updated 06:36 pm EDT, Sat October 5, 2013
Windows 8, Surface RT struggles mean pay cut for Ballmer
Microsoft chief executive Steve Ballmer will only earn 79 percent of his potential incentive award for fiscal 2013 due to the poor performance of the Windows Division and the company's underperforming Surface RT device. Earlier this week, the software giant released its fiscal 2013 proxy statement, revealing Ballmer's docked pay. Last year, the Microsoft head received 91 percent of his eligible incentive award.
Microsoft's proxy statement points to the continuing struggles of the Windows 8 platform, which only recently passed Apple's OS X platform in worldwide market share. Windows 8 has struggled since its release last October, as consumers increasingly opt for smartphones and tablets instead of traditional PC form factors. Adding to the platform's struggles was the new "Modern" user interface, which confused and turned off many of those consumers who were buying new computers.
The statement also notes the failure of the Surface RT, which wound up costing Microsoft $900 million in unsold inventory. The Surface RT, meant to be the flagship device for the Windows RT platform, debuted to middling reviews and lackluster consumer interest. Microsoft has already introduced a follow-up device, the Surface 2, and the company seems prepared to put significant marketing muscle behind the device.
"Weakness in the PC market," as the report calls it, is a large concern for Microsoft, which has relied on Windows licensing fees to generate revenue. Microsoft has sold more than 100 million Windows licenses, but that is far below what the company expected at launch.
While the report isn't entirely negative on Ballmer -- the committee and board express their faith in their CEO within the report -- it does point out that the underperformance of Windows 8 and Surface resulted in an 18 percent decline in operating income for the Windows Division. Ballmer has announced his retirement within the next 12 months, and the company is still in the process of locating a successor.