decade, such as the Xbox 360. But it's often been late to the party, coming up with its own twists on products that other companies have already introduced.

Vanity Fair's article may have been right on in pointing the finger at poor management and bureaucracy. If those claims are accurate, then it seems Microsoft will have to continue to try to keep its head above water in a technological river that keeps moving faster than the company can handle.