Satya Nadella took over as Microsoft's CEO six months ago, on Feb. 4, 2014. While that six months seemed to have gone a lot quicker than the gestation period prior to Nadella's coronation, it's plenty long enough for us to get a bead on the kind of supremacy it will be in Redmond.
When Nadella took over, Microsoft was mired in the aftermath of a lengthy and ultimately unpopular reign by longtime CEO -- and Microsoft majority shareholder -- Steve Ballmer. Given the constraint of that checkered past, some might argue that Nadella hasn't had enough time to make his imprint on every aspect of Microsoft. Yet there have been many changes already under Nadella's watch, and patterns are certainly emerging as to the kind of company Microsoft will be in the years ahead.
Here's my take on what Nadella has and hasn't done in the past six months, looking at the company from the perspective of a longtime Microsoft customer.
Ghost of empires past
When Nadella assumed the reins, Ballmer had steered Microsoft 16 months into what could be called a "devices and services" quagmire. The strategy saw Microsoft selling services aplenty at the end of Ballmer's tenure, but the "devices" half wasn't living up to the mark, comprising a money-losing game console and a line of tablets with slap-on keyboards that sparked big write-offs with pathetically few sales. Although Microsoft had announced Nokia's acquisition at that point, Nokia hadn't yet been absorbed into the Redmond borg.
Six months later, Xbox sales still fall short of Sony's PS4, Surface sales have barely broken the surface, Windows Phone remains an also-also-also-ran, and 12,500 Nokia employees have or will soon have their pink slips. So much for devices.
Microsoft ain't no Apple, and that's not necessarily a bad thing.
For his part, Nadella has engaged in an elephantine pirouette, paying lip service to the "devices" contingent, while clearly betting the company long-term on the cloud. The one true constant between the regimes may be the desire to milk the old cash cows Windows and Office for as long as they can be flogged.
The vision thing
Some argue that Nadella's "mobile-first, cloud-first" mantra is no different than Ballmer's "devices and services" strategy. Not even close -- Nadella clearly sees the writing on the wall. Hell, as head cheerleader of Microsoft's cloud efforts for many years, he wrote some of the writing on the wall. Nadella's vision for Microsoft's future undeniably shows congruence with the way the winds are blowing.
I give his strategic vision thus far an A.
Contrariwise, "reinventing productivity" -- another Nadella catchphrase -- sounds decades-old, overworked, and perennially underdelivered. We've heard it all before -- and the //oneweek hacks Microsoft has launched under Nadella are a long way from real products. The next decade's productivity improvements are going to come, not from rewriting Office, but from a hundred different sources that aren't even on the radar yet. Microsoft will be lucky to invent two or three of them, and buy or copy a dozen more.
I call Nadella's "reinventing productivity" a tactical vision, and give Nadella a gentleman's C.
Finally, Nadella's ability to clearly enunciate his future direction sucks. Whatever happened to straight talk? InfoWorld's Robert X. Cringely nailed it when he said, "When describing the future direction [Nadella intends] to take, [he uses] long-winded and vague language with as many buzzwords as possible to obscure, even obliterate any specific meaning or intention while trying to sound decisive and knowledgeable." Lee Hutchinson wasn't quite so charitable in his decidedly NSFW diatribe in Ars Technica: "Nadella's email drips with that familiar mixture of faux sympathy and non-information that is so typical of carefully managed corporate communication."
It isn't clear if Nadella's jargon-laden missives came from his pen or from those of his handlers at communications firm Waggener Edstrom, but they sound like warmed-over Ballmer-speak, with a liberal sprinkling of corporate BS.
Definitely a D for communication.
People power
Nadella has assembled a strong inner circle, drawing on people who have been around for years: Chris Capossela came back to marketing, Qi Lu (Nadella's former boss) took on applications and services and Scott Guthrie got bumped up to head of cloud and enterprise (Nadella's old turf). Just as important, many good people stayed in their old spots: Kevin Turner as COO, Terry Myerson for operating systems, Amy Hood as CFO, General Counsel Brad Smith, and others.
Execs with no clear mandate departed: Tony Bates, who was a top contender for CEO, and Tami Reller, who used to head marketing and (briefly) Windows. Mark "Scroogled" Penn was shifted to a place where his particular brand of venom won't be as noticeable.
Bill Gates was supposed to be on the Nadella insider team. but predictably, we haven't heard anything out of him. (Frankly, he has more important fish to fry in his philanthropic pursuits -- go Bill!) Ballmer was supposed to be on the sidelines, but as the company's No. 1 stockholder, you can bet that he's had a lot of interaction with Nadella.
Steven Luzco, CEO of Seagate, left the board, and Mason Morfit of Value Act Capital (widely expected to be an activist of some stripe) joined the board, and last week came international wireless heavy John Stanton -- all with remarkably few visible ripples.
All is well on the executive front: Grade A.
No, I didn't mention Stephen Elop, who brought Nokia into Microsoft. He's Ballmer's legacy, not Nadella's. You get to make up your own mind about Lisa Brummel, who's continuing as head of HR (see below).
By contrast, the rank-and-file are taking it in the shorts, and not only in Finland: 18,000 people fired, 12,500 at Nokia, 5,500 in the "old" Microsoft, 1,351 layoffs in the Seattle area. The Mini-Microsoft blog, long a sounding board for disgruntled (ex) employees, sprang back into life. Any way you slice it, the firing process was hamfisted, too slow, and steeped in corporate double-talk that doesn't escape Microsoft's surviving employees.
The day after the bloodletting was announced, Microsoft took a hatchet to its "external staff" -- contractors/second-class citizens who do much of the work around the place. And I certainly haven't heard about a reduction in Microsoft's demand for H-1B visas.
Human resources' grade: F.
Pimping products
One of the clearest signs that Nadella gets it? Releasing Office on iPad before there's a finger-friendly version for Windows. Yes, Office for iPad was developed under Ballmer -- but Ballmer didn't have the cojones (or perhaps the opportunity) to get it out before it turned stale. Thirty-five million downloads can't all be wrong.
Now we even have Skype and OneNote on Amazon.com's hardware. And just this past Friday, Microsoft revealed that the new version of mobile Internet Explorer would render websites in the same way iOS Safari and Firefox do, because the iOS approach is how users expect the Web to work. Talk about seeing the world as it is, as a collection of vendor platforms.
Platform agnosticism, the antithesis of "Windows first," is Microsoft's best bet in an era where the term "Windows" has turned into a marketing liability, if not an epithet.
Platform support grade: A.
In spite of the bean counters' rigged reports, the Surface tablet is a disaster. Much of the problem can be attributed to Ballmer's watch, but the recent reports of Surface Pro 3 glitches have Nadella written in the margin. At least Nadella didn't release a Windows RT-only version of the Surface Mini.
The Surface Pro 3 is getting good reviews, and it may have a future, but it's far from the success story Microsoft needs to build a hardware division.
Enterprise device grade: C--.
And Xbox? Puh-lease. Drop Kinect, lower the price by a hundred bucks (both actions taken on Nadella's watch), crow about how your sales have doubled in one month -- then discover that Sony's PS4 still outsold the Xbox.
Consumer device grade: D.
Azure, Office 365, Dynamics CRM, SQL Server, and Hyper-V, by contrast, are firing on all cylinders. Rumors of Windows 365 and a massive investment in cloud development environments all show that Nadella knows where his future bread is buttered. And the environment is feeding on itself: Office 365 drives Azure Active Directory, Enterprise Mobility, Azure Intelligence Service, with much more in the pipeline. Well planned and executed -- Nadella's been running this show for a long time.
Cloud services grade: A+ (even if AWS is still the 800-pound gorilla in the market).
Nadella couches Microsoft's foray into future markets by blurring the line between fun and work:
Productive people and organizations are the primary drivers of individual fulfillment and economic growth, and we need to do everything to make the experiences and platforms that enable this ubiquitous. We will think of every user as a potential 'dual user' -- people who will use technology for their work or school and also deeply use it in their personal digital life. ... Microsoft will push into all corners of the globe to empower every individual as a dual user.
Although some people buy into the "dual user" marketing direction, I've seen a whole lot of evidence that consumers want simpler solutions that don't get bogged down in corporate baggage. The first time your Windows wristwatch blue-screens, you can tell me different.
Consumer market vision grade: D.
Then there's Windows. Salvation may be at hand, but Windows is dying, and Microsoft hammered eight nails into the coffin. Nadella gave the go-ahead to put all of the Windows effort into one team (an unconscionable lapse of the Ballmer/Sinofsky era), but now we're looking at a forthcoming version of Windows that's supposed to run on everything, everywhere. Of course that won't happen except in marketing drivel -- Microsoft, after all, can call anything "Windows" -- but there's been precious little insight or direction coming from Redmond about where it's headed with Windows, the most ubiquitous Microsoft product.
Windows transparency grade: F.
The financials
Microsoft's stock, which was doing well after Ballmer announced his impending departure a little over a year ago, has been positively golden. Microsoft's shares closed just under $37 on Feb. 4, 2014, and their value lately hovers around $44, for an increase of about 20 percent over six months.
Company value grade: A.
Nadella only had a small impact as CEO on Microsoft's financial results for the fiscal year ending June 30, but those results speak for themselves: $87 billion in revenue, $28 billion in operating income, commercial cloud revenue (including Azure and Office 365) at a $4.4 billion annual rate, $86 billion in cash -- all records. Nadella's impact as CEO will show up in the numbers next year, but his old job had a big effect on the numbers that were recently released.
Company financials grade: A.
Overall grade
How you rate Satya Nadella overall depends very much on what you value. If you're looking at stock price and financials -- certainly a worthwhile barometer -- he's done exceptionally well in a short period of time, and he'll likely continue to do well. In that regard, he definitely gets an A.
If you're a Nokia employee, your perspective might be a bit different.
Looking at Nadella's performance from the point of view of a stuck-in-the-mud, old-fashioned Windows and Office guy, he's clearly not all that interested in my dying technology. I give him a C--, extending the benefit of the doubt largely because he is keeping Windows and Office alive, although he won't tell us much about what it's going to look like. Also, there may actually be progress with Surface ... some day.
Putting on my other hat, as an enthusiastic tablet toter, phone puncher, and media consumer, I still don't see any signs that Microsoft will come up with something that'll turn my head. I'm not a dual user, and I don't want to be a dual user, although I'll begrudgingly admit that Office for iPad is a treat. Let's call the consumer recap a C.
From the enterprise point of view, with cloud deployment inevitable and prices falling rapidly, I'm tempted to give Nadella a B+. He's certainly running hard to catch up with -- and in some cases beat -- Amazon.
One thing's for sure: Microsoft wouldn't have survived another six months of devices and services.
