The last few months have been eventful for Microsoft (
MSFT
) as it saw the release of the Windows 8 operating system and now
the exit of its Windows division head Steven Sinofsky. It remains
unclear as to why Sinofsky left the company, but it seems like his
reputation of being difficult to work with was the primary reason
for his ousting.
We think that Microsoft's recent push toward integrating its
platforms with the Windows 8 OS is forcing the focus on company
culture as CEO Steve Ballmer is seeking to build a company that is
more integrated and focused on collaboration. Over the longer term,
we expect these changes are likely to help Microsoft become more
team-oriented and foster innovation through collaboration.
See our complete analysis of Microsoft here
Context of Departure
Sinofsky was the President of the Windows and Windows Live
division and was the primary public face of the firm's Windows 8
launches. According to some rumors, there was growing friction
between Sinofsky and other Microsoft executives due to his lack of
collaboration during the Windows 8 release cycle.
Specifically, Sinofsky is alleged to have not shared internal
test versions of Windows 8 with other teams within Microsoft, which
led to a lack of full integration of Office on the Surface RT
tablet. While this behavior might have been overlooked for smaller
product releases, Windows is the biggest contributor to Microsoft's
value and Window's 8 is arguably the most important upgrade cycle
in its recent history. This have been the tipping point for CEO
Steve Ballmer.
Ballmer Aims to Make Microsoft Better Integrated
In our opinion, the departure of the Windows head was an effort
by Ballmer to make the company more focused on the success of
Windows 8. We think the company's top brass has rightly realized
that it needs deeper integration across products and services,
otherwise it risks losing market share to well integrated companies
like Apple (
AAPL
). The company can achieve this only if all of its teams
collaborate on building the best product with as many Microsoft
services as possible.
One of the first steps that Ballmer took after Sinofosky's
departure was to force co-operation by hiring two executives to
replace the Windows head instead of hiring one. We expect that some
employees in the Windows division who are loyal to Sinofsky will
also leave the company over the next few months, and the company
can steadily improve on creating a collaborative culture over the
long term.
Sinofsky's Exit Could Make Windows 8 More Open
One primary criticism leveled at Microsoft during the Windows 8
release was that the Windows ecosystem was moving towards becoming
closed for outside developers. We aren't sure whether this occurred
due to Sinofsky or is part of Microsoft's long-term strategy, but
we will be closely watching if the new Windows heads will make any
changes to make Windows 8 more open going forward.
We currently have a
$41 price estimate for Microsoft
, which is approximately 40% above the current market price.
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