Elop rises, Larson-Green falls in Microsoft CEO handicapping

By any measure, Stephen Elop’s star just rose overnight.

The former head of Microsoft’s Business Division was tapped to lead an expanded devices business at Microsoft, formed by absorbing more than 32,000 Nokia employees in a $7 billion dollar deal announced late on Monday.

Microsoft
Steve Ballmer and Stephen Elop—together again.

Many now consider him to be the front-runner in a race between several internal and external candidates to succeed Steve Ballmer, Microsoft’s chief executive, who said recently that he would step down in a year’s time. But Elop’s ascension has probably lowered the fortunes of Julie Larson-Green, who was just named executive vice president of Microsoft’s Devices and Studios division—and who will soon report to Elop.

If it’s true that phones are now the catalyst of Windows, as Microsoft’s presentation to analysts on Monday said, then Elop is now one of the most important figures at Microsoft—even though he won’t work there in an official capacity until the deal closes, expected during the first quarter of 2014.

“Stephen will go from external [candidate] to internal,” Ballmer told The Seattle Times. “The board will continue [to look at] all appropriate candidates through that process.”

One source inside the company said that some scuttlebutt within Microsoft pegs Elop as the heir apparent—even as, the source admits, it’s premature, and possibly wrong. Elop would join Microsoft early next year, on the back half of Ballmer’s self-imposed 12-month timetable, and would immediately be asked to lead the Devices team. He could still then jump to the CEO spot, but the sensitivity of the new position could make that unlikely. Larson-Green could still be promoted over Elop, but the traditions of management hierarchy make that an outside chance.

”Since Elop will be reporting to Ballmer directly, and apparently EVP Julie Larson-Green will be reporting to Elop after the acquisition is completed, it feels like Elop is being positioned for an eventual CEO move,” Brian Proffitt, an adjunct instructor at the Mendoza College of Business at Notre Dame, said in an email. “But after Elop came on board Nokia as CEO in 2008, that company went to heck in a handbasket. The question is, was Nokia always doomed to fail and Elop implemented the best soft landing that he could, or was it his involvement that sent Nokia from a $40 billion market cap to a $15 billion figure in just under three years? The answer to that should determine his chances of being picked as CEO.”

Julie Larosn-GreenMicrosoft
Julie Larson-Green

A betting man would give Elop the edge. Ladbrokes—probably not the measure of such things, but as a yardstick of public opinion—gives Elop 2:5 odds, as in bet $5 to win $2, that Elop will replace Ballmer. Larson-Green doesn’t even appear on the house’s short list. Instead, Ladbrokes favors Facebook chief operating officer Sheryl Sandberg (7:1) and former Windows exe Steven Sinofsky (12:1) behind Elop.

Investors gave the deal mixed reviews; at 11:30 AM ET, Microsoft’s stock prices was down 6.27 percent to $31.30, but Nokia’s shares on thre NYSE were up 34.4 percent, to $5.24.

Elop’s track record has been somewhat mixed; as chief executive of Macromedia for three months, he helped sell the company to Adobe. He then bounced to Juniper for a year, then to Microsoft’s Business Division for two-and-a-half years. There, he oversaw a period of relative health, as his business consistently grew his unit’s revenue and net income over his tenure. In Sept. 2010, he was named CEO of Nokia.

There, however, he was unable to prevent the phone giant’s decline. In January 2011, Nokia’s sales for the fourth quarter of 2010 were 12.66 million euro. By January 2013, they had fallen to 8.0 million euro. And phone sales had fallen, as well, from 123.7 million units to 86 million smart devices, with an average price of just 45 euro. Whether that was due to Nokia’s dependence on Windows Phone, the rise of Android, endemic problems with Nokia, or Elop’s incompetence will be up to Microsoft’s executive committee to decide.

Elop does bring to the table two attributes Microsoft seems to value: he knows the business, and he has more knowledge about the phone and tablet business than most at Microsoft. But is he more valuable as the leader of Microsoft’s devices business, or at the helm?

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