Microsoft case
Since it was established, Microsoft has never needed other people's money. When Bill Gate and Paul Allen founded the
company, they borrowed a little, but it's been pay-as-you-go ever since: $60 billion in market capitalization, all
generated by internal cash flow; the company has never had a dime in long-term debt.
Yet, Gate and Allen decided to incorporate in 1981, and to take the company public in 1986. Why did they do so?
Call in rich
When working stiffs need a break, they “call in sick” for a few days. When Microsoft need a break, they “call in rich.”
Forever.
Roughly a third of Microsoft’s 30,000 employees are already millionaires, thanks to a 764-fold rise in Microsoft’s
stock value since it went public in 1986, and the company just released yet another round of better-than-anticipated
earnings yesterday. But now the company that made them wealthy is paying a steep price: More than half a dozen of its
high-level executives have resigned or taken leaves since the beginning of the year. Some of the recent key execs to call
in rich:
Chris Peters. Was: VP of Office division. Now: On leave of absence to train for new career as a pro bowler.
Nathan Myhrvold. Was: Chief technology officer. Now: On leave to pursue interest in scientific research and to travel.
John Ludwig. Was: VP of Microsoft’s Consumer and Commerce Group. Now: On indefinite leave.
Steve Perlman. Was: President of Microsoft’s WebTV unit. Now: Quit to explore new entrepreneurial ventures.
Pete Higgins. Was: VP of Microsoft’s (now-defunct) interactive media group. Now: On leave to hang out with his kids,
travel and perhaps “go to golf school.”
Sam Jadallah. Was: VP of enterprise sales. Now: Quit to join a Seattle-based start-up.
Peter Neupert. Was: VP of news and publishing for (now-defunct) interactive media group. Now: Quit to become
president of Drugstore.com. Click for more
The shift is transforming Microsoft. Look back five years. Many of the minds who led Microsoft to its greatest victories
have left for good. Now that the stock’s “upside” appears more limited… Now that the passion to make a mint may
outweigh the passion to make great software… Now that Internet start-ups are begging (and paying big) for top talent
the trend is also trickling down to the lesser-known millionaires known inside the company as the “Microsoft
volunteers.”
The shift has already transformed Seattle, turning it into an entrepreneurial hotbed that resembles Silicon Valley 15
years ago. Much like the Fairchild (then Hewlett-Packard) refugees who created Silicon Valley, Microsoft refugees are
starting, financing and/or joining a whole new round of tech startups. For instance:
RealNetworks, the streaming media company. Founded by Rob Glaser, formerly VP of Microsoft’s Multimedia and
Consumer Systems.
Infospace, one of the Net’s best people-finder sites. Founded by Naveen Jain, formerly a product manager for MSN.
QPass, the PowerWallet people. Founded by Chase Franklin, formerly part of Microsoft’s interactive television and
MSN initiatives.
Aditi, Internet-based customer service provider. Started by Pradeep Singh, a nine-year veteran
of Microsoft.
Onyx, collaboration software maker. Founded by Brent Frei, formerly involved with Microsoft’s international efforts.
The shift threatens to transform the Internet as well, by permeating the market with a new breed of startup. The piranhas
are out of the aquarium, and they promise to transform the Net with their market-focused, fast-moving, aggressive
startup ideas. Headed by Microsoft veterans. Financed by Microsoft money. And infused with the meat-eating
Microsoft mindset. Care to guess who the next Microsoft exec to bail out will be?
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Here is where you will find Microsoft execs who topped the company’s 1994 organizational chart:
STILL THERE
OUT OF THERE
Bill Gates
Then: Chair and CEO
Now: Same, but with less
focus on day-to-day
operations
Steve Ballmer
Then: Executive VP of
Worldwide Sales and
Support
Now: President of Microsoft
Bill Neukom
Then: Senior VP of Law &
Corporate Affairs
Now: Same
Nathan Myhrvold
Then: Senior VP of Advanced Technologies
Now: On indefinite leave of absence as of June 1, 1999
Mike Maples
Then: Executive VP of Worldwide Products
Now: Joined board of directors for Mission Critical Software, Inc. in April 1999 after
resigning from Microsoft in July 1995
Mike Brown
Then: VP of Corporate Finance
Now: Chair of the NASDAQ Stock Market Board of Directors since 1997, retired from
Microsoft that same year
Russ Siegelman
Then: General Manager of Online Services
Jeff Raikes
Then: Senior VP of Sales for
North America
Now: VP of Worldwide Sales
and Support
Now: Partner in prominent Silicon Valley venture-capital firm Kleiner Perkins Caufield &
Byers; resigned from Microsoft in July 1996 after spearheading MSN and Slate
Roger Heinen
Then: Senior VP of Developer Division
Now: On boards of directors for several tech firms including Progress Software, ANSYS,
MAPICS, AVID Technology and
Pete Higgins
Then: Senior VP of Desktop Applications Division
Now: On leave to hang out with his kids, travel, and perhaps “go to golf school”
Patty Stonesifer
Then: VP of Consumer Software
Now: President and chair of the Gates Library Foundation
Brad Silverberg
Then:Senior VP of Personal Operating Systems
Now: On leave since 1997; recently rejected a plea from
Steve Ballmer to take over Microsoft’s Web commerce efforts but agreed to return parttime as a consultant
The Register-Guard, Monday, June 21, 1999 list the world's richest billionaire.
1.
Gates, William H.III, US, $90 billion, Microsoft
7.
Dell, Micheal, US, $16.5 billion, Dell computer
2.
Buffett, Warren, US, $36 billion, Berkshire Hathaway
8.
3.
Allen, Paul, US, $30 billion, Microsoft
Walton, Alice L., US, $16 billion, inheritance (WalMart Store)
4.
Ballmer, Steven, US, $19.5 billion, Microsoft
9.
Walton, Helen R., US, $16 billion, inheritance (WalMart store)
5.
Oeri, Hoffman and Sacher families, Swizeland, $17
billion, Roche
6.
Anschutz, Philip, US, $16.5 billion, oil, railroads,
telecommunications
10. Walton, Jim C., US, $16 billion, inheritance (WalMart store)
11. Walton, John T., US, $16 billion, inheritance (WalMart store)
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Discussion questions
1. What are Microsoft competitive advantages?
2. What are the most critical resources of Microsoft's success?
3. Why did Allen and Gates go public in 1986?
4. What are the key challenges for Microsoft?

Why do people leave now?

What do they do after leaving?

Consequences of people leavings?
5. What should Microsoft do?
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