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Originally published August 24, 2013 at 4:39 PM | Page modified August 24, 2013 at 8:41 PM

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Ballmer’s biggest success was out of the spotlight

Fortunately for Microsoft and the future health of the Puget Sound economy, there are two strong contenders to replace outgoing Chief Executive Steve Ballmer — one at hand and the other nearby.

Seattle Times technology columnist

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Imagine the help-wanted ad that Bill Gates is drafting in Redmond this week.

Needed: Brilliant, visionary leader with extraordinary management and technical experience to chart future course of technology and serve as lightning rod for world’s frustration with their old computers. Perks include free soda and locker-room towels.

Fortunately for Microsoft and the future health of the Puget Sound economy there are two strong contenders to replace outgoing Chief Executive Steve Ballmer — one at hand and the other nearby.

Both are highly respected engineers who would boost Microsoft’s credibility with software developers and the technical talent it needs to continue growing through the next generation of computing.

The obvious nearby candidate is Paul Maritz, a Zimbabwe native who led Microsoft’s platforms business and developer relations when he left the company in 2000 after a 14-year run.

Maritz went on to lead strategy at business computing giant EMC and serve as chief executive of Palo Alto, Calif.-based virtualization pioneer VMware, but all the while kept his home on Mercer Island.

Perhaps Gates could lure Maritz back for a few years — he’s approaching 60 — by offering him the moon, and a few nearby planets.

A more likely choice seems to be Satya Nadella, a relatively low-profile executive vice president in his mid-40s who is now leading Microsoft’s Cloud and Enterprise software group.

The energetic native of Hyderabad, India, previously ran the Server & Tools business, which has been Microsoft’s brightest star and is now its second-largest business. Nadella has degrees in electrical engineering, computer science and business, covering all the bases to build devices and software services.

Equally important, Nadella is a fresh face who has charisma and flair.

Speaking to developers in San Francisco in June, Nadella said his group is straddling the cloud, winning business online and off, then showed how easy it is to build iPhone apps using Microsoft’s latest software tools.

Maybe Gates and the rest of Microsoft’s hiring committee will split the difference and hire Maritz for a transition period, to right the ship and finish grooming Nadella for the corner office in Building 34.

Either way, the company may be unable to fully replace Ballmer, who will be remembered as one of the great characters in the story of the Seattle region, the rise of modern computing and the world of business.

Ballmer is also one of this generation’s most misunderstood public figures. That’s partly by choice because he opted to stay largely in the background and leave the spotlight on Gates during Microsoft’s formative years and its Wall Street honeymoon through the 1990s.

Gates and Paul Allen founded the company, but Ballmer was there almost from the start, as a pal of Gates at Harvard. Eventually Gates lured Ballmer to Bellevue to help run what was then a 30-person startup.

A few months later, Ballmer and Gates finalized the critical agreement with IBM to use Microsoft software on its first PC, launching Microsoft toward becoming the most profitable company in history.

“No one can rival his passion and smarts, and he combines it with a surprising charisma that is most commonly found in U.S. presidents and the like,” said Rich Barton, who worked for Ballmer in the late 1990s before he spun Expedia out of Microsoft.

Barton called Ballmer “the trunk of the mighty oak that has been supporting the ever-growing branches of Microsoft for decades, through two eras of computing — the PC and the Internet.”

Now that we’re in the third era, mobile computing, “It seems like an obvious and opportune time for Steve to step aside and make room for a new generation of leadership,” he said.

Ballmer became chief executive in 2000 at another turning point, after the dot-com crash and amid a punishing antitrust case. He freed Gates to focus on product development and then his second act as the world’s most generous philanthropist.

At the time Microsoft employed about 20,000 people in the Puget Sound region. That has doubled to 42,000 under Ballmer, who also oversaw a massive expansion of the headquarters campus that continued through the recession. Amazon.com’s sprawling presence in Seattle has drawn more attention lately, but Microsoft’s campus in Redmond is still five times larger.

Microsoft is no longer the most valuable company in the world, but it remains in the top 10, which is a remarkable feat, noted John Connors, a former Microsoft chief financial officer.

“When you look over history the number of companies that stay in the top over a multiyear period, there’s not many,” he said.

Exactly why Ballmer decided to retire ahead of schedule isn’t clear. I’d heard from one of his confidants that the board agreed earlier this year to give him at least another five years.

My guess is that Ballmer is leaving in part to avoid the spotlight once again. Shareholders smelling weakness in the trough of the PC business began circling this summer and were expected to push for a shake-up and perhaps breakup of the company this fall.

By announcing his retirement, Ballmer blunted their attack on the company, removed the focal point of investors’ angst and avoided making it all about him.

Looking through the small screen of a smartphone, it’s easy to miss the bigger picture. Microsoft is struggling through the downward cycle of PC sales, but it’s making small but significant gains in phones and search. Its cloud-computing platform is a serious contender and it’s gearing up to launch the next Xbox, building on the huge popularly of the current Xbox 360.

Yes, Ballmer was caught flat-footed by the iPhone and iPad. But that may fade in importance. The smartphone wave seems to be cresting and tablet prices are plummeting, turning them into cheap commodities with small margins. Even Apple is struggling with slowing sales of its marquee devices and casting about for the next big thing.

Web-connected watches and smarter TVs may come next, but the bigger business opportunity is powering online services that are becoming essential to companies, governments and consumers around the world.

This is where Ballmer is leaving Microsoft in a strong position, with infrastructure, software tools and customers invested in the company’s platform. It’s the “services” side of the “devices and services” company Ballmer has been reshaping Microsoft into over the last year.

Microsoft will make some but not all of the devices that connect to its services. It probably doesn’t need to dominate any single category as long as its services are ubiquitous.

It’s also why Nadella seems like the leading candidate to run Microsoft over the next decade. Over that time period the price of smartphones may fall to $30 and tablets will be given away free with an oil change, but you’ll be paying $10 or $20 a month for online software and file storage.

While Steve Jobs was winning with the iPod, iPhone and iPad, Ballmer was winning over companies with Microsoft servers and business software. Jobs tried and failed to break into the enterprise server business and nobody cared; Ballmer struggled with music players and phones and was mocked.

Popular opinion now judges tech companies first by their shiny gadgets and second by their stock price. Ballmer didn’t seem to care much for either one.

As a near founder and uber billionaire, Ballmer was always more interested in the long-term success of the company and employees than he was in popularity. Investors won’t miss this attitude, but others will, especially around here.

Indifference to Wall Street demands is a hallmark of Seattle’s greatest public companies. It’s why Microsoft continues to make long-term bets and offer benefits that draw smart people from around the world, some of whom go on to build other companies in the area. It’s also why Microsoft continued building its online infrastructure — the foundation of its services platform and its future — despite investor pressure to cut back or sell it for a quick lift.

Let’s hope that Maritz, Nadella or whoever is next has skin half as thick as Ballmer’s.

Brier Dudley’s column appears Mondays. Reach him at 206-515-5687 or bdudley@seattletimes.com

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About Brier Dudley

Brier Dudley offers a critical look at technology and business issues affecting the Northwest.
bdudley@seattletimes.com | 206-515-5687

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