From Nokia chief to Bill Gates, guessing game begins on new Microsoft CEO

Nokia Chief Executive Stephen Elop demonstrates the camera technology of the company's latest high-end smartphone, the Lumia 1020, at the company's headquarters in Espoo, during an interview with Reuters, July 17, 2013.

Credit: Reuters/Ritsuko Ando

LONDON | Tue Aug 27, 2013 5:51pm BST

LONDON (Reuters) - As Steve Ballmer bows out of Microsoft Corp, the guessing game over who will replace him has started with a British bookmaker putting Nokia's Stephen Elop as the favourite.

Ballmer, 57, unexpectedly announced his retirement last Friday after more than three decades at the world's largest software company, including 13 years as chief executive.

With no heir apparent, Ladbrokes opened up betting on successors for Ballmer who will depart within the next year, with Elop, 49, topping a list of 26 candidates with odds of 5/1.

British and Irish bookmakers offer a wide range of bets as a niche sideline to more lucrative wagers on sports. Online gambling is far more restrictive in the United States.

Elop, a Canadian, led Microsoft's business division before becoming chief executive of the Finnish firm Nokia in 2010 with a brief to revive the once-undisputed leader in mobile phones.

Senior Nokia employees say he has forced them to make faster decisions. But Nokia's ability to compete in the global smartphone market is increasingly questioned; its market share stands at around three percent, far behind Samsung and Apple which control around 50 percent between them.

Internal Microsoft candidate Kevin Turner, chief operating officer, is second favourite with odds of 6/1 to replace Ballmer, according to Ladbrokes. In third is former Microsoft executive Steve Sinofsky, who left the company last November.

The top female candidate in the stakes is internal head of devices and studios, Julie Larson-Green, in fourth place.

Microsoft co-founder Bill Gates is ranked as a 50/1 shot to return to fill the void but he is considered more likely than rank 100/1 outsider Tim Cook, CEO at Apple.

Ladbrokes' spokesman Alex Donohue said the market was a "who's who of high fliers" in the technology world. "With a year to go we anticipate that this market will smash all previous records for technology betting," Donohue said in a statement.

(Reporting by Belinda Goldsmith; Editing by Pravin Char)

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Analysis: New Microsoft CEO faces big choices post-Ballmer

Microsoft CEO Steve Ballmer speaks during his keynote address at the Microsoft ''Build'' conference in San Francisco, California June 26, 2013.

Credit: Reuters/Robert Galbraith

By Bill Rigby

SEATTLE | Mon Aug 26, 2013 2:16am EDT

SEATTLE (Reuters) - The next CEO of Microsoft Corp has one big decision to make: press on with retiring chief executive Steve Ballmer's ambitious plan to transform the software giant into a broad-based devices and services company, or jettison that idea and rally resources around its proven strength in business software.

Ballmer's grand design - unveiled just six weeks before Friday's surprise announcement that he would retire within a year - calls for 'One Microsoft' to pull together and forge a future based on hardware and cloud-based services.

But poor sales of the new Surface tablet, on top of Microsoft's years-long failure to make money out of online search or smartphones, have cast doubt on that approach.

For years, investors have called on Microsoft to redirect cash spent on money-losing or peripheral projects to shareholders, while limiting its focus to the vastly profitable Windows, Office and server franchises.

Activist investor ValueAct Capital Management LP, whose recent lobbying of the company may have played a role in Ballmer's decision to retire earlier than he planned, is thought to favor such an approach.

In the last two years alone, Microsoft has lost almost $3 billion on its Bing search engine and other Internet projects, not counting a $6 billion write-off for its failed purchase of online advertising agency aQuantive. It took a $900 million charge for its poor-selling Surface tablet last quarter.

For now at least, Microsoft seems intent on pursuing Ballmer's vision. John Thompson, Microsoft's lead independent director who is also heading the committee to appoint a new CEO, said on Friday the board is "committed" to Ballmer's transformation plan.

The eventual choice of that committee - which has given itself a year to do its work - should provide a clue to how committed the board really is, and how open to outside advice.

"Taking an internal candidate like Satya Nadella - the guy nurturing servers - or some of the other people on the Windows team, that makes sense to keep a steady hand through this reorganization and strategic shift," said Norman Young, an analyst at Morningstar.

"But a strong case could be made that the company needs a breath of fresh air, someone who can execute on the strategy but also bring an outsider perspective," he added.

That could mean selling the Xbox and abandoning Bing, or cutting short efforts to make tablets or other computers.

SHAREHOLDERS CLAMOUR FOR MONEY, BALLMER'S HEAD

Throughout the last decade, as Microsoft's share price has remained flat, shareholders have called for bigger dividends and share buybacks to beef up their returns.

Microsoft obliged with a one-time $3 a share special dividend in 2004 and has trebled its quarterly dividend to 23 cents since then.

But shareholders still want a bigger slice of Microsoft's $77 billion cash hoard, $70 billion of which is held overseas.

Rick Sherlund, an analyst at Nomura, believes that if the retirement of Ballmer means the company is listening to ValueAct and its supporters, then action on the dividend and share buyback could perhaps happen as early as September 19, when Microsoft hosts its annual get-together with analysts and is expected announce its latest dividend.

"The momentum of shareholder activism is well underway and likely to benefit shareholders even though the process of how this unfolds is not certain," said Sherlund.

The lackluster performance of Microsoft's stock has long been the stick that shareholders beat Ballmer with, and it has looked all the worse compared with the staggering gains made by Apple Inc under Steve Jobs.

Yet Ballmer - who owns just under 4 percent of the company - never showed any doubts about his intention to stay in the job. His old friend and ally Bill Gates, who still owns 4.8 percent of the company, never wavered in his public support.

The first public signs of dissent on Microsoft's board came in 2010, when Ballmer's bonus was trimmed explicitly for the flop of the infamous Kin 'social' phone and a failure to match Apple's iPad, according to regulatory filings.

It was around that time, though not necessarily connected, that the board started considering how it would manage a succession, according to a source familiar with the matter. Ballmer and the board began talking to both internal and external candidates.

About 18 months to two years ago, Ballmer started thinking seriously about a succession plan, the internal source said.

The time since was not marked with glory for Ballmer, with a tepid launch of Windows 8, the disappointment of the Surface tablet, and a $731 million fine by European regulators for forgetting to offer a choice of browsers to Windows users.

Two to three months ago, Ballmer started thinking seriously about his retirement and concluded it was the "right time to start the process," the source said. That was shortly after ValueAct took a $2 billion stake in Microsoft.

July's gloomy earnings, which offered no immediate hope of quick improvement, may have sealed the decision. Ballmer said Friday he made the choice in the few days prior, and informed the board on Wednesday. Whether the board urged Ballmer to leave is not known.

The impending exit of Ballmer leaves a difficult and perhaps impossible choice to his successor - pushing a large and insular behemoth through a highly risky transformation to the mobile world, or clinging to an island of profitable but PC-centric businesses.

"I'm not sure there is someone who can do Steve's (Ballmer's) job 'better'. It's an incredibly difficult job, perhaps intractable," said Brad Silverberg, a former senior Windows executive and co-founder of Seattle venture capital firm Ignition Partners. "Perhaps the way the job is defined needs to change, and this is the harbinger of bigger changes to come."

(Additional reporting by Liana Baker in NEW YORK; Editing by Jonathan Weber and Miral Fahmy.)

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Microsoft Boss To Leave Amid 'New Direction'

Updated: 3:28pm UK, Friday 23 August 2013

By Thomas Moore, Sky News Science Correspondent

Microsoft has struggled as the PC market has declined.

Five years ago more than 90% of computers ran a version of the Windows operating system, according to tech analysts Forrester.

By 2012 - with Apple and Google dominating mobile computing - it was found on just 30% of devices.

In an effort to revamp its image for the touchscreen era, the company launched Windows 8 late last year.

But the lack of the iconic 'start' button and the new interface of tiled apps irritated users tied to a keyboard and mouse.

It's now done a U-turn and a soon-to-be-launched update - Windows 8.1 - will restore the start button.

Microsoft will hope the tweaks will breathe life into the operating system.

It has failed to convince PC users to upgrade so far, despite a marketing budget that's estimated to top $1bn  (£600m).

Eight months old and Windows 8 is still only found on 5.4% of computers, according to data from Net Applications.

Windows 7 still dominates, with a share of 44.5%.

The malaise is affecting PC makers.

HP recently reported that sales of desktop and notebook computers had slumped by 8% in a year.

So the stakes are high for Microsoft and the industry that relies on its software.

If the new-look Windows fails to stop the slide in sales many will ask whether the PC has a future.

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Microsoft Boss To Leave Amid 'New Direction'

Updated: 3:28pm UK, Friday 23 August 2013

By Thomas Moore, Sky News Science Correspondent

Microsoft has struggled as the PC market has declined.

Five years ago more than 90% of computers ran a version of the Windows operating system, according to tech analysts Forrester.

By 2012 - with Apple and Google dominating mobile computing - it was found on just 30% of devices.

In an effort to revamp its image for the touchscreen era, the company launched Windows 8 late last year.

But the lack of the iconic 'start' button and the new interface of tiled apps irritated users tied to a keyboard and mouse.

It's now done a U-turn and a soon-to-be-launched update - Windows 8.1 - will restore the start button.

Microsoft will hope the tweaks will breathe life into the operating system.

It has failed to convince PC users to upgrade so far, despite a marketing budget that's estimated to top $1bn  (£600m).

Eight months old and Windows 8 is still only found on 5.4% of computers, according to data from Net Applications.

Windows 7 still dominates, with a share of 44.5%.

The malaise is affecting PC makers.

HP recently reported that sales of desktop and notebook computers had slumped by 8% in a year.

So the stakes are high for Microsoft and the industry that relies on its software.

If the new-look Windows fails to stop the slide in sales many will ask whether the PC has a future.

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Microsoft CEO Ballmer to retire within 12 months

1 of 2. Microsoft CEO Steve Ballmer arrives for the launch of Windows 8 operating system in New York, in this file photo from October 25, 2012.

Credit: Reuters/Lucas Jackson/Files

By Bill Rigby

SEATTLE/NEW YORK | Fri Aug 23, 2013 6:04pm EDT

SEATTLE/NEW YORK (Reuters) - Steve Ballmer, a passionate salesman who has been a central figure at Microsoft Corp for more than three decades, unexpectedly announced his retirement as chief executive on Friday, ending a controversial 13-year reign in which the world's largest software company lost its position as the dominant force in computing.

The surprise move sent the company's share price up 7 percent, reflecting a widespread view that Ballmer is not the man to reverse the fortunes of a company that remains highly profitable but has failed to navigate the transition to the mobile computing era.

Ballmer's planned exit comes just weeks after the company announced a major reorganization and delivered an earnings report that showed across-the-board weakness in the business, including dismal sales of the company's new Surface tablet and a lukewarm reaction to the crucial Windows 8 operating system.

Microsoft said it had engaged the executive search firm Heidrick & Struggles and would consider both internal and external candidates to succeed Ballmer - underscoring the lack of a succession plan at a company where many talented executives have been squeezed out over the years. Ballmer will stay on for up to a year until a new CEO is found.

A close friend and confidant of co-founder Bill Gates since the company's earliest days, the 57-year-old Ballmer formally notified the company two days ago of his intention to retire, according to a regulatory filing. In an interview with the trade publication ZD Net, director John Thompson said the search for a successor had in fact been underway for some time.

"We are well down the path in the search," said Thomson, who is leading a search committee that also includes Gates.

Still, the timing of the announcement and the lack of a succession plan suggest the recent setbacks may have spurred the company's board to act. Gates remains chairman of the board, which has historically followed his lead.

Ballmer himself acknowledged his decision was abrupt.

"There is never a perfect time for this type of transition, but now is the right time," he wrote in a memo to employees. "This is an emotional and difficult thing for me to do. I take this step in the best interests of the company I love."

Ballmer has faced criticism from investors for years as rivals led by Apple Inc and Google Inc came to dominate huge new markets in smartphones, tablets, Internet search and cloud computing even as Microsoft remained reliant on the traditional personal computer.

Activist investing fund ValueAct Capital Management LP said in April that it had taken a stake in the company and shortly after began agitating for a change in strategy and a clear CEO succession plan.

Microsoft, like Apple, has been under pressure from shareholders to hand back more of its cash hoard, which now totals $77 billion.

"This might accelerate more shareholder-friendly capital returns of that cash treasure trove, which would help in the revaluation of the stock to more appropriate levels," said Todd Lowenstein at fund firm HighMark Capital Management, which holds Microsoft shares.

There are no obvious candidates to succeed Ballmer at a company that has only had two CEOs in its 38-year history. Ballmer had once indicated that he intended to stay at least until 2017.

Ballmer can claim some important successes: revenue tripled during his tenure, profits doubled, and the company scored a big success with the Xbox videogame business. The Windows and Office franchises remain highly profitable, and Microsoft is well-entrenched as a vendor of corporate computing products and services.

At the same time, though, repeated forays into mobile phones, tablets and music players have come to grief. The Surface tablet, aimed at the hugely successful iPad, alienated longtime hardware partners even as it failed to generate significant sales, and a phone partnership with Nokia has thus far yielded little for either company.

At the same time, the company has lost billions trying to compete with Google in the Internet search business. Some of Microsoft's corporate computing businesses are also under threat from the industry-wide transition to cloud-based services.

The recent reorganization was aimed at reshaping Microsoft - once primarily a purveyor of packaged software - into a company focused on devices and services, essentially mimicking Apple.

Yet most industry watchers felt it was too little, too late, with some calling on the company to back away from the consumer products sector and focus on serving businesses.

In the ZD Net interview, Ballmer rejected that approach. "Nobody has ever managed to figure out how to build a device for a user that was just enterprise or just consumer," he said. "These core experiences do span 'consumer and enterprise.'"

PASSION AT THE TOP

Ballmer, a forceful, often emotional leader, was regarded a great salesman rather than a brilliant technologist.

A physically imposing presence with a booming voice, his motivational efforts were the stuff of legend: a clip of a semi-hysterical Ballmer screeching and dancing around the stage to rally Microsoft employees has been viewed nearly five million times on YouTube.

Yet the antics sometimes acquired an air of desperation as Apple and other rivals produced industry-changing innovations that Microsoft couldn't match.

"That is the most expensive phone in the world and it doesn't appeal to business customers," Ballmer laughed in a TV interview after the launch of Apple's iPhone in 2007. Five years later, iPhone sales alone were greater than Microsoft's overall revenue.

A Michigan native, Ballmer studied applied mathematics and economics at Harvard, where he met Gates. Several years later Gates persuaded him to drop out of Stanford Business School to become Microsoft's first commercial manager and the company's 30th employee.

To induce him, Gates offered Ballmer part ownership of the company, and when Microsoft incorporated a year later, Ballmer had almost an 8 percent stake. That formed the foundation of his wealth which is now valued at $15 billion by Forbes magazine.

Ballmer remains one of the largest holders of Microsoft stock, with about four percent of the company. His net worth, ironically, soared by nearly a billion dollars on Friday as the stock market celebrated his departure.

Microsoft shares closed up 7.3 percent at $34.75 on Nasdaq on Friday.

(Additional reporting by Nicola Leske, Sinead Carew and Liana Baker in New York; Writing by Jonathan Weber. Editing by Jeffrey Benkoe, Lisa Von Ahn and Bernard Orr)

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Microsoft CEO Ballmer to retire within 12 months

1 of 2. Microsoft CEO Steve Ballmer arrives for the launch of Windows 8 operating system in New York, in this file photo from October 25, 2012.

Credit: Reuters/Lucas Jackson/Files

By Bill Rigby

SEATTLE/NEW YORK | Fri Aug 23, 2013 6:04pm EDT

SEATTLE/NEW YORK (Reuters) - Steve Ballmer, a passionate salesman who has been a central figure at Microsoft Corp for more than three decades, unexpectedly announced his retirement as chief executive on Friday, ending a controversial 13-year reign in which the world's largest software company lost its position as the dominant force in computing.

The surprise move sent the company's share price up 7 percent, reflecting a widespread view that Ballmer is not the man to reverse the fortunes of a company that remains highly profitable but has failed to navigate the transition to the mobile computing era.

Ballmer's planned exit comes just weeks after the company announced a major reorganization and delivered an earnings report that showed across-the-board weakness in the business, including dismal sales of the company's new Surface tablet and a lukewarm reaction to the crucial Windows 8 operating system.

Microsoft said it had engaged the executive search firm Heidrick & Struggles and would consider both internal and external candidates to succeed Ballmer - underscoring the lack of a succession plan at a company where many talented executives have been squeezed out over the years. Ballmer will stay on for up to a year until a new CEO is found.

A close friend and confidant of co-founder Bill Gates since the company's earliest days, the 57-year-old Ballmer formally notified the company two days ago of his intention to retire, according to a regulatory filing. In an interview with the trade publication ZD Net, director John Thompson said the search for a successor had in fact been underway for some time.

"We are well down the path in the search," said Thomson, who is leading a search committee that also includes Gates.

Still, the timing of the announcement and the lack of a succession plan suggest the recent setbacks may have spurred the company's board to act. Gates remains chairman of the board, which has historically followed his lead.

Ballmer himself acknowledged his decision was abrupt.

"There is never a perfect time for this type of transition, but now is the right time," he wrote in a memo to employees. "This is an emotional and difficult thing for me to do. I take this step in the best interests of the company I love."

Ballmer has faced criticism from investors for years as rivals led by Apple Inc and Google Inc came to dominate huge new markets in smartphones, tablets, Internet search and cloud computing even as Microsoft remained reliant on the traditional personal computer.

Activist investing fund ValueAct Capital Management LP said in April that it had taken a stake in the company and shortly after began agitating for a change in strategy and a clear CEO succession plan.

Microsoft, like Apple, has been under pressure from shareholders to hand back more of its cash hoard, which now totals $77 billion.

"This might accelerate more shareholder-friendly capital returns of that cash treasure trove, which would help in the revaluation of the stock to more appropriate levels," said Todd Lowenstein at fund firm HighMark Capital Management, which holds Microsoft shares.

There are no obvious candidates to succeed Ballmer at a company that has only had two CEOs in its 38-year history. Ballmer had once indicated that he intended to stay at least until 2017.

Ballmer can claim some important successes: revenue tripled during his tenure, profits doubled, and the company scored a big success with the Xbox videogame business. The Windows and Office franchises remain highly profitable, and Microsoft is well-entrenched as a vendor of corporate computing products and services.

At the same time, though, repeated forays into mobile phones, tablets and music players have come to grief. The Surface tablet, aimed at the hugely successful iPad, alienated longtime hardware partners even as it failed to generate significant sales, and a phone partnership with Nokia has thus far yielded little for either company.

At the same time, the company has lost billions trying to compete with Google in the Internet search business. Some of Microsoft's corporate computing businesses are also under threat from the industry-wide transition to cloud-based services.

The recent reorganization was aimed at reshaping Microsoft - once primarily a purveyor of packaged software - into a company focused on devices and services, essentially mimicking Apple.

Yet most industry watchers felt it was too little, too late, with some calling on the company to back away from the consumer products sector and focus on serving businesses.

In the ZD Net interview, Ballmer rejected that approach. "Nobody has ever managed to figure out how to build a device for a user that was just enterprise or just consumer," he said. "These core experiences do span 'consumer and enterprise.'"

PASSION AT THE TOP

Ballmer, a forceful, often emotional leader, was regarded a great salesman rather than a brilliant technologist.

A physically imposing presence with a booming voice, his motivational efforts were the stuff of legend: a clip of a semi-hysterical Ballmer screeching and dancing around the stage to rally Microsoft employees has been viewed nearly five million times on YouTube.

Yet the antics sometimes acquired an air of desperation as Apple and other rivals produced industry-changing innovations that Microsoft couldn't match.

"That is the most expensive phone in the world and it doesn't appeal to business customers," Ballmer laughed in a TV interview after the launch of Apple's iPhone in 2007. Five years later, iPhone sales alone were greater than Microsoft's overall revenue.

A Michigan native, Ballmer studied applied mathematics and economics at Harvard, where he met Gates. Several years later Gates persuaded him to drop out of Stanford Business School to become Microsoft's first commercial manager and the company's 30th employee.

To induce him, Gates offered Ballmer part ownership of the company, and when Microsoft incorporated a year later, Ballmer had almost an 8 percent stake. That formed the foundation of his wealth which is now valued at $15 billion by Forbes magazine.

Ballmer remains one of the largest holders of Microsoft stock, with about four percent of the company. His net worth, ironically, soared by nearly a billion dollars on Friday as the stock market celebrated his departure.

Microsoft shares closed up 7.3 percent at $34.75 on Nasdaq on Friday.

(Additional reporting by Nicola Leske, Sinead Carew and Liana Baker in New York; Writing by Jonathan Weber. Editing by Jeffrey Benkoe, Lisa Von Ahn and Bernard Orr)

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Wall Street ends up a day after Nasdaq outage, Microsoft jumps

1 of 2. Traders work on the floor of the New York Stock Exchange August 21, 2013.

Credit: Reuters/Brendan McDermid

By Rodrigo Campos

NEW YORK | Fri Aug 23, 2013 4:55pm EDT

NEW YORK (Reuters) - Stocks rose in light trading on Friday, led by a jump in Microsoft shares, as trading took place without interruption a day after the Nasdaq stock exchange suffered an unprecedented, three-hour trading halt.

Microsoft (MSFT.O) shares posted their largest daily percentage gain in more than four years after the head of the world's largest software company, Steve Ballmer, announced he will retire within 12 months.

The stock closed up 7.3 percent at $34.77 and was the largest contributor to the advance on the three major indexes.

"The big news today is the succession at Microsoft, but beyond that it's pretty quiet," said Dan Veru, chief investment officer at Palisade Capital Management in Fort Lee, New Jersey.

The Dow Jones industrial average .DJI rose 46.77 points or 0.31 percent, to 15,010.51, the S&P 500 .SPX gained 6.54 points or 0.39 percent, to 1,663.5 and the Nasdaq Composite .IXIC added 19.085 points or 0.52 percent, to 3,657.792.

Volume was among the lowest of the year with about 4.9 billion shares changing hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, far below the daily average so far this year of about 6.3 billion shares.

Trading volume was only slightly higher than Thursday's 4.4 billion, affected by a technological problem that shut down trading in Nasdaq securities for three hours in the afternoon.

On Friday, Robert Greifeld, chief executive officer of Nasdaq OMX (NDAQ.O) said the exchange resolved the technical problems that led to the halt but could not guarantee there would never be future glitches. Nasdaq shares gained 1.2 percent to close at $30.83.

Friday's gains helped the S&P 500 and Nasdaq Composite end a two-week losing streak, but the Dow posted its third consecutive weekly decline. For the week the Dow fell 0.5 percent, the S&P gained 0.5 percent and the Nasdaq added 1.5 percent.

Economic data showed sales of new single-family homes fell by 13.4 percent in July to an annual rate of 394,000 units, well below expectations of 490,000 units.

The data weighed on homebuilder stocks, with PulteGroup (PHM.N) down 1.6 percent to $16.06 and Toll Brothers (TOL.N) off 3.9 percent to $31.19. The PHLX housing sector index .HGX lost 1.6 percent.

Pandora Media Inc (P.N) slumped 12.9 percent to $18.91 after the Internet radio service said late Thursday that rising expenditures to acquire music and expand its sales force would push fiscal 2014 earnings below analyst expectations.

Aeropostale Inc (ARO.N) tumbled 20.2 percent to $8.76 after the teen apparel retailer forecast a steep third-quarter loss.

Shares of Autodesk (ADSK.O) rallied 7.7 percent to $38.91 after earlier hitting $41.72, its highest level since April 2012.

Roughly two issues rose for every one that fell on the NYSE and on Nasdaq 13 rose for every 11 decliners.

(Reporting by Rodrigo Campos, additional reporting by Chuck Mikolajczak; Editing by Kenneth Barry)

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Wall Street ends up a day after Nasdaq outage, Microsoft jumps

1 of 2. Traders work on the floor of the New York Stock Exchange August 21, 2013.

Credit: Reuters/Brendan McDermid

By Rodrigo Campos

NEW YORK | Fri Aug 23, 2013 4:55pm EDT

NEW YORK (Reuters) - Stocks rose in light trading on Friday, led by a jump in Microsoft shares, as trading took place without interruption a day after the Nasdaq stock exchange suffered an unprecedented, three-hour trading halt.

Microsoft (MSFT.O) shares posted their largest daily percentage gain in more than four years after the head of the world's largest software company, Steve Ballmer, announced he will retire within 12 months.

The stock closed up 7.3 percent at $34.77 and was the largest contributor to the advance on the three major indexes.

"The big news today is the succession at Microsoft, but beyond that it's pretty quiet," said Dan Veru, chief investment officer at Palisade Capital Management in Fort Lee, New Jersey.

The Dow Jones industrial average .DJI rose 46.77 points or 0.31 percent, to 15,010.51, the S&P 500 .SPX gained 6.54 points or 0.39 percent, to 1,663.5 and the Nasdaq Composite .IXIC added 19.085 points or 0.52 percent, to 3,657.792.

Volume was among the lowest of the year with about 4.9 billion shares changing hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, far below the daily average so far this year of about 6.3 billion shares.

Trading volume was only slightly higher than Thursday's 4.4 billion, affected by a technological problem that shut down trading in Nasdaq securities for three hours in the afternoon.

On Friday, Robert Greifeld, chief executive officer of Nasdaq OMX (NDAQ.O) said the exchange resolved the technical problems that led to the halt but could not guarantee there would never be future glitches. Nasdaq shares gained 1.2 percent to close at $30.83.

Friday's gains helped the S&P 500 and Nasdaq Composite end a two-week losing streak, but the Dow posted its third consecutive weekly decline. For the week the Dow fell 0.5 percent, the S&P gained 0.5 percent and the Nasdaq added 1.5 percent.

Economic data showed sales of new single-family homes fell by 13.4 percent in July to an annual rate of 394,000 units, well below expectations of 490,000 units.

The data weighed on homebuilder stocks, with PulteGroup (PHM.N) down 1.6 percent to $16.06 and Toll Brothers (TOL.N) off 3.9 percent to $31.19. The PHLX housing sector index .HGX lost 1.6 percent.

Pandora Media Inc (P.N) slumped 12.9 percent to $18.91 after the Internet radio service said late Thursday that rising expenditures to acquire music and expand its sales force would push fiscal 2014 earnings below analyst expectations.

Aeropostale Inc (ARO.N) tumbled 20.2 percent to $8.76 after the teen apparel retailer forecast a steep third-quarter loss.

Shares of Autodesk (ADSK.O) rallied 7.7 percent to $38.91 after earlier hitting $41.72, its highest level since April 2012.

Roughly two issues rose for every one that fell on the NYSE and on Nasdaq 13 rose for every 11 decliners.

(Reporting by Rodrigo Campos, additional reporting by Chuck Mikolajczak; Editing by Kenneth Barry)

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Wall Street ends up a day after Nasdaq outage, Microsoft jumps

1 of 2. Traders work on the floor of the New York Stock Exchange August 21, 2013.

Credit: Reuters/Brendan McDermid

By Rodrigo Campos

NEW YORK | Fri Aug 23, 2013 4:55pm EDT

NEW YORK (Reuters) - Stocks rose in light trading on Friday, led by a jump in Microsoft shares, as trading took place without interruption a day after the Nasdaq stock exchange suffered an unprecedented, three-hour trading halt.

Microsoft (MSFT.O) shares posted their largest daily percentage gain in more than four years after the head of the world's largest software company, Steve Ballmer, announced he will retire within 12 months.

The stock closed up 7.3 percent at $34.77 and was the largest contributor to the advance on the three major indexes.

"The big news today is the succession at Microsoft, but beyond that it's pretty quiet," said Dan Veru, chief investment officer at Palisade Capital Management in Fort Lee, New Jersey.

The Dow Jones industrial average .DJI rose 46.77 points or 0.31 percent, to 15,010.51, the S&P 500 .SPX gained 6.54 points or 0.39 percent, to 1,663.5 and the Nasdaq Composite .IXIC added 19.085 points or 0.52 percent, to 3,657.792.

Volume was among the lowest of the year with about 4.9 billion shares changing hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, far below the daily average so far this year of about 6.3 billion shares.

Trading volume was only slightly higher than Thursday's 4.4 billion, affected by a technological problem that shut down trading in Nasdaq securities for three hours in the afternoon.

On Friday, Robert Greifeld, chief executive officer of Nasdaq OMX (NDAQ.O) said the exchange resolved the technical problems that led to the halt but could not guarantee there would never be future glitches. Nasdaq shares gained 1.2 percent to close at $30.83.

Friday's gains helped the S&P 500 and Nasdaq Composite end a two-week losing streak, but the Dow posted its third consecutive weekly decline. For the week the Dow fell 0.5 percent, the S&P gained 0.5 percent and the Nasdaq added 1.5 percent.

Economic data showed sales of new single-family homes fell by 13.4 percent in July to an annual rate of 394,000 units, well below expectations of 490,000 units.

The data weighed on homebuilder stocks, with PulteGroup (PHM.N) down 1.6 percent to $16.06 and Toll Brothers (TOL.N) off 3.9 percent to $31.19. The PHLX housing sector index .HGX lost 1.6 percent.

Pandora Media Inc (P.N) slumped 12.9 percent to $18.91 after the Internet radio service said late Thursday that rising expenditures to acquire music and expand its sales force would push fiscal 2014 earnings below analyst expectations.

Aeropostale Inc (ARO.N) tumbled 20.2 percent to $8.76 after the teen apparel retailer forecast a steep third-quarter loss.

Shares of Autodesk (ADSK.O) rallied 7.7 percent to $38.91 after earlier hitting $41.72, its highest level since April 2012.

Roughly two issues rose for every one that fell on the NYSE and on Nasdaq 13 rose for every 11 decliners.

(Reporting by Rodrigo Campos, additional reporting by Chuck Mikolajczak; Editing by Kenneth Barry)

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Wall Street ends up a day after Nasdaq outage, Microsoft jumps

1 of 2. Traders work on the floor of the New York Stock Exchange August 21, 2013.

Credit: Reuters/Brendan McDermid

By Rodrigo Campos

NEW YORK | Fri Aug 23, 2013 4:55pm EDT

NEW YORK (Reuters) - Stocks rose in light trading on Friday, led by a jump in Microsoft shares, as trading took place without interruption a day after the Nasdaq stock exchange suffered an unprecedented, three-hour trading halt.

Microsoft (MSFT.O) shares posted their largest daily percentage gain in more than four years after the head of the world's largest software company, Steve Ballmer, announced he will retire within 12 months.

The stock closed up 7.3 percent at $34.77 and was the largest contributor to the advance on the three major indexes.

"The big news today is the succession at Microsoft, but beyond that it's pretty quiet," said Dan Veru, chief investment officer at Palisade Capital Management in Fort Lee, New Jersey.

The Dow Jones industrial average .DJI rose 46.77 points or 0.31 percent, to 15,010.51, the S&P 500 .SPX gained 6.54 points or 0.39 percent, to 1,663.5 and the Nasdaq Composite .IXIC added 19.085 points or 0.52 percent, to 3,657.792.

Volume was among the lowest of the year with about 4.9 billion shares changing hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, far below the daily average so far this year of about 6.3 billion shares.

Trading volume was only slightly higher than Thursday's 4.4 billion, affected by a technological problem that shut down trading in Nasdaq securities for three hours in the afternoon.

On Friday, Robert Greifeld, chief executive officer of Nasdaq OMX (NDAQ.O) said the exchange resolved the technical problems that led to the halt but could not guarantee there would never be future glitches. Nasdaq shares gained 1.2 percent to close at $30.83.

Friday's gains helped the S&P 500 and Nasdaq Composite end a two-week losing streak, but the Dow posted its third consecutive weekly decline. For the week the Dow fell 0.5 percent, the S&P gained 0.5 percent and the Nasdaq added 1.5 percent.

Economic data showed sales of new single-family homes fell by 13.4 percent in July to an annual rate of 394,000 units, well below expectations of 490,000 units.

The data weighed on homebuilder stocks, with PulteGroup (PHM.N) down 1.6 percent to $16.06 and Toll Brothers (TOL.N) off 3.9 percent to $31.19. The PHLX housing sector index .HGX lost 1.6 percent.

Pandora Media Inc (P.N) slumped 12.9 percent to $18.91 after the Internet radio service said late Thursday that rising expenditures to acquire music and expand its sales force would push fiscal 2014 earnings below analyst expectations.

Aeropostale Inc (ARO.N) tumbled 20.2 percent to $8.76 after the teen apparel retailer forecast a steep third-quarter loss.

Shares of Autodesk (ADSK.O) rallied 7.7 percent to $38.91 after earlier hitting $41.72, its highest level since April 2012.

Roughly two issues rose for every one that fell on the NYSE and on Nasdaq 13 rose for every 11 decliners.

(Reporting by Rodrigo Campos, additional reporting by Chuck Mikolajczak; Editing by Kenneth Barry)

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CEO Ballmer retires as Microsoft struggles to modernize

Microsoft CEO Steve Ballmer speaks during his keynote address at the Microsoft ''Build'' conference in San Francisco, California June 26, 2013.

Credit: Reuters/Robert Galbraith

By Bill Rigby

SEATTLE/NEW YORK | Fri Aug 23, 2013 11:26pm BST

SEATTLE/NEW YORK (Reuters) - Steve Ballmer, a passionate salesman who has been a central figure at Microsoft Corp for more than three decades, unexpectedly announced his retirement as chief executive on Friday, ending a controversial 13-year reign in which the world's largest software company lost its position as the dominant force in computing.

The surprise move sent the company's share price up 7 percent, reflecting a widespread view that Ballmer is not the man to reverse the fortunes of a company that remains highly profitable but has failed to navigate the transition to the mobile computing era.

Ballmer's planned exit comes just weeks after the company announced a major reorganization and delivered an earnings report that showed across-the-board weakness in the business, including dismal sales of the company's new Surface tablet and a lukewarm reaction to the crucial Windows 8 operating system.

Microsoft said it had engaged the executive search firm Heidrick & Struggles and would consider both internal and external candidates to succeed Ballmer - underscoring the lack of a succession plan at a company where many talented executives have been squeezed out over the years. Ballmer will stay on for up to a year until a new CEO is found.

A close friend and confidant of co-founder Bill Gates since the company's earliest days, the 57-year-old Ballmer formally notified the company two days ago of his intention to retire, according to a regulatory filing. In an interview with the trade publication ZD Net, director John Thompson said the search for a successor had in fact been underway for some time.

"We are well down the path in the search," said Thomson, who is leading a search committee that also includes Gates.

Still, the timing of the announcement and the lack of a succession plan suggest the recent setbacks may have spurred the company's board to act. Gates remains chairman of the board, which has historically followed his lead.

Ballmer himself acknowledged his decision was abrupt.

"There is never a perfect time for this type of transition, but now is the right time," he wrote in a memo to employees. "This is an emotional and difficult thing for me to do. I take this step in the best interests of the company I love."

Ballmer has faced criticism from investors for years as rivals led by Apple Inc and Google Inc came to dominate huge new markets in smartphones, tablets, Internet search and cloud computing even as Microsoft remained reliant on the traditional personal computer.

Activist investing fund ValueAct Capital Management LP said in April that it had taken a stake in the company and shortly after began agitating for a change in strategy and a clear CEO succession plan.

Microsoft, like Apple, has been under pressure from shareholders to hand back more of its cash hoard, which now totals $77 billion.

"This might accelerate more shareholder-friendly capital returns of that cash treasure trove, which would help in the revaluation of the stock to more appropriate levels," said Todd Lowenstein at fund firm HighMark Capital Management, which holds Microsoft shares.

There are no obvious candidates to succeed Ballmer at a company that has only had two CEOs in its 38-year history. Ballmer had once indicated that he intended to stay at least until 2017.

Ballmer can claim some important successes: revenue tripled during his tenure, profits doubled, and the company scored a big success with the Xbox videogame business. The Windows and Office franchises remain highly profitable, and Microsoft is well-entrenched as a vendor of corporate computing products and services.

At the same time, though, repeated forays into mobile phones, tablets and music players have come to grief. The Surface tablet, aimed at the hugely successful iPad, alienated longtime hardware partners even as it failed to generate significant sales, and a phone partnership with Nokia has thus far yielded little for either company.

At the same time, the company has lost billions trying to compete with Google in the Internet search business. Some of Microsoft's corporate computing businesses are also under threat from the industry-wide transition to cloud-based services.

The recent reorganization was aimed at reshaping Microsoft - once primarily a purveyor of packaged software - into a company focused on devices and services, essentially mimicking Apple.

Yet most industry watchers felt it was too little, too late, with some calling on the company to back away from the consumer products sector and focus on serving businesses.

In the ZD Net interview, Ballmer rejected that approach. "Nobody has ever managed to figure out how to build a device for a user that was just enterprise or just consumer," he said. "These core experiences do span 'consumer and enterprise.'"

PASSION AT THE TOP

Ballmer, a forceful, often emotional leader, was regarded a great salesman rather than a brilliant technologist.

A physically imposing presence with a booming voice, his motivational efforts were the stuff of legend: a clip of a semi-hysterical Ballmer screeching and dancing around the stage to rally Microsoft employees has been viewed nearly five million times on YouTube.

Yet the antics sometimes acquired an air of desperation as Apple and other rivals produced industry-changing innovations that Microsoft couldn't match.

"That is the most expensive phone in the world and it doesn't appeal to business customers," Ballmer laughed in a TV interview after the launch of Apple's iPhone in 2007. Five years later, iPhone sales alone were greater than Microsoft's overall revenue.

A Michigan native, Ballmer studied applied mathematics and economics at Harvard, where he met Gates. Several years later Gates persuaded him to drop out of Stanford Business School to become Microsoft's first commercial manager and the company's 30th employee.

To induce him, Gates offered Ballmer part ownership of the company, and when Microsoft incorporated a year later, Ballmer had almost an 8 percent stake. That formed the foundation of his wealth which is now valued at $15 billion by Forbes magazine.

Ballmer remains one of the largest holders of Microsoft stock, with about four percent of the company. His net worth, ironically, soared by nearly a billion dollars on Friday as the stock market celebrated his departure.

Microsoft shares closed up 7.3 percent at $34.75 on Nasdaq on Friday.

(Additional reporting by Nicola Leske, Sinead Carew and Liana Baker in New York; Writing by Jonathan Weber. Editing by Jeffrey Benkoe, Lisa Von Ahn and Bernard Orr)

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Microsoft CEO Ballmer to retire within 12 months

1 of 2. Microsoft CEO Steve Ballmer arrives for the launch of Windows 8 operating system in New York, in this file photo from October 25, 2012.

Credit: Reuters/Lucas Jackson/Files

By Bill Rigby

SEATTLE/NEW YORK | Fri Aug 23, 2013 6:04pm EDT

SEATTLE/NEW YORK (Reuters) - Steve Ballmer, a passionate salesman who has been a central figure at Microsoft Corp for more than three decades, unexpectedly announced his retirement as chief executive on Friday, ending a controversial 13-year reign in which the world's largest software company lost its position as the dominant force in computing.

The surprise move sent the company's share price up 7 percent, reflecting a widespread view that Ballmer is not the man to reverse the fortunes of a company that remains highly profitable but has failed to navigate the transition to the mobile computing era.

Ballmer's planned exit comes just weeks after the company announced a major reorganization and delivered an earnings report that showed across-the-board weakness in the business, including dismal sales of the company's new Surface tablet and a lukewarm reaction to the crucial Windows 8 operating system.

Microsoft said it had engaged the executive search firm Heidrick & Struggles and would consider both internal and external candidates to succeed Ballmer - underscoring the lack of a succession plan at a company where many talented executives have been squeezed out over the years. Ballmer will stay on for up to a year until a new CEO is found.

A close friend and confidant of co-founder Bill Gates since the company's earliest days, the 57-year-old Ballmer formally notified the company two days ago of his intention to retire, according to a regulatory filing. In an interview with the trade publication ZD Net, director John Thompson said the search for a successor had in fact been underway for some time.

"We are well down the path in the search," said Thomson, who is leading a search committee that also includes Gates.

Still, the timing of the announcement and the lack of a succession plan suggest the recent setbacks may have spurred the company's board to act. Gates remains chairman of the board, which has historically followed his lead.

Ballmer himself acknowledged his decision was abrupt.

"There is never a perfect time for this type of transition, but now is the right time," he wrote in a memo to employees. "This is an emotional and difficult thing for me to do. I take this step in the best interests of the company I love."

Ballmer has faced criticism from investors for years as rivals led by Apple Inc and Google Inc came to dominate huge new markets in smartphones, tablets, Internet search and cloud computing even as Microsoft remained reliant on the traditional personal computer.

Activist investing fund ValueAct Capital Management LP said in April that it had taken a stake in the company and shortly after began agitating for a change in strategy and a clear CEO succession plan.

Microsoft, like Apple, has been under pressure from shareholders to hand back more of its cash hoard, which now totals $77 billion.

"This might accelerate more shareholder-friendly capital returns of that cash treasure trove, which would help in the revaluation of the stock to more appropriate levels," said Todd Lowenstein at fund firm HighMark Capital Management, which holds Microsoft shares.

There are no obvious candidates to succeed Ballmer at a company that has only had two CEOs in its 38-year history. Ballmer had once indicated that he intended to stay at least until 2017.

Ballmer can claim some important successes: revenue tripled during his tenure, profits doubled, and the company scored a big success with the Xbox videogame business. The Windows and Office franchises remain highly profitable, and Microsoft is well-entrenched as a vendor of corporate computing products and services.

At the same time, though, repeated forays into mobile phones, tablets and music players have come to grief. The Surface tablet, aimed at the hugely successful iPad, alienated longtime hardware partners even as it failed to generate significant sales, and a phone partnership with Nokia has thus far yielded little for either company.

At the same time, the company has lost billions trying to compete with Google in the Internet search business. Some of Microsoft's corporate computing businesses are also under threat from the industry-wide transition to cloud-based services.

The recent reorganization was aimed at reshaping Microsoft - once primarily a purveyor of packaged software - into a company focused on devices and services, essentially mimicking Apple.

Yet most industry watchers felt it was too little, too late, with some calling on the company to back away from the consumer products sector and focus on serving businesses.

In the ZD Net interview, Ballmer rejected that approach. "Nobody has ever managed to figure out how to build a device for a user that was just enterprise or just consumer," he said. "These core experiences do span 'consumer and enterprise.'"

PASSION AT THE TOP

Ballmer, a forceful, often emotional leader, was regarded a great salesman rather than a brilliant technologist.

A physically imposing presence with a booming voice, his motivational efforts were the stuff of legend: a clip of a semi-hysterical Ballmer screeching and dancing around the stage to rally Microsoft employees has been viewed nearly five million times on YouTube.

Yet the antics sometimes acquired an air of desperation as Apple and other rivals produced industry-changing innovations that Microsoft couldn't match.

"That is the most expensive phone in the world and it doesn't appeal to business customers," Ballmer laughed in a TV interview after the launch of Apple's iPhone in 2007. Five years later, iPhone sales alone were greater than Microsoft's overall revenue.

A Michigan native, Ballmer studied applied mathematics and economics at Harvard, where he met Gates. Several years later Gates persuaded him to drop out of Stanford Business School to become Microsoft's first commercial manager and the company's 30th employee.

To induce him, Gates offered Ballmer part ownership of the company, and when Microsoft incorporated a year later, Ballmer had almost an 8 percent stake. That formed the foundation of his wealth which is now valued at $15 billion by Forbes magazine.

Ballmer remains one of the largest holders of Microsoft stock, with about four percent of the company. His net worth, ironically, soared by nearly a billion dollars on Friday as the stock market celebrated his departure.

Microsoft shares closed up 7.3 percent at $34.75 on Nasdaq on Friday.

(Additional reporting by Nicola Leske, Sinead Carew and Liana Baker in New York; Writing by Jonathan Weber. Editing by Jeffrey Benkoe, Lisa Von Ahn and Bernard Orr)

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Wall Street ends up a day after Nasdaq outage, Microsoft jumps

1 of 2. Traders work on the floor of the New York Stock Exchange August 21, 2013.

Credit: Reuters/Brendan McDermid

By Rodrigo Campos

NEW YORK | Fri Aug 23, 2013 4:55pm EDT

NEW YORK (Reuters) - Stocks rose in light trading on Friday, led by a jump in Microsoft shares, as trading took place without interruption a day after the Nasdaq stock exchange suffered an unprecedented, three-hour trading halt.

Microsoft (MSFT.O) shares posted their largest daily percentage gain in more than four years after the head of the world's largest software company, Steve Ballmer, announced he will retire within 12 months.

The stock closed up 7.3 percent at $34.77 and was the largest contributor to the advance on the three major indexes.

"The big news today is the succession at Microsoft, but beyond that it's pretty quiet," said Dan Veru, chief investment officer at Palisade Capital Management in Fort Lee, New Jersey.

The Dow Jones industrial average .DJI rose 46.77 points or 0.31 percent, to 15,010.51, the S&P 500 .SPX gained 6.54 points or 0.39 percent, to 1,663.5 and the Nasdaq Composite .IXIC added 19.085 points or 0.52 percent, to 3,657.792.

Volume was among the lowest of the year with about 4.9 billion shares changing hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, far below the daily average so far this year of about 6.3 billion shares.

Trading volume was only slightly higher than Thursday's 4.4 billion, affected by a technological problem that shut down trading in Nasdaq securities for three hours in the afternoon.

On Friday, Robert Greifeld, chief executive officer of Nasdaq OMX (NDAQ.O) said the exchange resolved the technical problems that led to the halt but could not guarantee there would never be future glitches. Nasdaq shares gained 1.2 percent to close at $30.83.

Friday's gains helped the S&P 500 and Nasdaq Composite end a two-week losing streak, but the Dow posted its third consecutive weekly decline. For the week the Dow fell 0.5 percent, the S&P gained 0.5 percent and the Nasdaq added 1.5 percent.

Economic data showed sales of new single-family homes fell by 13.4 percent in July to an annual rate of 394,000 units, well below expectations of 490,000 units.

The data weighed on homebuilder stocks, with PulteGroup (PHM.N) down 1.6 percent to $16.06 and Toll Brothers (TOL.N) off 3.9 percent to $31.19. The PHLX housing sector index .HGX lost 1.6 percent.

Pandora Media Inc (P.N) slumped 12.9 percent to $18.91 after the Internet radio service said late Thursday that rising expenditures to acquire music and expand its sales force would push fiscal 2014 earnings below analyst expectations.

Aeropostale Inc (ARO.N) tumbled 20.2 percent to $8.76 after the teen apparel retailer forecast a steep third-quarter loss.

Shares of Autodesk (ADSK.O) rallied 7.7 percent to $38.91 after earlier hitting $41.72, its highest level since April 2012.

Roughly two issues rose for every one that fell on the NYSE and on Nasdaq 13 rose for every 11 decliners.

(Reporting by Rodrigo Campos, additional reporting by Chuck Mikolajczak; Editing by Kenneth Barry)

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Wall Street ends up a day after Nasdaq outage, Microsoft jumps

1 of 2. Traders work on the floor of the New York Stock Exchange August 21, 2013.

Credit: Reuters/Brendan McDermid

By Rodrigo Campos

NEW YORK | Fri Aug 23, 2013 4:55pm EDT

NEW YORK (Reuters) - Stocks rose in light trading on Friday, led by a jump in Microsoft shares, as trading took place without interruption a day after the Nasdaq stock exchange suffered an unprecedented, three-hour trading halt.

Microsoft (MSFT.O) shares posted their largest daily percentage gain in more than four years after the head of the world's largest software company, Steve Ballmer, announced he will retire within 12 months.

The stock closed up 7.3 percent at $34.77 and was the largest contributor to the advance on the three major indexes.

"The big news today is the succession at Microsoft, but beyond that it's pretty quiet," said Dan Veru, chief investment officer at Palisade Capital Management in Fort Lee, New Jersey.

The Dow Jones industrial average .DJI rose 46.77 points or 0.31 percent, to 15,010.51, the S&P 500 .SPX gained 6.54 points or 0.39 percent, to 1,663.5 and the Nasdaq Composite .IXIC added 19.085 points or 0.52 percent, to 3,657.792.

Volume was among the lowest of the year with about 4.9 billion shares changing hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, far below the daily average so far this year of about 6.3 billion shares.

Trading volume was only slightly higher than Thursday's 4.4 billion, affected by a technological problem that shut down trading in Nasdaq securities for three hours in the afternoon.

On Friday, Robert Greifeld, chief executive officer of Nasdaq OMX (NDAQ.O) said the exchange resolved the technical problems that led to the halt but could not guarantee there would never be future glitches. Nasdaq shares gained 1.2 percent to close at $30.83.

Friday's gains helped the S&P 500 and Nasdaq Composite end a two-week losing streak, but the Dow posted its third consecutive weekly decline. For the week the Dow fell 0.5 percent, the S&P gained 0.5 percent and the Nasdaq added 1.5 percent.

Economic data showed sales of new single-family homes fell by 13.4 percent in July to an annual rate of 394,000 units, well below expectations of 490,000 units.

The data weighed on homebuilder stocks, with PulteGroup (PHM.N) down 1.6 percent to $16.06 and Toll Brothers (TOL.N) off 3.9 percent to $31.19. The PHLX housing sector index .HGX lost 1.6 percent.

Pandora Media Inc (P.N) slumped 12.9 percent to $18.91 after the Internet radio service said late Thursday that rising expenditures to acquire music and expand its sales force would push fiscal 2014 earnings below analyst expectations.

Aeropostale Inc (ARO.N) tumbled 20.2 percent to $8.76 after the teen apparel retailer forecast a steep third-quarter loss.

Shares of Autodesk (ADSK.O) rallied 7.7 percent to $38.91 after earlier hitting $41.72, its highest level since April 2012.

Roughly two issues rose for every one that fell on the NYSE and on Nasdaq 13 rose for every 11 decliners.

(Reporting by Rodrigo Campos, additional reporting by Chuck Mikolajczak; Editing by Kenneth Barry)

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CEO Ballmer retires as Microsoft struggles to modernize

Microsoft CEO Steve Ballmer speaks during his keynote address at the Microsoft ''Build'' conference in San Francisco, California June 26, 2013.

Credit: Reuters/Robert Galbraith

By Bill Rigby

SEATTLE/NEW YORK | Fri Aug 23, 2013 11:26pm BST

SEATTLE/NEW YORK (Reuters) - Steve Ballmer, a passionate salesman who has been a central figure at Microsoft Corp for more than three decades, unexpectedly announced his retirement as chief executive on Friday, ending a controversial 13-year reign in which the world's largest software company lost its position as the dominant force in computing.

The surprise move sent the company's share price up 7 percent, reflecting a widespread view that Ballmer is not the man to reverse the fortunes of a company that remains highly profitable but has failed to navigate the transition to the mobile computing era.

Ballmer's planned exit comes just weeks after the company announced a major reorganization and delivered an earnings report that showed across-the-board weakness in the business, including dismal sales of the company's new Surface tablet and a lukewarm reaction to the crucial Windows 8 operating system.

Microsoft said it had engaged the executive search firm Heidrick & Struggles and would consider both internal and external candidates to succeed Ballmer - underscoring the lack of a succession plan at a company where many talented executives have been squeezed out over the years. Ballmer will stay on for up to a year until a new CEO is found.

A close friend and confidant of co-founder Bill Gates since the company's earliest days, the 57-year-old Ballmer formally notified the company two days ago of his intention to retire, according to a regulatory filing. In an interview with the trade publication ZD Net, director John Thompson said the search for a successor had in fact been underway for some time.

"We are well down the path in the search," said Thomson, who is leading a search committee that also includes Gates.

Still, the timing of the announcement and the lack of a succession plan suggest the recent setbacks may have spurred the company's board to act. Gates remains chairman of the board, which has historically followed his lead.

Ballmer himself acknowledged his decision was abrupt.

"There is never a perfect time for this type of transition, but now is the right time," he wrote in a memo to employees. "This is an emotional and difficult thing for me to do. I take this step in the best interests of the company I love."

Ballmer has faced criticism from investors for years as rivals led by Apple Inc and Google Inc came to dominate huge new markets in smartphones, tablets, Internet search and cloud computing even as Microsoft remained reliant on the traditional personal computer.

Activist investing fund ValueAct Capital Management LP said in April that it had taken a stake in the company and shortly after began agitating for a change in strategy and a clear CEO succession plan.

Microsoft, like Apple, has been under pressure from shareholders to hand back more of its cash hoard, which now totals $77 billion.

"This might accelerate more shareholder-friendly capital returns of that cash treasure trove, which would help in the revaluation of the stock to more appropriate levels," said Todd Lowenstein at fund firm HighMark Capital Management, which holds Microsoft shares.

There are no obvious candidates to succeed Ballmer at a company that has only had two CEOs in its 38-year history. Ballmer had once indicated that he intended to stay at least until 2017.

Ballmer can claim some important successes: revenue tripled during his tenure, profits doubled, and the company scored a big success with the Xbox videogame business. The Windows and Office franchises remain highly profitable, and Microsoft is well-entrenched as a vendor of corporate computing products and services.

At the same time, though, repeated forays into mobile phones, tablets and music players have come to grief. The Surface tablet, aimed at the hugely successful iPad, alienated longtime hardware partners even as it failed to generate significant sales, and a phone partnership with Nokia has thus far yielded little for either company.

At the same time, the company has lost billions trying to compete with Google in the Internet search business. Some of Microsoft's corporate computing businesses are also under threat from the industry-wide transition to cloud-based services.

The recent reorganization was aimed at reshaping Microsoft - once primarily a purveyor of packaged software - into a company focused on devices and services, essentially mimicking Apple.

Yet most industry watchers felt it was too little, too late, with some calling on the company to back away from the consumer products sector and focus on serving businesses.

In the ZD Net interview, Ballmer rejected that approach. "Nobody has ever managed to figure out how to build a device for a user that was just enterprise or just consumer," he said. "These core experiences do span 'consumer and enterprise.'"

PASSION AT THE TOP

Ballmer, a forceful, often emotional leader, was regarded a great salesman rather than a brilliant technologist.

A physically imposing presence with a booming voice, his motivational efforts were the stuff of legend: a clip of a semi-hysterical Ballmer screeching and dancing around the stage to rally Microsoft employees has been viewed nearly five million times on YouTube.

Yet the antics sometimes acquired an air of desperation as Apple and other rivals produced industry-changing innovations that Microsoft couldn't match.

"That is the most expensive phone in the world and it doesn't appeal to business customers," Ballmer laughed in a TV interview after the launch of Apple's iPhone in 2007. Five years later, iPhone sales alone were greater than Microsoft's overall revenue.

A Michigan native, Ballmer studied applied mathematics and economics at Harvard, where he met Gates. Several years later Gates persuaded him to drop out of Stanford Business School to become Microsoft's first commercial manager and the company's 30th employee.

To induce him, Gates offered Ballmer part ownership of the company, and when Microsoft incorporated a year later, Ballmer had almost an 8 percent stake. That formed the foundation of his wealth which is now valued at $15 billion by Forbes magazine.

Ballmer remains one of the largest holders of Microsoft stock, with about four percent of the company. His net worth, ironically, soared by nearly a billion dollars on Friday as the stock market celebrated his departure.

Microsoft shares closed up 7.3 percent at $34.75 on Nasdaq on Friday.

(Additional reporting by Nicola Leske, Sinead Carew and Liana Baker in New York; Writing by Jonathan Weber. Editing by Jeffrey Benkoe, Lisa Von Ahn and Bernard Orr)

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Microsoft CEO Ballmer to retire within 12 months

1 of 2. Microsoft CEO Steve Ballmer arrives for the launch of Windows 8 operating system in New York, in this file photo from October 25, 2012.

Credit: Reuters/Lucas Jackson/Files

NEW YORK | Fri Aug 23, 2013 10:34am EDT

NEW YORK (Reuters) - Microsoft Corp Chief Executive Steve Ballmer unexpectedly announced his retirement on Friday, ending a controversial 13-year reign at the head of the world's largest software company and sending the company's shares up 7.1 percent.

Ballmer, 57, took over from co-founder Bill Gates in January 2000, but his leadership was questioned throughout his tenure by Wall Street and Silicon Valley, as Microsoft's stock price floundered and the PC-centric pioneer was overtaken by Apple Inc and Google Inc in the shift toward mobile computing.

Ballmer's planned exit comes shortly after activist investing fund ValueAct Capital Management LP took a small stake in the company, and started agitating for a change in strategy and a clear CEO succession plan.

Only last month Ballmer launched a massive reorganization to reshape Microsoft into a company focused on devices and services, essentially mimicking Apple, leaving most industry watchers nonplussed.

"My original thoughts on timing would have had my retirement happen in the middle of our company's transformation to a devices and services company," said Ballmer in a statement. "We need a CEO who will be here longer term for this new direction."

Although Ballmer has faced criticism for some time, his decision to retire surprised analysts.

"Yes, this was a surprise, especially considering how close it is to the recently announced strategic overhaul towards devices and services," said Sid Parakh, an analyst at McAdams Wright Ragen.

Ballmer is to retire within the next 12 months, once a special committee has selected a new CEO.

The committee is to be chaired by John Thompson, the board's lead independent director, and includes Microsoft co-founder and Chairman Bill Gates, as well as other board members Chuck Noski and Steve Luczo.

It will consider both external and internal candidates and work with executive recruiting firm Heidrick & Struggles International Inc, according to Microsoft.

Its shares rose 7.1 percent to $34.69 on Nasdaq.

(Reporting by Sinead Carew and Bill Rigby in Seattle; Editing by Jeffrey Benkoe and Lisa Von Ahn)

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Microsoft continues courting Web devs with IE 11 for Windows 7, Parallels discount

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Microsoft takes $900 million hit for unsold Surface RTs in 4Q13 earnings

An otherwise healthy earnings statement from Microsoft was overshadowed by a substantial $900 million charge attributed to "Surface RT inventory adjustments." The ARM-powered tablet, Microsoft's first foray into selling computers, recently had its price cut by $150 to $349 amid long-standing reports of poor sales. With this $900 million charge, those poor sales and price cuts are hitting Microsoft's bottom line.

Revenue for the fourth quarter was $19.896 billion, up 10 percent on the same quarter last year. Operating income was $6.073 billion and earnings per share $0.59, both essentially unchanged from a year ago.

As ever, Microsoft also published non-GAAP numbers. The GAAP numbers defer revenue that was taken for Office 2013 and Windows 8 prior to the availability of the software, not booking the revenue until the software is actually delivered. The non-GAAP numbers book the revenue as soon as it's taken. Under that metric, quarterly revenue was $19.114 billion, up three percent year on year. Operating income was $5.291 billion, down 24 percent year on year, and earnings per share were $0.52, down 29 percent on a year ago.

For the full 2013 financial year, revenue was $77.849 billion, up six percent on 2012. Operating income was $26.764 billion, an increase of 23 percent, and earnings per share were $2.58, a 29 percent improvement. Much of this improvement is due to 2012's $6.193 billion write-down over the aQuantive purchase.

Though Microsoft has announced a significant corporate reorganization, its financial reporting uses the same divisional model and could continue to do so even as the reorganization is implemented. Full details of this will be disclosed in September.

Windows division revenue—which includes Surface RT—saw the fourth quarter grow by six percent to $4.411 billion, with operating income down 54 percent to $1.099 billion. For the full year, the division had revenue of $19.239 billion, up 4.6 percent, and an operating income of $9.504 percent, down 18 percent.

The division continues to suffer from the downturn in the broader PC market. OEM revenue was down 15 percent, driven by the decline of x86 sales. Non-OEM revenue was up 22 percent, with double-digit growth in volume licensing. The company says that close to three-quarters of enterprise desktops are now using Windows 7.

The Server and tools division posted quarterly revenue of $5.502 billion, up nine percent year on year. Operating income was $2.325 billion, up 14 percent. For the full year, revenue was $20.281 billion, up nine percent on 2012, and operating income was up 13 percent at $8.164 billion.

Both product revenue and Enterprise Services showed nine percent growth. System Center showed growth of 14 percent, SQL Server increased revenue by 16 percent. The company reports growing Azure momentum, too, with 25 percent more enterprise customers.

Microsoft Business Division had quarterly revenue of $7.213 billion, up 14 percent, with operating income of $4.873 billion, an increase of 18 percent. Over the full year, revenue was up three percent to $24.724 billion and operating income was up two percent to $16.194 billion.

Business revenue, representing about 85 percent of the division's revenue, was up seven percent. Business subscription revenue was up 10 percent, offsetting a one percent drop in license-only transactional revenue. Consumer revenue was hammered, however, falling by 27 percent due to the weakness of the x86 market. Office 365 is now on track to have annual revenue of $1.5 billion, with more than one million users of the consumer-oriented Office 365 Home Premium version. Exchange, SharePoint, and Lync all experienced double-digit growth.

Online Services division revenue for the quarter was $0.804 billion, up nine percent on the same quarter last year. Operating loss was $0.372 billion. The loss a year ago was $6.672 billion, but most of this was due to the aQuantive write-down. Excluding that, the loss has been reduced by $0.107 billion, or 22 percent. Full year revenue was $3.201 billion, up 12 percent.

Entertainment and Services division had quarterly revenue of $1.915 billion, up eight percent on last year. The division posted an operating loss of $0.110 billion, a 57 percent reduction on last year. Full year revenue was $10.165 billion, up six percent on 2012, with operating income of $0.848 billion, up 123 percent from last year.

Even as it heads toward replacement, Xbox 360 is continuing to sell, with the company shifting a million units last quarter. Xbox LIVE revenue was up by about 20 percent. Windows Phone-related revenue, covering both Windows Phone and patent licensing agreements, was up $0.222 billion.

The company also offered guidance for the first quarter of the 2014 financial year. Windows division will continue to suffer from the poor PC market, with OEM revenue (about 65 percent of what the division turns over) expected to decline by the mid teens. Server and Tools revenue is expected to grow by high single digits. Business division enterprise revenue is anticipated to grow by mid-single digits, but consumer revenue will lag the PC market by five percent. The company estimates that Online Services revenue will grow by double digits. Entertainment and Devices revenue will decline by low single digits.

The quarterly and full year results for the Business and Server divisions were both strong. Online Services continues to lose money, though it's losing less each quarter. Entertainment and Devices seemed to perform decently, considering the age of Xbox and the significant seasonal variations it experiences. Setting aside the Surface adjustment, even the Windows division performed reasonably well, considering the general malaise of the PC market.

But that Surface adjustment is huge. The company said that it's for Surface RT and related parts and accessories. We don't know the exact breakdown of the $900 million figure. Worst case, it implies that the company has six million Surface RTs ($900 million divided by $150 price cut per unit) sitting unsold. The true number may be a little lower, due to some of the hit coming from parts and accessories. But Microsoft is still sitting on several million—perhaps as many as five—Surface RTs.

That the company is struggling to sell them is perhaps not so surprising. The value proposition of the Surface RT was never clear. For those who wanted an out-and-out tablet, the Nexus 10 and iPad were in the same price ballpark but with much richer ecosystems. For those who really wanted Windows software, Atom-powered devices provided a lot more compatibility and a bit more performance, again with prices in the same ballpark. Surface RT was stuck awkwardly in the middle.

What is surprising, however, is that the company so grossly overestimated demand for the product that it apparently had its manufacturers build many millions, such that it would then have to write down the value of millions of units of unsold Surface RT stock. That's a spectacular misjudgment.

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Microsoft Falls on PC Shipment Decline

Credit: Microsoft

Microsoft Corp. shares took a beating today after Goldman Sachs issued a sell recommendation amid news that PC shipments dropped 14 percent in the first quarter, in part because Windows 8 hasn’t caught on.

Microsoft fell 5.1 percent to $28.75 at 2:35 p.m. Until today, it had been slightly outpacing the surging Standard & Poor’s 500 Index with a 13 percent gain since Jan. 1.  But the shares have been sliding sideways for a decade or more, mostly stuck in the $20 to $30 range as rivals like Google and Apple have zoomed past.

A Goldman analyst wrote: ”The company faces critical secular challenges given the deteriorating PC demand backdrop” and profit and sales will “gradually deteriorate unless Microsoft successfully repositions itself as a more meaningful participant in the new era of consumer computers.”

Worldwide PC shipments had their worst quarter since records have been kept dating back to 1995 as more people switch to tablets and smartphones.  Windows 8 has been lauded by critics for new features and functions but it requires users to learn a new way of operating the PC without many familiar landmarks.

Another factor weighing on Microsoft is Surface, its tablet computer. The company has only sold 1.5 million of the devices since October, Bloomberg News reported, compared with analysts’ estimates of 2 million.

Still, the world’s top software maker has over $60 billion in cash and investments, enough to allow its managers to pursue nearly any strategy as long as they wish.

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Google And Microsoft In Mobile Device Struggle

Tech giants Google and Microsoft have seen significant share price slides, hours after they revealed worse-than-expected second quarter results.

The market sell-off saw Microsoft lose more than 11% in Friday trades, while Google's share price, which was down nearly 4% earlier in the day, recovered to finish 1.55% down.

The negative sentiment occurred after the results showed both firms struggling to adapt to a small-screen, mobile world.

Although Google was a trendsetter for desk-based computer searches, it now appears to have hurdles with advertising amid the technological transition to smartphones and tablets.

The devices pose a financial challenge for Google because their smaller screen sizes fetch lower ad rates than the marketing spend made on traditional desktop and laptop computers.

Google's average ad rate fell by 6% from the same time last year during the three months ending in June.

It marks the seventh consecutive quarter that Google's average ad price, or cost per click, has fallen from the previous year.

The magnitude of the declines had eased in each of the previous three quarters, raising hopes that the worst was over.

Instead, things deteriorated from the 4% decline in ad rates posted during the first three months of the year.

Google earned $3.2bn (£2bn) in the quarter, up 16% from $2.8bn (£1.81bn) a year earlier, with gross revenue up 19% to $14.1bn (£9.2bn).

But after subtracting Google's ad commissions, revenue stood about $275m (£180m) below analyst projections.

Meanwhile, Microsoft also missed forecasts and struggled to ship one million Surface tablets in each of the last two quarters and has a meagre 2% of the market's share.

Microsoft's revenue grew 10% to $19.9bn (£13bn), with a net income between April and June of $4.97bn (£3.2bn), but it incurred a $900m (£590m) write-down over the poor sales of Surface.

The results came a week after the company announced a major reorganisation to help it transform into a "devices and services" company that is less reliant on providing software for personal computers.

The quarterly profit missed by Microsoft was the most in a decade and raised new questions as to whether the transition will succeed.

Both Windows 8 and the Surface tablet represent Microsoft's big bets on the tablet computer market as PC sales continue to decline.

Research firms IDC and Gartner said last week that global PC shipments fell 11% in the April-June quarter - the fifth consecutive quarterly decrease.

Acknowledging the company's difficulties with the change, Microsoft chief financial officer Amy Hood told investors that "this journey will take time".

On Thursday both IBM and chipmaker Intel reported their own struggles amid a decline in PC sales.

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