Ballmer’s iPhone call just about said it all

The Microsoft chief executive will be remembered for failing to recognise the threat posed by the iPhone

Steve Ballmer’s  blanket dismissal of the iPhone back in 2007 will go down as one of the most damning moments of his career.  Photograph: Joshua Roberts/Bloomberg

Steve Ballmer’s blanket dismissal of the iPhone back in 2007 will go down as one of the most damning moments of his career. Photograph: Joshua Roberts/Bloomberg

Mon, Aug 26, 2013, 01:00

In 1962, the head of A&R at Decca Records, Dick Rowe, rejected the chance to sign the Beatles, allegedly telling Brian Epstein that the foursome had no chance of making it in the music industry.

Reality, of course, proved otherwise and, despite Rowe’s other successes in the business, he was from that point on destined to be remembered as the buffoon who couldn’t spot how amazing the Beatles were.

Now replace “music label A&R man” with “technology company chief executive” and “the Beatles” with “the iPhone”, and you might get a picture of the fate history has in store for Steve Ballmer.

His blanket dismissal of the iPhone back in 2007 will go down as one of the most damning moments of his career.

The video of one interview from that time is rightly famous – a journalist has the temerity to ask him how he reacted when Steve Jobs unveiled the revolutionary touchscreen device.

He narrows those deep-set eyes, thrusts his head forward, flashes a shark-like grin, audibly snorts, and then, in a moment that will haunt him for ever more, guffaws with a theatrical, forced laugh.

“$500, fully subsidised, with a plan? I said that is the most expensive phone in the world,” he bellows disdainfully.

He follows it up with a painfully unconvincing defence of Microsoft’s position in mobile, citing something called the Motorola Q as evidence that his company is all over the space, and heavily implies that Steve Jobs is some sort of Walter Mitty character.

In the space of 120 seconds, he runs the gamut of defensive, delusional, out-of-touch, aggressive and foolish. The clip fairly summarised his ill-starred reign, in which he oversaw the decline of the empire Bill Gates built, the firm going from fearsome technological colossus to hapless irrelevance.

It is very unlikely that Friday’s bombshell announcement he was leaving was of his own volition – nobody who proposes the sort of structural reorganisation he did last month is in a mind to step down.

This is a firing, basically, and it would appear the last straw for the board was the $900 million write-down he had to take on the disastrous Surface RT tablet device Microsoft brought out last year.

It speaks volumes about Microsoft’s listlessness that the last straw needed to be just shy of a billion dollars, particularly when it was clear for more than half a decade at least that the man was utterly incapable of leading the company in an era of post-PC disruption.

He saw his role as shepherding the traditional revenues from Windows and Office, and pretty much all his other ventures ended up resembling various shapes of pear.

A thumbnail sketch of his failure might suggest he was merely incapable of rising to the challenges of Clayton Christensen’s “innovator’s dilemma”, lacking the determination to undermine today’s guaranteed profits in order to pursue potential future success. When Apple and Android tablets and smartphones began to threaten the Windows and Office hegemony, Ballmer’s Microsoft was way too slow to react, and then missed the target badly when it finally did produce a response in the form of Windows 8.


Boardroom wargames
Ballmer was also so insecure that he ran all his most likely successors, the likes of J Allard, Robbie Bach and Steve Sinofsky, out of Redmond. With every high-profile departure, it was clear that the poisonous politicking that by all accounts runs through Microsoft like veins through marble came right from the top.

You didn’t even need to be a keen technologist or investor to spot these weaknesses – Ballmer was the most conspicuous of that breed of chief executive who spouts meaningless business jargon in lieu of honest, plain English. His speeches and conference talks, his corporate memos and interviews, brought bluster to a whole new level.

Such rhetoric might be enough to spoof a board into leaving you in your post for 13 years, but the best programmers and designers, the sort of people who can actually “out-innovate Google” or “out-design Apple”, will run a mile from that variety of platitudinous nonsense. And the ones who stay won’t actually believe you anyway.

That’s a recipe for long-term disaster, and that’s basically what he oversaw. The Windows and Office profits will continue to roll in, though they will likely stagnate before contracting sharply in a few years, but I suspect the best Microsoft can hope for in the medium-term is an IBM-style transformation into an “enterprise-solutions” provider, with a decent XBox business on the side. Maybe some outsider can turn the place around, but it’s kind of like expecting the banking culture to significantly change – far-fetched and counter to all the facts at our disposal.

Ballmer’s business epitaph was cast in stone the moment he derisively laughed at the iPhone – within five years of that interview, the iPhone alone was a bigger business than all of Microsoft’s myriad efforts. History doesn’t look fondly on such hubris.

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