Steve Ballmer IS the right man to turn around Microsoft mobile

The headline is my answer to the question "Is Steve Ballmer Really the Best Choice to Run Microsoft's Consumer Business?" asked by Kevin Tofel at GigaOM on May 25th. There are several good reasons why Ballmer is the right man at the right time, but one stands out. He turned around another important Microsoft product: Windows.

"For the last 12 months, I've been running our Windows business," Ballmer told financial analysts in July 2009. It was a startling proclamation. The division, now called Windows and Windows Live, had no president running operations. There was Steven Sinfosky in charge of day-to-day Windows development, but no executive above him. Ballmer took the role that Sinfosky inherited in July 2009 as president. After bungling Vista, Microsoft got Windows 7 right, under Ballmer's supervision.

Microsoft's May 25th Entertainment and Devices reorganization removed two key leaders from power: Divisional president Robbie Bach and creative leader J Allard. Same day, I called the reorganization "doomed," because of the leaders filling the vacuum. But since I got to thinking about the reorganization differently. Andrew Lees, senior veep of the Mobile Communications Business, and Don Mattrick, senior veep of E&D's Interactive Entertainment Business, will assume key leadership roles, but reporting directly to Ballmer. For now, there is no E&D president, just like there was no Windows division president when Ballmer was in charge. Accountability now firmly stops at the top.

Competitors are invading Microsoft Territory

At first blush, Ballmer doesn't look like the right man for the job. He represents Microsoft's past successes -- Office and Windows -- at a time when Microsoft must move beyond the products. As I asserted on May 26th: "The Windows era is over." The future is anytime, anywhere, on-anything computing, and the pace of change is accelerating. Microsoft will long dominate the PC, but the mobile device-to-cloud service apps stack is rapidly diminishing the Windows PC's relevance. Microsoft's mobile strategy is a train wreck. The company's living room strategy is ailing, with only Xbox and Xbox Live holding up the structure. Google TV and rumored new Apple TV will run mobile operating systems, supported by the Android Marketplace and iTunes App Store, respectively -- that's assuming the Apple TV rumors are true.

Microsoft is under assault from non-desktop operating systems encroaching on long-held territory. Microsoft Chairman Bill Gates introduced the Tablet PC about a decade ago, but it is now Apple's iPad taking the tablet glory. Google TV and Apple TV threaten Xbox, Xbox Live and Windows Media Center. Apple and Google already have games in their mobile app stores and infrastructure for collecting payments and delivering the goods. Xbox's next competitive threat may come from Apple, which already has squeezed Nintendo and Sony in the handheld gaming market.

Ballmer is right to take charge, to be the go-to man for Entertainment and Devices. Microsoft's future is at risk if competitors confine the company to just one screen -- the PC. Microsoft has long advocated a three-screen -- PC, TV and mobile phone -- strategy, but failed to deliver. Do-or-die time is coming.

The failure isn't Ballmer taking charge but not doing so sooner. Projects like the Courier tablet demonstrate how far off Entertainment and Devices leadership had strayed. Courier's two-panel design simply made no sense. It's not rocket science to see the usability problems and potential high manufacturing/component costs associated with a two-touchscreen design, particularly compared against Apple's iPad, which appeal is simpler single-slate design and reasonably low purchase price. How could Microsoft conceivably offer a two-panel tablet for $499? Ballmer is Mr. Common Sense. There's nothing sensible about Courier as a consumer product.

Windows Phone 7 is the Sales Pitch of a Lifetime

Ballmer is a sales guy. He understands customers, and he understands how Microsoft should treat them and how to successfully woo partners. Windows Phone 7 needs the sales pitch of a lifetime. Same may be said of aging Xbox and Xbox Live, particularly with Apple and Google circling the living room liking vultures over a carcass. Windows Phone 7 development is already far enough along. Like Windows, Ballmer needs to focus more on marketing and go-to-market strategy, stuff he is really good at.

The challenge isn't so much technological but psychological. Ballmer must sell customers and partners on the revamped mobile strategy and show them that Microsoft can deliver. Given the mindshare and market share advantages that Apple and Google have, Ballmer may need to call in every favor, use every conceivable marketing pitch to win over customers, developers and other partners. The one thing Ballmer can say: "I turned around Windows. I can do it again."

Ballmer starts off with a heavy burden, and not just Microsoft's troubled consumer and mobile strategies. The worst situation for any salesman is loss of a major customer. HP's Palm acquisition gives a major partner a rival mobile operating system. Following the acquisition, HP's Windows 7 tablet is essentially dead, and the company already has announced a WebOS-based tablet for release this year. HP also no longer has much, if any, incentive to keep licensing Windows Mobile Classic or taking up Windows Phone 7. Worse, Microsoft's once loyal customer is now a competitor.

There's Nothing Ambitious About 30 Million Units

Yesterday, the Web buzzed about a slide Microsoft presented during ReMIX on May 27th: 30 million Windows Phone 7 units by end of 2011. Most pundits pooh poohed the number as unrealistic. Some examples:

• Engadget, Donald Melanson: "To state the obvious, that's pretty ambitious any way you slice it -- especially considering that the first Windows Phone 7 devices are still quite a few months away from hitting the market, giving Microsoft just over a year to reach that mark."
• Boy Genius Report, Andrew Munchback: "Here's a fairly bold prognostication."
• All About Microsoft: Mary-Jo Foley: "That's a pretty ambitious goal (to say the least)."

The skeptics need a reality check. Thirty million units isn't too high a goal, it's way too low. For starters, Microsoft's slide misstated the numbers, which are for all Windows Mobile versions -- 32 million units -- through end of 2011. Microsoft based the number on IDC forecasts, and the analyst firm measures shipments into the channel rather than sales out to end users. Shipments to carriers and dealers would easily be higher than sales.

More importantly, if the measurement is license shipments, 32 million is a no-brainer number. Thirty-two million license shipments actually wouldn't be ambitious at all based on where Windows Mobile is today. The forecast is actually dismal, suggesting modest but not great improvement coming from Windows 7. Sales numbers tell the story.

According to Gartner, which measures actual sales, Microsoft moved 15 million Windows Mobile units in 2009 and another 3.7 million during first quarter. So with an aging operating system and stiff competition from Apple, Google and Research in Motion, Microsoft sold about 18.7 million Windows Mobile units over 15 months. During the same time period, Apple sold 33.25 iPhones. During first quarter, iPhone sales rose 112.2 percent year over year, according to Gartner; Windows Mobile was flat. Last week, Google asserted there are 100,000 new Android activations a day, which is a quarterly sales rate of 9 million handsets. Activations typically come after sales.

E&D will be Ballmer's Last Stand

I don't see anything outrageous at all in 32 million Windows phone units shipped by end of 2011. Based just on where major mobile competitors are today, Microsoft will need to at least double the number to keep even trailing pace behind Apple, Google and RIM. That's going to take some tough hands-out management and CEO sales intervention with carriers, developers and hardware manufacturers. Can Ballmer do it? Some folks surely say not.

Emory Kale, writing yesterday at TG Daily, sees Ballmer as a "geezer CEO." More:

You can tell because, he is still stuck in the same mental fortress that Microsoft put him in when he started out with Gates. It's a relentless pursuit of a vision that has been, to put it frankly, fulfilled.

It's Windows this, and Windows that. It's Office this, and Office that. Game over. You won, dude. Stop telling us how great you are because of what happened thirty years ago... Geezers don't move on that easily. They tend to have a history and they've earned the right to rest on their laurels. Ballmer isn't going to cut it in the mobile space because he is a geezer CEO. He won't be able to hire anyone to cut it for him either because, he doesn't offer them any glory. Just a really well kept lawn.

I disagree. If Ballmer is locked in to any "mental fortress" it's about sales. Office is rapidly morphing into SharePoint, because business customers' needs changed; under Ballmer's leadership, Microsoft adapted. The sales fortress is a potential problem because Ballmer isn't locked so much into an Office-Windows mindset as an enterprise mindset. Microsoft's core market is the corporation, with some small- and mid-size businesses mixed in. Ballmer will have to ditch the enterprise mindset if he is to make the consumer sales pitch to partners.

In January, I asserted: "Microsoft, don't give up on Steve Ballmer just yet." But if Ballmer fails to turn around Microsoft's mobile business or loses the living room to Apple or Google, he should go. Because if Microsoft loses mobile, it loses the future. Office and Windows will remain profitable businesses for many years to come, but ones in certain decline. Blame for such catastrophe must belong to the CEO. Steve Ballmer.