Microsoft CEO search enters endgame

Board's need for speed resulted in Ballmer's departure, and will prompt successor choice this year

Microsoft's search for a new CEO is entering its endgame, according to a report by Bloomberg last week.

In a story published Friday, Bloomberg said that Microsoft's board of directors would narrow the list of candidates to three to five people in a meeting slated for today, a day before Microsoft hosts its shareholders meeting not far from its Redmond, Wash. headquarters.

The board aims to select a new CEO as soon as next month, Bloomberg said, citing an anonymous source.

In late August, current CEO Steve Ballmer abruptly announced he would retire and cede control to a new chief executive within 12 months. At the time, there was speculation that Ballmer was forced out by the board for one too many strategic mistakes, but in his first in-depth interview since then, Ballmer told the Wall Street Journal (subscription required) that he made the decision to step aside when it was clear he couldn't change Microsoft fast enough to suit the board.

While the 12 months Ballmer gave as his notice won't expire until August 2014, there are good reasons for the company to move much faster.

Financial analysts have urged the Redmond, Wash. technology giant to act quickly to shorten the period of uncertainty about the new leader and his or her plans for the firm. If that timespan stretched beyond investors' patience, Microsoft's share price, which has climbed 17% since its closing the day before Ballmer announced his retirement, could lose momentum or even decline.

Another possible timing issue stems from Microsoft's August 2013 decision to add a new board member in January under an agreement with ValueAct Capital, an activist shareholder that had been pressing for changes. In return for the board seat and other considerations, ValueAct has made several promises, including not to acquire more than 4.9% of Microsoft's outstanding share, not to conduct a proxy fight, and not to "disparage the Company ... or any of its current or former officers or directors," according to a filing with the U.S. Securities and Exchange Commission (SEC).

By choosing a CEO this year, Microsoft's current directors can work without outside interference. If the selection process drags into 2014, ValueAct's president, G. Mason Morfit, will have a voice in the choice.

But the Wall Street Journal interview with Ballmer and others revealed that, above all else, the board wanted the pace of change sped up. The desire to accelerate Microsoft's pivot from a purveyor of packaged software to a company focused on devices and services would be negated by a lethargic search for a new CEO, and run counter to its demand that Ballmer "get on with it," as John Thompson, the independent director who heads the CEO-search committee, put it to the newspaper.

That need for speed is likely behind the numerous major decisions Ballmer has announced, if not since his announced retirement, at least since he told the board in June that he would step aside.

Those include the radical overhaul of the company's structure, revealed in July; the September acquisition of Finnish phone maker Nokia's handset business and the licensing of its patent portfolio for more than $7 billion; and most recently, last week's abandonment of the firm's long-derided "stack ranking" process of evaluating and rewarding employees.

After the last two of those decisions, critics questioned Ballmer's right to make them as a lame duck. By acquiring Nokia and changing a critical management practice -- and in hindsight, the corporate reorganization as well -- the theories went, Ballmer was handcuffing his replacement before one had been named, forcing him or her to walk the same strategic and operational roads.

But from the account given by Ballmer and others -- including Thompson -- to the Wall Street Journal, it's clear that the decisions' timing was vetted by the board, which could not wait for a new chief executive to come aboard if its drumbeat was speed, speed and more speed.

Microsoft will host its annual shareholders meeting Tuesday, Nov. 19, at the Meydenbauer Center in Bellevue Wash, starting at 8 a.m. PT (11 a.m. ET). The company will webcast the event, where executives will summarize the last year and take questions from shareholders. It's likely that some of those questions will be about the changes already made, as well as the status of the CEO search.

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, or subscribe to Gregg's RSS feed . His email address is gkeizer@computerworld.com.

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