Microsoft Comes Down to Earth With Appointment of Connors as CFO

And whether or not John Connors is up to the challenge, a new power struggle is likely to emerge.
Author:
Publish date:

SAN FRANCISCO -- Those who know

Microsoft's

(MSFT) - Get Report

new CFO John G. Connors consider him a stand-up guy likely to keep the trains running on time. Unlike his predecessor, though, Connors lacks investment banking experience -- and that could cause other executives to jockey for control of Microsoft's deal-making muscle.

Connors takes over Microsoft's financial reins from Greg Maffei, who is leaving to become the CEO of

Worldwide Fiber

, a privately held fiber-optic company in Vancouver, Canada. Connors wasn't available for comment, but interviews with former colleagues, venture capitalists and analysts depict Connors as a family man and well-liked colleague whose broad experience puts him in a good position to manage Microsoft's massive financial operations.

"John is a down-to-earth, smart, no-BS, people person," says Sam Jadallah, Microsoft's former VP of sales who left in July to become managing director of holding company

Internet Capital Group

(ICGE)

. "He knows everybody at the company. He's one of the few people who's worked in multiple divisions."

But while Connors is an 11-year Microsoft veteran with sales, technology and financial management experience, he lacks the investment banking and financial negotiating skills of his predecessor, say three of those interviewed. That is likely to trigger a power struggle for the company's top deal-making slot.

A Study in Contrasts

Although Connors and Maffei ended up in the same job, the two took very different paths to get there. The Montana-born Connors is a certified public accountant who has held a variety of high-ranking positions at Microsoft, including chief corporate controller, chief information officer and, most recently, vice president of its worldwide enterprise group.

Maffei, a New York native and a graduate of

Harvard Business School

who came to Microsoft in 1993 after hunting for buyout targets at

Citicorp Venture Capital

, served as the company's treasurer and VP of corporate development. Microsoft hired Maffei to establish a sort of mini-investment banking operation, and his stature grew as he negotiated many of its deals with the cable industry, such as its $5 billion investment in

AT&T

(T) - Get Report

.

David Readerman, director of Internet research for

Thomas Weisel Partners

, says Connors is "not the schmoozer the way Greg really relished being in the limelight and being at all the conferences."

Yet some former colleagues say Connors' more low-key and straightforward style will play well on the Street. "John will do great with ... the analysts that I know, people like Mary

Meeker and Rick Sherlund and

David Readerman," predicts Peter Neupert, a Microsoft veteran who ran

MSN

before joining

Drugstore.com

(DSCM)

as its president and CEO.

And in the take-no-prisoners Microsoft culture, says Neupert, Connors stood out as a genuinely nice guy. "I don't know how to say this politely, but I liked working with him," says Neupert, suggesting that that wasn't necessarily the norm at Microsoft.

While Connors is likely to keep firm control over Microsoft's finances, some observers say it's less clear whether he'll emerge as a creative force in the art of accounting. Maffei, after all, is credited as the father of Microsoft's conservative accounting practices, which helped build its reputation as a master of Wall Street's earnings-management game.

"Before Greg, everyone recognized software revenue relatively quickly," observes Karl Jacob, a former general manager of Microsoft's Office group who left in June 1999 to become an entrepreneur-in-residence at

Benchmark Capital

. Instead, Maffei recognized revenue at a slower rate, which made the company's income seem a pillar of stability. "A lot of people thought Greg was a pioneer in that space," says Jacob.

As the Internet and its wacky financial metrics become a more important part of Microsoft's business, Jacob says the company may need someone to pull its accounting methods into the future. "Only time will tell if he's as good as Greg was at inventing new ways of looking at Microsoft's business," says Jacob.

A Rumble in Redmond

Whether or not Connors is up to the challenge, Maffei's departure is likely to result in a new power structure within Microsoft, which has recently been hit with several high-level defections. Some of the remaining executives are expected to vie for the top deal-making job left open by Maffei's absence, and Connors' inclination to serve as a more traditional CFO.

The job of deal-making poobah is almost certain to come from Microsoft's Business Leadership Team, an executive counsel formed in March 1999. The top candidates, say sources close to Microsoft, include 12-year veteran Brad Chase, now senior vice president of the Consumer and Commerce Group; Richard Belluzzo, who left

Silicon Graphics

(SGI)

to become vice president of Microsoft's Consumer and Commerce Group; and 11-year veteran Laura Jennings, currently vice president of Worldwide Strategic Planning.

No matter who comes out on top, this latest round of corporate musical chairs suggests that mighty Microsoft is becoming more like any other high-technology company struggling to hold on to its key talent.

"They're coming down to earth," says Jacob, who founded an Internet start-up called

Keen.com

while at Benchmark Capital. "People are pursuing other opportunities rather than them having an insanely high retention rate."

-- Silicon Valley columnist Adam Lashinsky contributed to this story.