James Dennin, Kapitall: Microsoft (MSFT) CEO Steve Ballmer is retiring, just as PC sales are projected to rise into 2014. That should be music to the ears of a company so dependent on robust PC sales. But Microsoft has seen declining PC revenues for years, as Apple (AAPL) surged and start-ups cornered a booming market for mobile devices.
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Still, many of the biggest tech stocks in the Dow, from Microsoft to Hewlett-Packard (HPQ), have been making quiet (and not so quiet) changes that subtly acknowledge the mounting pressure to innovate if they are to stay competitive.
The most high-profile change of late is Ballmer's upcoming departure, who company insiders refer to as more of a "bean-counter" than an innovator or inventor. As Microsoft's skeptics have pointed out, it's far less coherent than most technology companies. A majority of its revenue comes from its business division – its bread and butter has long been IT departments who are wary of acquiring technology that changes too quickly. However it also dabbles heavily in gaming, software, and web-services, a practice that arose from Ballmer's bad habit of acquiring companies and then failing to incorporate them gracefully into Microsoft's corporate structure. Even worse, this has had a tendancy to drive much of Microsoft's younger talent to more youthful competitors – the median age at Facebook (FB) is almost a decade lower than Microsoft's.Ballmer's departure was seen by the market as a primarily positive development for a company that needs to change directions if it is going to remain competitive. Even if PC sales begin to rebound, it is only projected to change a modest 5%. And many have also pointed out that Microsoft's efforts to keep Windows relevant with fancy new software and interfaces is precisely the kind of tinkering that IT directors – Microsoft's biggest customers – are trying to avoid.
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