What's Wrong With Tech CEOs?

Fired CEOs are seldom the idiots in retrospect they appeared to be at the time. Take GM's late Bob Stempel, a supremely accomplished executive who received a lot more respect in his obits last week than he did in the early 1990s.

Back then, the economy was emerging from recession, and Stempel was the first of a series of big-name CEOs overthrown by activist boards at companies that seemed unable to get in gear. These revolts weren't seen as disconnected episodes at the time. They were hailed as evidence that boards of directors had finally begun to do their job, taking charge of companies whose drift was beginning to verge on catastrophe.

And now for the historical parallel: In place of Stempel of GM, Akers of IBM, and Robinson of American Express, should we today be thinking of Ballmer of Microsoft, Bartz and Yang of Yahoo, and Chambers of Cisco?

Steve Ballmer has grown sales and earnings impressively over his 11 years heading Microsoft. Yet the stock has been flat for most of that time. Serious critics don't fault Mr. Ballmer because Microsoft hasn't turned itself into Google, Apple and Facebook rolled into one. If anything, they fault him for throwing capital in too many directions and treating every company that comes along as a strategic rival. Their latest frustration is his $8.5 billion purchase of Skype, a profitless company that sold two years earlier for $2.7 billion, which some see as an expensive play to keep an asset out of Google's hands.

Unthinkable to Microsofties, unsentimental holders of the stock just wish the company would focus on milking its Windows and Office franchises rather than battling the Joneses.

Yahoo's fumbles are traced more to its cofounder Jerry Yang than its latest CEO Carol Bartz. Mr. Yang rejected a rich offer three years ago from Microsoft at twice today's share price. Just as investors were beginning to value Yahoo based on its ownership stake in China's Alibaba, now comes a revelation that a key Alibaba asset has been transferred to the company's Chinese CEO on unknown terms in a deal that somehow eluded Yahoo's notice. Mr. Yang, who serves on Alibaba's board, was supposed to be on top of such things.

Then there's the case of Cisco's John Chambers—so reminiscent of IBM's John Akers.

Mr. Akers was hardly passive as the PC revolution engulfed IBM's mainframe business. He laid off 100,000 workers. He closed nearly half of IBM's plants. As the Journal noted at the time, he was "astute" in "keeping the sense of crisis alive at IBM."

But he also argued that it was unfair to expect IBM to adapt to industry upheaval overnight, and he had a patient board, led by the commanding James Burke, former chairman of Johnson & Johnson. But the bad news kept coming, and Mr. Burke finally lost faith and replaced his friend with outsider Louis Gerstner, whose motto was: "If we're going to err, we're going to err in the direction of moving too fast."

Likewise, on every earnings call, Mr. Chambers today is Cisco's strongest, most impatient voice for change. But a succession of earnings disappointments and rolled-back forecasts has started to worry investors that Cisco's problems are deeper and more systematic than it first appeared.

Mr. Chambers's decision to close Cisco's Flip camera business was hardly an embarrassment on the order of Microsoft's short-lived Kin phone, withdrawn from the market after a month. But the meteoric decline of Flip, overtaken by increasingly capable video cameras embedded in smart phones, suggests a disturbing possibility: A similar strategic glaucoma might also afflict Cisco's crucial networking business.

In this column on business idiots, we have not encountered a single idiot. We have encountered companies that have come, or may have come, to that point where an outsider is required to do what an insider realistically can't be expected to do, namely take a meat axe to departments and colleagues with whom he has shared a life.

Perhaps the stickiest case of all is Microsoft's.

An obvious alternative strategy would be to break up the company so its more venturesome components could find their capital in the markets rather than sucking up cash created by the cows. But nothing like this is likely to happen until and unless Bill Gates decides it should happen—Mr. Gates, the company chairman, whose official Web page features the quote: "We've really achieved the ideal of what I wanted Microsoft to become."

His mind obviously is elsewhere these days, on his philanthropic ventures, and probably will remain so unless the company's drift produces a serious crisis for its stock price. Only then, when his legacy is threatened, might he be willing to drop what he's doing (which he seems to enjoy) and return to the company he founded in order to put things right.

Thanks To Holman W. Jenkins, Jr. / Dow Jones & Company, Inc.
http://online.wsj.com/article/SB10001424052748703509104576329112614004894.html?mod=dist_smartbrief#printMode