SEATTLE (Reuters) - The world’s largest software maker may have developed a problem of holding onto top executives with ambitions.
Stephen Elop’s decision to jump from the top flight of Microsoft Corp (MSFT.O), quitting as business division president, to run mobile phone company Nokia NOK1V.HE makes him the latest in a clutch of top managers moving to cap their careers elsewhere.
That may reflect the fact that Microsoft is no longer the most exciting place to work in technology, or perhaps that 56-year-old Chief Executive Steve Ballmer is not expected to give up his office any time soon, effectively putting a glass ceiling on his top lieutenants.
“Anyone who has ambitions of being CEO and running a company, it’s probably going to be quite some time before they get that opportunity at Microsoft,” said Toan Tran, an analyst at Morningstar. “If that’s something they want to do in their career, then there’s going to be better opportunities elsewhere.”
Last year Microsoft Chief Financial Officer Chris Liddell stepped down to look for a bigger job, eventually ending up as CFO of carmaker General Motors Co GM.UL. The year before, platforms and services unit chief Kevin Johnson left to become CEO of network gear firm Juniper Networks Inc (JNPR.N).
Microsoft’s top ranks were thinned again in May this year when Robbie Bach, head of the entertainment and devices unit, decided to retire.
The departure of 46-year-old Elop, who was viewed as a good leader of the company’s Office unit -- its largest division by sales -- may signal a worrying trend.
“It is concerning when you see some high level executives leaving and you see a pattern like this emerging,” said Todd Lowenstein, portfolio manager at HighMark Capital Management, which holds Microsoft shares.
“You would prefer continuity, especially at a company that is trying to change hearts and minds and perceptions out there,” said Lowenstein. “It may just be circumstantial, but it doesn’t bolster investor confidence.”
The turnover of top managers at Microsoft, while not dramatic, has been noticeably higher than at rivals such as Google Inc (GOOG.O), Apple Inc (AAPL.O) or International Business Machines Corp (IBM.N). Only Yahoo Inc YHOO.O, which went through a drastic shake-up after the departure of co-founder and CEO Jerry Yang early last year, seems to have a worse problem.
Google and Apple, which have gripped consumers’ and investors’ imagination with their products over the past few years, now seem to be more exciting and potentially lucrative places to work than Microsoft.
The rewards for employees owning stock and options in those companies look much more attractive, which may be part of Microsoft’s problem.
The Redmond, Washington-based company stopped issuing stock options as part of compensation in 2003, and now grants shares to employees. But with a stock price essentially unchanged for the last seven years, that has not proved to be as financially rewarding as it would have been in the 1990s, when Microsoft shares grew almost one hundred-fold.
“Maybe (Elop) felt he wasn’t going to get upside on compensation at Microsoft any longer, given that maybe its go-go growth days are largely behind it,” said Lowenstein.
But he defended Microsoft’s ability to interest top managers. “They can still attract talent: it’s a big company but still growing at decent rates. They’ve got some interesting things going on.”
It is perhaps a mark of approval that Microsoft executives have been chosen to run other companies. One insider points out that the situation could be compared to General Electric Co (GE.N) under Jack Welch, which generated future leaders of companies like Boeing Co (BA.N) and Home Depot Inc (HD.N).
“There’s a lot of really talented individuals at Microsoft so we think they’ll be fine,” said Kevin Walkush, an analyst at Oregon-based Jensen Investment Management, which holds Microsoft shares.
Microsoft should be able to fill the vacant post with an insider or a new hire, Walkush said. “They’ve got so much deep talent, either scenario -- internal or external -- is plausible and good.”
CEO Ballmer gave no indications of who the next head of Elop’s former unit would be, but said existing executives Chris Capossela, Kurt DelBene, Amy Hood and Kirill Tatarinov would report directly to him in the meantime, perhaps suggesting the successor will come from that group.
Reporting by Bill Rigby; Editing by Richard Chang