In His Final Investor Letter, Steve Ballmer Admits Microsoft Is An Enterprise Company

In his final letter to investors as CEO of Microsoft, it looks like Steve Ballmer is finally making a concession people have wanted for years.

Ballmer seems to finally be willing to confess that Microsoft is indeed an enterprise company.

Todd Bishop at GeekWire highlights this passage from the letter, which, while very clunky certainly suggests Microsoft is an enterprise company at its core:

As we go to market, we will primarily monetize our high-value activities by leading with devices and enterprise services. In this model, our consumer services such as Bing and Skype will differentiate our devices and serve as an on-ramp to our enterprise services while generating some revenue from subscriptions and advertising. Enterprise services continue to be an area of great strength, growth and opportunity as businesses of all sizes look to Microsoft to help them move to the cloud, manage a growing number of devices, tap into big data and embrace new social capabilities.

In case you didn't read it, or just don't understand it, what Ballmer is saying is that Microsoft's money will come from selling devices and enterprise services.

Device sales are things like the Surface and Nokia phones. We'll see how that goes. So far, it's off to a rough start. Enterprise is cloud stuff, and Office.

The enterprise services is particularly key for Microsoft. Its growth, and its strength today comes from its Servers & Tools division, as well as its Office division. The consumer facing parts of the business like Windows, Online Services, and Xbox are in decline, losing money, and making almost no money at all.

As a result of Microsoft's struggles in the consumer space, the company was routinely questioned for continuing to pursue the consumer.

When people would ask Ballmer, "Is Microsoft a consumer or an enterprise company?" he would always answer by rejecting the premise.

"The key isn't are you in consumer or are you in enterprise. If you're going to be in e-mail, you're going to be in e-mail. You can't say, okay, I only want to be in enterprise e-mail. If you're in real time communications, what, you only want to let enterprise people talk to enterprise people but never talk to consumers? These experiences span," he said in an interview with ZDNet on the day he announced his retirement.

He continued, saying, "So I know there's a lot of press, blah, blah, blah about this, but the truth of the matter is I don't even know how you could opt, what it would mean to just opt to be all enterprise, unless you want to look like Oracle and not participate in certain high value activities, or you want to choose to look like Apple and not participate in certain enterprise activities. But that's not where we grew up. We grew up with a horizontal experience called Windows and Office that's equally applicable to people in their personal lives and their professional lives."

What he's saying here is exactly right. Enterprises are seeing an influx of consumer technology, so Microsoft shouldn't ignore the consumer space.

But, at the same time, this answer reveals one of the great flaws of Microsoft under Ballmer.

He lacks an ability to clearly, simply articulate a vision and a focus for the company. I don't mean focus, as in Microsoft releases too many products, but focus as in, the company does not have a clearly defined easily understood business mission.

In this situation, he just had to say, "We are first and foremost an enterprise company. That's how we make our money, that's our future. That said, we are still a big consumer company and we always will be. The consumer today, more than ever, influences the enterprise, so we would be fools to abandon that market."

By defining Microsoft as an enterprise company, Ballmer would provide clarity to people inside and outside the company. Right now, it seems like a bit of a jumble because there is no singular guiding mission.

As a result Microsoft is hammered more than other technology companies for the consumer versus enterprise distinction.

Amazon, for instance, is primarily an e-commerce company, but it's also making tablet computers and has a huge public cloud business. Google is a search engine, but it's also starting health and aging companies, developing driverless cars, doing Fiber, investing in wearable computing, and a lot of other random stuff.

Neither Amazon, nor Google, get dinged too badly for trying a lot of stuff. Google is lauded for being so innovative and trying to solve so many problems. And no one wonders if Amazon is an enterprise company because of its cloud business.

I think the reason those companies don't get the same sort of flak that Microsoft gets is that everyone knows what their core business is. Microsoft doesn't have that same core definition of business focus.

However, Ballmer's final letter appears to be working towards that focus.

Ironically, as he's on the way out the door, Microsoft appears to be in the best position it's been for a long time.

The new re-organization should get the company working towards shared goals. The focus on making money from services and devices as sales of Windows decline makes a lot of sense.

Whoever takes over just has to execute on the ideas Ballmer has laid out in his final letter, and perhaps, bring just a touch more clarity to the company's mission.