Steve Ballmer Says Smartphones Strained His Relationship With Bill Gates
Steve Ballmer said his decision to
push Microsoft Corp. into the hardware business contributed to the breakdown of
his relationship with longtime friend and company co-founder Bill Gates.
Ballmer's only regret: not doing it sooner.
Ballmer, who was chief executive officer of Microsoft for 14
years, told Bloomberg Television that if he could do it all again, he would
have entered the mobile device market years earlier. When he finally did, Gates
and other members of the board disagreed, he said.
Ballmer, now owner of the NBA's Los Angeles Clippers, told
Bloomberg Television's Emily Chang, that he and Gates have "drifted
apart" partly due to a disagreement over whether Microsoft should make its
own handsets and tablets.
Ballmer said they had a "brotherly
relationship in the good parts and the bad parts." (He opens up more
about Gates, his Microsoft tenure, the Clippers, and his philanthropic and
government work on Bloomberg Television's Studio 1.0 showat 9 a.m. PT this Sunday.)
"Towards the end, that was a bit more difficult than not, particularly with the strategic direction change and you know, the stock price isn't going anywhere, so the rest of the board felt pressure -- despite the fact that profits were going up -- so I think you had kind of a combustible situation," he recalled.
"There
was a fundamental disagreement about how important it was to be in the hardware
business," Ballmer said. "I had pushed Surface. The board had been a
little -- little reluctant in supporting it. And then things came to a climax
around what to do about the phone business."
Microsoft
entered the market in 2012 with the Surface RT, a tablet that sold poorly
and required Microsoft to take a $900 million charge to write down the value of
inventory. Now, the rejiggered Surface business is profitable and generated
more than $4 billion in sales for the most recent year.
Microsoft's
foray was a mess almost from the start, with Microsoft's board rejecting
Ballmer's initial plan to acquire Nokia Oyj's handset unit. By the time the
$9.5 billion deal closed, Ballmer had handed the reins over to Satya Nadella
and the Nokia business was in tatters. Microsoft has now written down almost
the entire value of the deal and laid off most of the workers.
Ballmer
said the mistake was getting into handsets and tablets too late.
"I
would have moved into the hardware business faster and recognized that what we
had in the PC, where there was a separation of chips, systems and software,
wasn't largely gonna reproduce itself in the mobile world," he said.
What
about that famous quote where Ballmer said Apple Inc.'s iPhone would never sell
because it cost too much? He now wishes he'd realized how Apple was going to
make it work -- through mobile carrier subsidies.
"I
wish I'd thought about the model of subsidizing phones through the
operators," he said. "You know, people like to point to this quote
where I said iPhones will never sell, because the price at $600 or $700 was too
high. And there was business model innovation by Apple to get it essentially
built into the monthly cell phone bill."
"It was definitely not a simple thing for either one of
us," he said. There was a "little bit of a difference in opinion on
the strategic direction of the company."
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