Cantillon: Ballmer’s exit a smart move for Microsoft

The share price said it all: Microsoft rose as much as 7 per cent on news that chief executive Steve Ballmer will step down within 12 months.

During his 13-year tenure Ballmer bet big on PCs. And lost. PC shipments fell about 11 per cent in the second quarter this year, for a record fifth straight quarter of declines. Ballmer never quite adapted to the shift from PCs to mobile devices and that perhaps has been his biggest failing.

His last big gamble was on Windows 8 in the hope the latest Windows operating system would let Microsoft hold on to dominance in a market the firm knows well. What it showed was that the tech giant is now fighting to retain home ground rather than seizing the initiative in new markets. It could have been very different. Microsoft had a smartphone operating system, Windows Phone, when the iPhone took to the market. Somehow that slipped by the wayside and now Apple’s IOS and Google’s Android control the lucrative smartphone market. Meanwhile, its latest Windows Phone 8 is proving a harder sell than anticipated.

Ballmer took over as chief executive in 2000 from Bill Gates, his schoolmate at Harvard. He has made a fortune from his early involvement with the firm – and remains its fifth largest shareholder.

A Vanity Fair article in June 2012 placed the blame for the firm's lacklustre performance squarely at Ballmer's door. With the cover blurb of "How
Microsoft lost its Mojo" it referred to Ballmer's tenure as "Microsoft's lost decade". It portrayed Ballmer as a businessman with a background in deal-making, finance and marketing. "He was not the product guy".

Last month’s reorganisation of the business into a functional structure rather than the divisional system introduced by Ballmer in 2002 perhaps signalled his race was run.

Ballmer’s successor faces the tough task of refocusing Microsoft towards the changing face of tech. It needs to look not only at improving its offerings in the tablet market but at leaping into the realm of wearable and in-car technologies.

His era may come to be defined as one of increased internal bureaucracy and betting on the wrong devices.

A happy ending for Datalex?

The seemingly never-ending story in recent years of the Irish small-cap technology sector has been: is somebody going to buy Datalex?

The listed travel technology firm, which sells software to help airlines maximise their ancillary sales, will present its interim results next week. Goodbody analyst Colm Foley is forecasting an 11 per cent rise in half-year revenues to $17.5m (Datalex is Irish, but reports in dollars), and is generally bullish on the stock. The company has guided earnings growth of at least 25 per cent.

Okay, so Datalex isn’t quite CRH in scale. But to some market observers, while small, it appears beautifully formed. With high fuel prices having turned aviation industry economics upside down, Datalex has the perfect solution for airlines that see their future as “flying shops”.

In its chief executive, Aidan Brogan (uncle of the Dublin GAA stars Bernard and Alan), it also has a steady pair of hands on the tiller.

Dermot Desmond owns 29 per cent, and is well-known for picking technology winners. Nick Furlong’s Pageant Holdings was also stake-building last year, perhaps in anticipation of someone making a move for the stock.

But who?

The conventional wisdom has been that Desmond, who owns another technology pioneer, Daon, might have a crack. But if that was the case, he would surely have made his move when it was cheaper: Datalex’s share price has been steadily rising for 18 months.

What about Amadeus, the world’s largest travel technology firm? Datalex needs scale (tick), an owner capable of broadening its suite of products (tick) and one with the firepower to grow it rapidly (tick).

The stock suddenly jumped almost 10 per cent yesterday. Perhaps the next chapter of the Datalex story is being authored as we speak.

Internships – exploitation or a valuable learning tool?

One upon a time, we understood internships to consist of making coffee, filing and photocopying. The recent death of a 21-year-old intern, Moritz Erhardt (below), employed by Bank of America Merrill Lynch in London, has placed a considerably darker focus on the world of work experience, however.

Whether as a result of the global economic crisis or of greater competition for jobs, it seems some internships
have evolved into 15-hour working days, all-nighters and meals in the office.

While internships and work placements can offer a welcome route into competitive industries, the line between useful experience and unacceptable exploitation can become blurred.

Take for example Ireland’s national internship scheme JobBridge. When it was introduced in 2011, the Government insisted it would not be used by employers to hire cheap labour. However, the last two years have seen a number of organisations criticised for their use of it.

Last month a Westmeath national school advertised a position for a primary school teacher. The nine-month position, which was open to qualified primary school teachers, involved a 30-hour working week. The intern would be paid €50 a week.

In September 2011, Tesco placed an ad on the scheme for 218 “customer assistant” internships for the busy Christmas period. The full-time roles included “filling shelves” and “ensuring customers would not have to queue”. Tesco said the interns would gain practical experience in merchandising, stock rotation and “management of waste and damages”.

In other places, interns are asked to put in long working hours, often clocking up more than 100 hours per week in an effort to secure their dream jobs. This occurs in spite of the EU working time directive.

While all interns in Ireland and elsewhere in Europe have basic employment rights, including the right to adequate breaks and holidays, it seems many decide to opt out in an effort to impress employers.

While they are adults that must take responsibility for their actions and decisions, they are by definition the weaker partner in the employer-intern relationship. The greater volume of responsibility for ensuring that internships work the way they should therefore lies with the bosses.