Ford CEO Alan Mulally’s name continues to pop up as a possible replacement for retiring Microsoft CEO Steve Ballmer. I like Mulally and there is certainly no arguing that Ford would have gone bankrupt without him. However, I do not think he is the right person to replace Ballmer, but could be an asset to Microsoft in another capacity. Making planes at Boeing and cars at Ford is quite different from running a premiere technology company.
We recently covered a report, in which investors have been pressuring Microsoft to name Mulally as CEO. Why would investors want Mulally as CEO? He isn’t from Google, Apple, Amazon, Twitter or some other hot silicon valley startup. He isn’t fawned upon by the Technorati (excluding the times he does large ad buys on their “respective” websites). Mulally isn’t young or hip. He isn’t a rich socialite or fashionista akin to Marissa Mayer. He isn’t a bully like Steve Jobs. He doesn’t flaunt his money with yachts and young girlfriends like Larry Elison. Instead Mulally is approaching the age of 69 and is the retiring CEO of a blue chip company. So why do investors want him running Microsoft?
One of the important lessons I learned from Lester Freamon in the critically acclaimed show “The Wire,” was to “…follow the money [...].” Let’s take a look at what Mulally did when came to Ford in 2006. First he mortgaged the entire company’s assets, almost ~24 billion. He then proceeded to focus Ford’s brand and sold off major assets including:
- Aston Martin
- Land Rover
Mulally was able to make billions in each of these sales. He also significantly reduced Ford’s stake in Mazda. Mulally sold off much else including Ford’s corporate Jets, closed factories, and outsourced what he could. He also fought hard with the auto workers unions, reducing their pay from $76 to $55 per hour. In terms of logistics he significantly reduced Ford’s inventory of automobiles and streamlined car models, brands, and production. This all in the backdrop of a financial crisis in 2008 with General Motors and Chrysler nearly going bankrupt and forced to take government bailouts. It’s easy to look good when your major competitors are failing around you.
During his time at Ford, Mulally has taken the company’s stock price from $1.80 to $17.31. I think it’s clear as to why investors want Mulally as Microsoft’s next CEO. They want him to come in and have a fire sale on Microsoft’s non-enterprise assets (Bing, MSN, Skype, Xbox, etc) and return those billions to shareholders in a special stock dividend. This will drive up the share price, so they can sell that off and make even more profit. I think investors also believe Ballmer would be open to naming Mulally as CEO, since Ballmer’s father was also an executive at the Ford Motor Company. Ballmer and Mulally are friends and have met many times in Michigan.
However, Ford has not been a leading technology. They have not been a leader in electric cars. Their ‘MyTouchFord’ software is a disaster, even if it is slightly better than their competitors. *If* you were hypothetically were considering a car company CEO, wouldn’t Elon Musk make a significantly better choice. His company has been forward thinking into the future to say the least.
As a side note, Mike Lawrie was also named in the report with Alan Mulally. Unsurprisingly, he was previously a general partner at ValueAct. The activist investor hedge fund who has recently gained a seat on Microsoft’s board, encouraging them to get rid of Ballmer and sell off Xbox, Bing etc.
Among Microsoft observers, I’ve seen little support for Mulally aside from Kara Swisher and Paul Thurrott. Thurrott has long advocated that Microsoft should split the company up. (any question as to why Thurrott is being cannibalized by Tom Warren, wmpoweruser, etc?)
Follow the money. Follow the money.