A Strange Shakeup at Microsoft

 | Nov 13, 2012 | 11:28 AM EST
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Steven Sinofsky is out as head of Windows 8 at Microsoft (MSFT), only a couple of weeks after its launch.

The timing is odd, and so is the decision for it to occur at all.

Sinofsky was well-respected inside and outside of Microsoft, going back to the days of his overseeing Office. When the Vista operating system became an embarrassment for the company, Sinofsky was tapped to come and take responsibility for Windows 7. That ended up being a hit for the company.

He then was charged with Windows 8, which was much more significant than a typical incremental OS update. Windows 8 is Microsoft's attempt at having a unified platform across PCs, tablets and phones and also incorporating touch in a major way.

Although it's hard to draw conclusions yet on its popularity, it certainly was a bold approach.

Sinofsky's name has been mentioned several times as a possible successor to CEO Steve Ballmer.

Now, he's gone.

From his departure note to employees, Sinofsky claims that he made the choice, but he also makes it clear that he's passionate about continuing to build software -- likely for a competitor -- in the future.

So, what is really going on here?

I suspect that this decision means that Steve Ballmer has no plans on leaving as CEO anytime soon. Ballmer probably perceived Sinofsky as a threat standing behind him and wanting the job and probably had a say in encouraging Sinofsky to depart rather than stick around.

It's hard to find Sinofsky deficient in doing his job. It must be more than that. It must be that he is a threat.

I had thought that Ballmer was likely ending his run as CEO. He has been CEO for 12 years. He's 56. He has worked at Microsoft all his life. If he retired tomorrow, he could say that the stock price hasn't moved that much over his tenure, but he could point to all the operating metrics and say that he left the company better than he found it.

However, I take this news to mean that he has no intention of budging from his position as the head of the company. I believe that's a big reason the stock is off 3% today. It's not that they're losing Sinofsky. It's that they're keeping Ballmer.

As I said yesterday on Real Money, I believe Microsoft is in a very vulnerable spot at the moment -- more so than any other time during Ballmer's tenure. There is a good chance that PCs sales continue to slow, hurting Office and Windows sales, and the new Surface tablet could lay an egg.

If and when Microsoft's stock price dips below $25, I expect to hear a lot of complaints from institutional investors about Ballmer.

Ballmer is still effectively a founder of the company, and he can fight off this pressure from outsiders as he has before. But it won't be helpful for the stock price.

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