Ballmer Exits Microsoft, Focuses On LA Clippers

Less than a year after stepping down as Microsoft’s CEO, Steve Ballmer officially resigned as the company’s chairman on Tuesday. He will remain the software giant’s single largest shareholder.

Ballmer, who recently acquired the Los Angeles Clippers for $2 billion, sees the pro basketball team, along with “civic contribution, teaching and study,” taking up much of his time.

“Given … the multitude of new commitments I am taking on now, I think it would be impractical for me to continue to serve on the board,” Ballmer said in a letter to his successor Satya Nadella, which was released publicly on Tuesday.

Ballmer left many challenges for Nadella, who has been with Microsoft since 1992.

Last month, the software giant said earnings for the quarter ended June 30 -- the first since Nadella took over for Ballmer -- fell short of analyst expectations. Earnings of 55 cents a share fell short of Wall Street’s hopes of 60 cents a share, although revenue of $23.4 billion -- up 17% year-over-year -- beat estimates.

The earnings fail was largely attributed to costs associated with Microsoft’s Nokia acquisition.

An optimistic Nadella cited Microsoft’s commercial cloud business -- revenue from which doubled year-over-year to a $4.4 billion annual run rate -- as evidence that the company was moving in the right direction.

Last quarter, devices and consumer revenue also grew 42% to $10 billion. Of particular note, Bing search advertising revenue grew 40%, while the unit’s domestic share of share of search grew to 19.2%.

However, “display [advertising] revenue remains soft,” Amy Hood, Microsoft’s EVP and CFO, told analysts on the company’s earnings call, last month.

This summer, Microsoft was also compelled to reduce its workforce by as many as 18,000 employees -- or about 14%. Nadella -- who telegraphed the move in a proceeding email -- said most of the cuts would be felt within the Nokia phone business.

“Nokia Devices and Services is expected to account for about 12,500 jobs, comprising both professional and factory workers,” Nadella explained in a letter to employees. The reductions are expected to result in a pretax charge of $1.1 billion to $1.6 billion, according to the company.

Also, as part of the restructuring, Microsoft said it would be dismantling its Xbox Entertainment Studios division, which has about 200 employees producing original programming. Nadella said that closing Xbox Entertainment Studios was necessary to focus more fully on gaming, which he called the unit’s “core business.” (It has been reported more recently, however, that Microsoft might have found a buyer for Xbox Entertainment Studios.)

Since stepping in for Ballmer earlier this year, Nadella has stressed the importance of accountability and strategic agility in countering Microsoft’s highly corporate culture. He reiterated those themes, last month, explaining in his letter: “We plan to have fewer layers of management, both top down and sideways, to accelerate the flow of information and decision making.”

“This includes flattening organizations and increasing the span of control of people managers,” Nadella explained. “In addition, our business processes and support models will be more lean and efficient with greater trust between teams."

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