The careful dismantling of Steve Ballmer's legacy is moving apace. Microsoft just announced 18,000 job cuts, more than two-thirds of which relate to Nokia, the handset maker the former boss bought for $7.2 billion. Xbox also is gently being moved out of Microsoft's central mission. Newish Chief Executive Satya Nadella is undoing his predecessor's work in a tactful and value-creating way.
In a missive to employees this month, Nadella jettisoned the description of Microsoft as a "devices and services" company. Ballmer unveiled the idea as integral to the $370 billion software company's strategy about a year-and-a-half earlier. Instead, Nadella played up capabilities in productivity and the cloud. It's the better path for Microsoft, given its success in business software and failure trying to break into consumer markets.
Nadella is moving rather deliberately, though. That means cutting far more employees than expected in connection with Nokia, rather than shutting down or divesting Ballmer's swan-song acquisition. Likewise, he characterized the Xbox gaming business as one that Microsoft is happy to retain, but which isn't essential to its future. That seems to leave open the possibility of offloading it, albeit not at a fire-sale price.
After years of withstanding Ballmer's value-destructive forays, investors are getting downright giddy at the smallest signs of progress. On the news last year that he was leaving his post as Microsoft's second-ever CEO, the company's market capitalization jumped by $20 billion. Buying Nokia subsequently wiped out most of that gain.
The elevation of Nadella, following a lengthy search that included outside candidates, started the climb anew. Since he took over in February, Microsoft has added almost $75 billion, or 25 per cent, to its value. It should be a strong sign to Nadella and the company's board of directors - which still includes Ballmer and founder Bill Gates, who stepped down as chairman this year - of the direction to keep moving.
