Sinofsky’s Power Play

At CES yesterday we may just have witnessed the first public exposure of an internal power play for the future leadership of Microsoft.

The only major news Microsoft had to announce at CES was the confirmation that Windows would be ported to the ARM Architecture but it wasn’t Ballmer who made that announcement. He was preempted by Sinofsky with a full press briefing and demo. That left Ballmer with absolutely nothing newsworthy for his main keynote.

This would never have happened with Bill giving the keynote.

The relative roasting SteveB got from the board last year regarding the lack of an effective mobile strategy says to me that his future hinges on the the performance of WP7. The fact that Steve provided zero insight on WP7 sales tells you everything you need to know about how they’re doing (Achim Berg’s 1.5M number was almost certainly 'Sell-In' to channel not 'Sell-Through' to end customer.)

My guess is that the company has sold less than 1M phones (~750K.) If they’re lucky the number maybe closer to 1.25M through through the Christmas season. However, there’s not much chance of a momentum uptick in H1 2011 if that’s the case. If the total number sold before the end of fiscal 11 is less than 2M then Steve Ballmer is out before the full year results are released in late August.

Sinofsky realizes that Ballmer’s replacement is either him or someone from the outside. If it’s an outsider the board will give them the authority to radically restructure the company’s strategy, a path which inevitably sees Sinofski losing power and influence.

Sinofsky’s performance and positioning at CES yesterday was as much a message to the board as it was to the outside world — «It's time to recognize that I hold the keys to the future of the company.» Or in the words of Donkey in Shrek «Pick me, Pick Me.»

7 responses

  1. Interesting analysis. It was a terrible keynote. No focus. No vision. No iPad answer despite the high stakes and another nine months passing. Agree that lack of WP7 numbers = weakness. But several OEMs had severe shipment problems (e.g. Dell). They could see an uptick now that those appear to be sorted out, especially if they finally get an update out that sorts out some of the current bugs and provides C&P. Not as convinced that Ballmer will be out if WP7 numbers are poor. Could happen for a host of other reasons, including MS’s lost decade, but don’t think they’d whack him just because Wp7 doesn’t ramp in year 1. Also not convinced about this «a path which inevitably sees Sinof­ski los­ing power and influence». An outsider, who by definition would need to get up to speed on the company, would be even more dependent on the one guy who has actually performed.

  2. Mark,

    Thanks for the comment and you might very well be right. However, the fact that the board made specific reference to Ballmer’s failure to deliver «innovations to take advantage of new form factors» in 2010 looks to me like setting the stage for his performance review in 2011. The phrase used of course takes into account both phones and tablets but given Microsoft’s complete lack of any near-term Win7 tablet strategy — and the board already knew that — this puts everything on the on Win Phone 7. I can’t see Steve surviving if WP7 is a bust.

    I understand that some of the OEMs might have had supply problems but that is a marginal issues in the great scheme. Were retailers out of stock of WP7 phones anywhere in the US in the run up to the holiday season. I don’t think so. Were they out of stock of the iPhone — yes. The fact that MS refuses to talk real 'Sold-through' numbers for WP7 is ultimately telling. This is Microsoft we’re talking about where the slightest vaporous good news is packaged up as a press release and sent out before the ink is dry.

    I respectfully disagree with your point about Sinofsky’s power increasing in the event of an outsider being brought in. If the board make that call then they will have a very very radical agenda in mind. SteveB is really the only person who can hold the ship together. The board know that. There would be civil war if Sinofsky got the job. My bet — fervent hope :-) — is the board will pre-empt that by deciding its time to break the whole thing up — or at least shrink it down to a manageable size by hiving off non-core parts — and will bring in an outsider to do it. In that scenario Sinofsky loses power and influence. Of course BillG could do a 'Jobs' and return to right the ship. In that scenario then Sinofsky certainly does gain.

    Whatever happens it will not be boring following the company in 2011 :-)

  3. Maybe, or maybe they needed to placate angry investors after back to back losses in mobile and tablets (and the resulting stock decline) and figured a non-rebuke rebuke was a convenient option? He still got 100% of his bonus. While 200% was possible, so was 50%. A number less than 100% would have better lent itself to a future performance-related discharge. I wouldn’t be surprised if he suggested the rebuke himself.

    Unfortunately, I think Ballmer will be there until he decides to retire or shareholders finally throw him out. And if the latter haven’t done that after the accumulated data of a decade, you really have to wonder what would spark it.
    Anyway, took the opportunity to read your proposed break up plan. Good stuff.

  4. According to what I saw and have also read in most articles. Ballmer did a brilliant job on the CES keynote with the material that he was provided. He spoke about the things he had to speak really well, and avoided the things it was best for Microsoft not to touch on.

    • @Jeff. Thanks for the comment but you talk like SteveB is some talking head junior presenter for the company. The 'Material he was provided'? He’s the CEO, the guy in charge. CEOs are meant to be visionary, they set their own agenda, they are meant to INSPIRE people. Steve did none of those things at CES. Sinofsky 'one-upped' him for the single visionary topic he had to talk about. I stick to what I said. Gates would never have allowed someone else to steal his thunder like that and the fact that SteveB let him do that is probably indicative of the precarious position he realizes he’s in.

  5. Considering Steve announced Bob Muglia’s departure a few days later it seems like you were onto something Jonathan. Knowing both, it was my opinion that Muglia would have been a better leadership choice, but as you know, the company tends to make some odd decisions in that area.

    • @Richard — I wish I could claim such foresight :-) Perhaps the two things are connected but I doubt it. Thanks for commenting.

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