While Steven Sinofsky may not have many fans in Microsoft, it seems Wall Street loved him.
In the wake of his departure Microsoft’s market cap took a $10 billion hit in early trading, recovering only somewhat during the course of the day.
Analyst Rick Sherlund, Nomura explained why:
“We hold Sinofsky in high regard as a technical visionary and his ability to deliver complex products on a timely basis,” he writes. “Sinofsky had previously driven successful Office releases, and the turn-around of Windows 7 after Vista, and we are of the view that the move is a loss to Microsoft.
We believe this also signals that Mr. Ballmer has no plans to turn over the reins as Microsoft’s CEO for the next several years, despite press speculation to the contrary. We think the move will weigh on the stock near-term. We don’t think the move is a reflection on the success of Windows 8 one-month after its release.”
John DiFucci, J.P. Morgan concurred, saying:
“We do not yet know what Mr. Sinofsky’s surprising departure means for Windows 8, but we expect investors will question whether Windows 8 is having the success MSFT management envisioned. Whether Steve Ballmer & Co. has been judging the success of Windows 8 by initial sales of the Surface tablet or by some other measure is not clear to us,” he writes. “Mr. Sinofsky was not only the President of Windows, the most profitable single business of MSFT, but he was the executive most talked about to receive the baton from current CEO Steve Ballmer when the time comes for Mr. Ballmer to retire. While some might state the obvious that a company the size of MSFT does not revolve around one person, next to the CEO, the most important person at MSFT is arguably the President of the Windows Division. … Windows is not likely to lose its dominance within the enterprise anytime soon. However, Mr. Sinofsky’s departure is likely to raise questions about MSFT’s ability to gain meaningful share in the tablet market, which we believe was the main goal of Windows 8. We anticipate the overhang of a possibly disappointing Windows 8 launch to weigh on MSFT shares in the near term.”
Expressing the contrarian view, Michael Turits, Raymond James said:
“While investors will ask if Sinofsky’s departure is a negative sign for the Windows 8 launch, that seems unlikely given W8 launched just over two weeks ago,” he writes. “In fact with the launch done and developers now focused on the next product cycle, we believe this was viewed as the right time for a leadership transition. While respected for shipping product on time, we believe Sinofsky was not viewed as equally successful in managing relationships with other top executives, customers, partners and developers, and that these issues in the end blocked his path forward. There has also been speculation that Sinofsky did not manage the relationships well with hardware partners as Microsoft announced that it would be rolling out the Microsoft Surface tablet based on its own competing hardware and that it would offer a non-Intel(ARM-based) version of the OS. Post the W8 launch priorities are likely shifting from just delivering the software to managing developer and partner relationships and building the universe of applications across multiple devices that will likely be the key to the adoption and commercial success of Window 8, Windows Phone 8, and both Microsoft and partner hardware-requiring skill sets that again we believe were not viewed as Sinofsky’s strengths, including perhaps the need cited in the press release to ‘drive alignment across all Microsoft teams, and have more integrated and rapid development cycles for our offerings.’”
Microsoft opened down $1.22, or 4.3%, to $27, from the previous nights close, trimming the company’s market cap by more than $10 billion, and at the time of writing is trading at $27.23, still 2.75% down from yesterday’s close.