Microsoft's Heir Apparent -- Steve Ballmer

Should Bill Gates ever give up control of Microsoft, his longtime friend and singing partner Steve Ballmer, known for his fierce competitiveness, loyalty, brains and charm, is widely seen as his only credible successor.

Even after Microsoft became the No. 1 software company in the late 1980s, a perennial question remained: Who would take over the company if something happened to Bill Gates?

Gates, after all, was the nonpareil visionary and leader everyone looked to on Microsoft's Redmond campus, inspiring what's called the "cult of Bill." No clear successor had emerged among his inner circle. Microsoft had lots of smart people and capable managers, but another Bill?

Today, the issue seldom gets raised. Were Gates for some reason to leave the Microsoft picture, consensus is that the mantle would fall on his best friend, Harvard classmate, his golf and singing partner, and, not least, Microsoft's head of sales, Steve Ballmer.

"Ballmer would clearly be Bill's successor," said John Doerr, a leading Silicon Valley venture capitalist, adding: "He's an original."

Whether challenging Janet Reno and the Justice Department, evangelizing over Microsoft's forthcoming Windows NT networking system, taking on Silicon Valley's anti-Microsoft cabal or cutting up with Gates in a video sendup of Volkswagen's "Drivers Wanted" commercial, the 41-year-old Ballmer has emerged over the past year as Microsoft's most public point man.

Coinciding with Gates' diminished, selective visibility in the antitrust scuffle with the Justice Department, Ballmer's rise has put a public face on the aggressive leadership role he has held for some years at Microsoft, motivating the company's push-the-limits approach to deal-making. As much as - if not more than - Gates, Ballmer is responsible for Microsoft's unyielding, in-your-face competitiveness, company insiders say, as well as the company's refusal to compromise on what it deems best for customers.

"He's the kind of businessman most companies either wish they had working for them or wish they didn't have to deal with," said Ann Livermore, vice president of software and services for Hewlett Packard, a leading Silicon Valley computer maker.

Having a rising profile means Ballmer has even covered for Gates in some cases of late. In October he appeared at the Churchill Club, a collection of civic and industry leaders in Silicon Valley that earlier had hosted a less-than-satisfactory visit from Gates (the club's usual rule governing audience participation appeared to be violated by canned, pre-selected questions). By most accounts, Ballmer charmed the potentially hostile gathering.

"I don't think he changed any minds," one observer said. "But you can't help but like the guy."

`The heck with Janet Reno'

Ballmer's likability, which friends and associates attribute to his "average guy" demeanor and willingness to listen and even to change his mind, may explain his high-profile role in the company's defense against antitrust accusations. More charismatic than Gates, he seemed a logical choice to carry the corporate line to the press and public.

After the Justice Department filed its suit in October to have Microsoft declared in violation of its consent decree with the government, Ballmer took a typically Microsoft hard line. In interviews and public appearances, he asserted a "no-negotiation" stance on the key issue of Microsoft's ability to integrate products of its choice with its Windows operating system.

Whether on TV's "Charlie Rose Show" or before a programmers convention, Ballmer appearances make great theater. Armed with a booming, megaphone voice and an evangelistic fervor that a cohort compared to a Southern Baptist preacher, Ballmer makes his points emphatically and unequivocally. His bald, pumpkinesque head bobs and rolls, his meaty hands gesticulate wildly, often pounding air or slapping the podium, and his 6-foot-1, 225-pound frame rocks or jerks as he drives home a concept.

Sometimes he gets carried away. That's what happened, he says, in a frequently quoted Janet Reno comment, given before a group of small-business software vendors in San Jose just days after the Justice filing.

An agitated Ballmer asked the audience, "How many of you think . . . the kind of integration in this product actually will be a good thing for you and for your customers?" When they responded with cheers, Ballmer said, "Then I say the heck with Janet Reno on this point." If bundling Microsoft's browser, Internet Explorer, with Windows 95 was good for customers, he added, that was reason enough to do it.

It was vintage Ballmer, whose truculence and competitiveness have been compared in national media profiles with Gen. George S. Patton and Ivan the Terrible. Some think he goes over the top. After Ballmer boasted in a Forbes magazine profile that Microsoft "knew exactly" where rival Web browser maker Netscape made its money, Netscape Chief Executive Officer Jim Barksdale retorted: "Oh, he's the biggest bag of wind," then joked, "I wish he'd tell me!" before adding, "I thought that was an arrogant statement. I would also say it indicates their predatory nature."

Similar characterizations make those who know Ballmer wince. Ballmer, they say, gets so caught up in his passion for winning and dedication to his company that he can say and do things he later regrets.

Deborah Willingham, vice president of Microsoft's corporate enterprise business unit and Microsoft's top-ranking woman executive, recalled how during a meeting her hyperkinetic boss started idly twirling a baseball bat to work off tension.

Unfortunately, Willingham said, the bat slipped from Ballmer's grasp and flew toward her, landing less than an inch from her ankle.

"I looked up, and there was this horror on his face," Willingham recalled. She looked Ballmer straight in the eye and deadpanned, "Boy you're really lucky you didn't hit me, buster!"

A sensitive guy

What people tend to miss about the big bearish guy, said sales executive Jeff Raikes, a longtime friend and executive at Microsoft, is his sensitivity.

"It's hard for people to understand who see him from a distance," Raikes said. "But if he feels like he's hurt somebody's feelings, there's nobody who's going to worry more about that than Steve Ballmer."

Raikes, Willingham and other colleagues say Ballmer can ride them hard on a blown deal or missed opportunity, but never makes it personal or carries it forward. At the end of a pep session, "you feel like you want to walk through the wall for the guy," said Willingham.

Raikes tells of having to fill in for Ballmer, who was attending his mother's funeral, during a meeting of 1,100 Microsoft sales managers from around the world last spring at the Seattle Sheraton. When Ballmer showed up unexpectedly for the final session, he got a standing ovation that moved him to tears.

"No one is more loved inside Microsoft," Raikes said.

Ballmer himself acknowledges he may have overstepped in his Reno comment. "It was not as bad in context, and I really meant no disrespect," he said in an e-mail interview. "But I regret the utterance." In a phone interview he also backed off the Netscape statement, saying Microsoft did not know how Netscape made "every nickel" but had studied its business plan and knew all its customers.

More recently, Ballmer has in other ways softened his message. Outside perceptions of the company led him to some soul-searching, insiders say. Ballmer immediately got behind the idea of elaborating and explaining the company's stance in a public-relations blitz earlier this month.

Microsoft's message - that it regrets any appearance of arrogance but will continue to defend its right to meld Windows with its browser, the software that allows users to navigate the Internet - has met with widespread skepticism among media and analysts. But the company continues to rank high in public-opinion polls. Fortune magazine-sponsored surveys of 800 and 840 adults, published in its Feb. 2 issue, found that 73 percent of Americans admire the company, and 78 percent believe its products to be of high quality.

`Ballmer and Butthead'

The son of a Swiss father and Russian mother, Ballmer grew up in Farmington Hills, Mich., near Detroit, which also produced computer executives Bill Joy and Scott McNealy, both of Microsoft archrival Sun Microsystems. On a recruiting trip to Harvard, Ballmer roomed with McNealy. Although they remain friends, McNealy declined interview requests for this story.

Ballmer's father, an executive for Ford, instilled in him the corporate loyalty that Ballmer proselytizes to others. Ballmer is famous around Microsoft for refusing to drive a non-Detroit car and even had reservations about appearing with Gates in a Volkswagen for the commercial parody. In the video, shown first in November at the fall Comdex trade show in Las Vegas, Gates and Ballmer are driving aimlessly when they spot a Sun computer abandoned on a curb. They put the computer in the back seat but soon notice an offensive smell. The final shot shows the computer in a trash can alongside the road.

The video has been an audience favorite and helped defuse some of the nastiness that lines the PC industry's landscape. It was shot after the combative McNealy, whose father was an executive at Chrysler, made a reference to "Ballmer and Butthead" during a speech.

The Ballmer-Gates association first clicked in 1974, when the two math fanatics met at Harvard's Currier House in Gates' sophomore year and went to a double bill featuring "Singin' in the Rain" and "A Clockwork Orange," a futuristic film that played off the musical's theme song in a macabre blend of rape and violence. Back at Currier, Ballmer and Gates' own rendition of the tune caused a heated exchange with a dorm mate, but the two later hooked up in memorable duets at industry functions (Gates has even taken professional singing lessons).

A sports fanatic who served as student manager of the Harvard football team, Ballmer was a big man on campus, in contrast to the less social Gates. Upon arriving at Harvard, he memorized the names and faces of his classmates from the class registry, a facility that quickly spread his popularity. Ballmer also was editor of the literary magazine; ad manager of the Crimson, Harvard's student newspaper; and a stalwart in the Fox Club, an all-male bastion he persuaded to induct Gates in a hilarious ritual of tipsy hazing and storytelling.

Last year he and Gates donated $25 million to Harvard - much of it to be used to build a new computer-science building in the names of their late mothers, Mary Maxwell Gates and Beatrice Dworkin Ballmer. Although Ballmer has talked about his father's influence, he has stayed silent about the death of his mother, who was a first cousin of comic Gilda Radner's mother: "It makes me too sad," he said.

After graduating magna cum laude in math, Ballmer was accepted into Stanford Business School but decided to defer enrollment. He visited Gates at Microsoft's headquarters of the time in Albuquerque, N.M., then went to work for Procter & Gamble in Cincinnati, where he was involved in redesigning food-mix boxes.

By the spring of 1979, he was off to seek his fortune in the movie business in Los Angeles. But he got little beyond parking cars and reading scripts before deciding that a safer calling was Stanford.

Like his Harvard friend - and actually because of Gates - Ballmer wound up a dropout, but not before he had distinguished himself at Stanford by winning two $10,000 awards for the best first-year student. It was yet another illustration of what Ann Winblad, a San Francisco venture capitalist and close friend of Gates, calls Ballmer's "extraordinary intelligence."

Ballmer "gives the impression publicly of being the rah-rah guy, but he is really a big part of the brains behind the scenes," Winblad said. "He may be the best strategist in the entire software industry." Head-to-head, Ballmer actually once beat Gates, scoring higher in the prestigious national Putnam math competition while the two were at Harvard. Ballmer also is famous for his ability to remember faces and names and is a terror at playing trivia games.

Around Microsoft, Ballmer is known as the supreme customer advocate. He will reduce a marketing plan to a one-line "Ballmerism," said developer-relations manager Tod Nielsen, provoking managers to argue that "It isn't that simple." In the end, Ballmer will prevail, proving that "customers will get excited" by his approach, Nielsen said.

`I love this company!'

Gates, desperate for a managerial type to run his growing company in Bellevue, signed Ballmer on in 1980 for $50,000 a year during a hysterical ship-to-shore exchange punctuated by the name of Gates' British Virgin Isles vacation sailboat, the Doo-Wah. Ballmer's earliest impact on Microsoft was to increase hiring, a move Gates first protested would bankrupt the company. Ballmer also helped negotiate the purchase of DOS, or disk operating system, from Seattle Computer Products. DOS, a program that allows applications software to run on a computer, became the foundation for MS-DOS, later standardized by the IBM PC and millions of clone computers and a key to building the Microsoft empire.

Although his salary was nothing special, Ballmer negotiated between 5 and 10 percent of the company as an incentive bonus. The move paid handsomely when Microsoft went public in 1986. Three years later, it also enabled Ballmer to purchase nearly 1 million shares of Microsoft stock after a rare slide.

Ballmer held on to the stock and in 1993 became Microsoft's third billionaire, behind Gates and co-founder Paul Allen. At the stock's peak last year, Ballmer holdings reached $8.5 billion in stock value alone.

Like many of Microsoft's multimillionaires, Ballmer lives below his means. His home in the exclusive Hunts Point area is comfortable but, at a valuation of $500,000, comparatively modest. He is so notorious for refusing to sell stock that, after he complained last summer that Microsoft was grossly overvalued, a Wall Street Journal reporter asked him why he didn't sell a few shares.

"The truth of the matter is," Ballmer told a group of analysts and media, "I love this company!" Raikes said Ballmer teases other old-timers, including Gates, about whether they have over 90 percent of their original stake.

A brilliant lieutenant

Known for incredible energy, Ballmer rises at 6 a.m. most mornings, running from 5 to 10 miles even while out of town. A family man before Gates was, and just as private about it, Ballmer says he no longer works the legendary 90-hour weeks of his youth, but still puts in 60 or more hours. His passion outside of Microsoft is sports, especially basketball, and he can often be found courtside at a Sonics game. But Ballmer denies any interest in owning a sports team, largely because, he said, it would dilute his focus on his work.

He may be compared with generals, but through much of his tenure at Microsoft, Ballmer has played the trusted lieutenant. Starting in the mid-1980s, he oversaw the development and improvement of Windows, which did not take hold until 1990. He also coordinated Microsoft's increasingly delicate relationship with IBM. In 1992 he was named head of Microsoft's sales and support worldwide, a responsibility he used to speed Microsoft's entry and growth in so-called enterprise computing - a multibillion-dollar corporate market traditionally dominated by large computer makers like IBM and Digital Equipment Corp.

With the growth of the Internet and World Wide Web in 1994 and 1995, Ballmer was among the earliest to see the potential for Windows NT, Microsoft's software that runs powerful computers, many of which are used to link corporate networks with the Web.

A key connection came when Ballmer and an energetic New Yorker, Jay Amato, formed an alliance to supply support and services to Windows NT customers. Amato's company, Vanstar (a vestige of the ComputerLand retail company), chose NT over rival Sun, Novell and IBM OS/2 systems and trained 400 engineers to back NT installations around the world. Vanstar's ability to instill confidence in NT, a powerful, maturing system released in 1993, gave impetus to numerous other big-vendor deals with Hewlett Packard, KPMG and Arthur Andersen.

"Steve developed the strategy where the goal was to offer partners the opportunity to invest in Microsoft technologies ahead of the curve," noted Ian Rogoff, Microsoft's general manager of enterprise partnerships. Their early commitments are expected to pay off big, especially when Version 5.0 of NT is released, scheduled for later this year.

Amato said his staff, wary of Microsoft's reputation, tried to warn him off the deal. "I said no, I felt real good about it," Amato recalled. "A lot of it was Steve's enthusiasm and his vision for NT."

Lately Ballmer has talked about Microsoft's role in corporations' and business' "Digital Nervous System," a Gates metaphor for the way companies do business in an electronic marketplace. The concept is still being refined.

Ballmer said Microsoft will remain his focus "for as long as I work, which will be a while." Asked if he would be interested in running Microsoft, he said he would "do what I needed to do" but that the issue is "not about who is running the company. It is about running a good business and doing whatever it takes, from all individuals."

Nonetheless, there would be no question who was in charge.

Paul Andrews' phone message number is 206-464-2360. His e-mail address is:

-------------------------- Steve Ballmer at Microsoft --------------------------

1980: Hired by Bill Gates as operations manager; helps company purchase DOS, the basis for MS-DOS, from Seattle Computer Products.

1981: Over Gates' reservations, ramps up hiring, doing many interviews himself.

1984: Marshals Microsoft's development of Windows, which is behind schedule and buggy.

1987: Begins custodianship of increasingly touchy IBM relationship, focusing on OS/2, a future competitor of Windows.

1989: Purchases 945,000 shares of Microsoft stock at an average of $48.91 per share.

1991: Asks J. Allard, new Microsoft hire, to put technology in Microsoft's networking products to make them Internet-compatible for the first time.

1991: Loses voice on trip to Japan, requiring surgical repair of his vocal cords.

1992: Named head of worldwide sales and marketing by Gates.

1993: Becomes Microsoft's third billionaire.

1994: Forges Microsoft's expansion in corporate networking with Windows NT.

1997: Begins push for Digital Nervous System, a strategy for using Microsoft products to build electronic commerce over the Internet.

1998: Calls Microsoft's biggest challenge maintaining Microsoft's "urgency to drive ahead." The company's success, he warns, risks a sense of complacency.