Microsoft’s scapegoating explanation doesn’t hold water

Reactionary management incompetence to placate OEMs

Microsoft LogoWhen SemiAccurate broke the story about HP dumping Microsoft’s ARM tablets, we actually didn’t expect them to turn on their own quite so viciously. Luckily, they did, and it shows just how out of touch management is.

If you recall, Microsoft just announced their Slate tablet two weeks ago, and it took OEMs by surprise. A few were told on the Friday prior to the launch, but most found out about it via the press. Needless to say, they were not pleased, and HP is only the first to flip WART (Windows on ARM RT) the proverbial bird. Trust us, others may be more politically savvy about messaging, but they will get their pound of flesh before the story is finished.

So what dis Microsoft do? They transferred the CVP of the OEM Division, Steven Guggenheimer, to parts unknown starting July 1. This is of course due to a long standing plan, and coincides with the end of the financial year at Microsoft, nothing more. He will be replaced by Nick Parker, but no word on where Steven is going after a planned sabbatical starting last Friday. The exact statement as given to the Seattle Times, reads as follows.

As a result of long term planning, Steven Guggenheimer will move on from his current role as CVP of the OEM Division effective July 1, to coincide with the start of Microsoft’s fiscal year. He is taking on a new senior leadership role at the company, and further details will be provided when finalized. Nick Parker, former VP of WW [worldwide] marketing will be assuming the role of CVP starting July 1st.” Others have reported Mr Guggenhiemer will take a sabbatical effective immediately.

How dumb do they think we are? Easy answer, really really dumb. They are right too because most of the press seems to have bought it. What happened to critical thinking skills in the fifth estate, have they been totally subverted by advertising dollars? No, don’t answer that.

So, this changing of the guard at Microsoft was long planned and had nothing to do with the Surface debacle and the OEM exodus that followed. Really. The timing is complete and utter coincidence, how could you think otherwise? Microsoft often changes CVPs of their major divisions at year end, happens all the time. (Authors note: I can’t find another example, can anyone else?) And they reassign long term Softies at the CVP level without a place to put them all the time too, why would you question not announcing where Guggenheimer is going? This kind of long term planned senior management change with a mystery landing spot, not finalized yet, happens all the time at large companies, how can you not believe Microsoft PR here?

For those without large Microsoft ad campaigns running, it sure does look fishy, but snap judgements are not good reporting, research is. SemiAccurate has lots of ties to the OEM community, and the author knows Mr. Guggenhiemer personally. We saw him speak a few times at Computex a few weeks ago, and ran in to him a few other times at the show. Ironically, the author and the CVP do share a fairly large circle of acquaintances in the OEM community. So we asked them about this long planned transition.

Remember, this is a major figure at the most dominant software company out there, one that no OEM is untouched by. They all have to work with Microsoft, and that means they have to work with Guggenhiemer, be it by choice or not. He spoke at many OEM events, keynotes, and conferences during Computex in early June too, he was all over the place during the show. When asked by SemiAccurate, none of those same OEMs had any clue about his departure nor his imminent successor.

You would be forgiven for thinking that a long term close contact might tell his friends and co-workers that he was about to go on sabbatical and change jobs. You could also understand why the CVP of the OEM division at Microsoft would use the single largest OEM conference in the world to say thanks and goodbye, then introduce his long planned successor. This is what you do in such a well thought out transition, you meet, greet, smile, and nod to contacts that spend tens or hundreds of millions of dollars a year at your business. Easing the transition is vital, hiccups here cost more than most corporate aircraft.

At Computex however, that didn’t happen. Steven Guggenhiemer did not mention moving on, introduce a successor, or do any of the usual planned swan song routine. It was business as usual, at least during the three or so of his speeches the author attended. There was absolutely no public sign of a transition in early June, period.

Public signs are not always warranted in these situations, OEM relations are not public relations. The aforementioned transitional group hug could have happened behind closed doors, Microsoft management is nothing if not subtle and demure. Unfortunately, multiple OEM contacts who SemiAccurate is positive both knows and works with Mr Guggenhiemer all indicated they had no idea the transition was coming. Every single one. Some even heard about the transition only when we asked over the weekend.

Does this sound like an orderly and planned transition to you? No soft landing, no future position, and some really tenuous reasoning for the timing all point to a reactionary knifing. The official Microsoft statement is laughably absurd on its face, and only gets more absurd when you follow up on the claims. They appear to be farcical at best, and SemiAccurate could not find a single OEM to back them.

That is where the funny bits come in. Microsoft obviously got caught with their pants down by HP and other OEM reactions to Surface. The panic in Redmond was obvious and palpable late last week. A professionally managed company would work tirelessly to placate the OEMs and do whatever it takes to make sure the people responsible for the overwhelming majority of their sales are happy. Not doing so could literally sink the company. Debacles of this magnitude have happened before, and will happen again across the Fortune 500, that is assured, but rarely do companies survive without backpedalling at full speed.

Instead of taking the professional approach, Microsoft picked a scapegoat and took his scalp. Surface was a top secret project at Microsoft, and the few OEMs that were told about its existence were told late on Friday before the Monday launch. The majority of OEMs however tell SemiAccurate that they had no warning, and most found out about it via the press, not from Microsoft.

Surface is not an OEM product, it is specifically not going to be licensed or sold through OEMs. It is the antithesis of an OEM device, in fact it is their direct in-house competition. Anyone want to bet the CVP of the OEM division either didn’t know, or found out about it very late in the project development process? Do you think he was allowed to tell his OEM contacts that it existed, or that Microsoft was about to take their most innovative features and then undercut them on price? Neither do I.

Basically, Steven Guggenhiemer was either not told about or not allowed to mention the Surface project to the OEMs he managed. When they found out about it, OEMs understandably went ballistic and pulled back from Microsoft, hastily kissing up to Google en masse. It was a disaster, and instead of punishing those responsible, Microsoft picked a scapegoat. Those responsible are still in power, a ludicrous cover story has been floated, and purchased press lapped it up. How professional.

According to SemiAccurate’s checks with OEMs during Computex, WART was plastered all over every booth simply because Microsoft was funding its presence there. Absolutely no vendor questioned thinks it will be a success, but Microsoft is paying handsomely to fund design work and lavishing advertising co-op money on anything that moves. All this however did not convince the OEMs that WART had a chance to succeed in the market, in private none were even mildly positive.

Microsoft has no plan for the mobile space, if they had, they would not have announced Surface like they did. It is simply rank management incompetence to think that it would not alienate the entire OEM community. It managed to alienate the OEMs  in a most spectacular fashion. That community was already on edge, unconvinced that the turkey called WART would fly on its own when pushed off the funding mountain. This is Windows Phone 7 part II, everyone knows it.

Instead of learning from that debacle, the same geniuses who took Microsoft’s phone operating system share from above 10% to below 2% were let loose on the tablet space. Their harebrained master plan blew up in their face once again, and took the entire OEM community with it. Microsoft then panicked and took a public scalp instead of holding those responsible to account. There is no plan on where to take things from here, Microsoft’s tablet hopes and dreams are stone cold dead. If upper management is allowed to survive this, the company has no chance.S|A

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Charlie Demerjian

Roving engine of chaos and snide remarks at SemiAccurate
Charlie Demerjian is the founder of Stone Arch Networking Services and is a technology news site; addressing hardware design, software selection, customization, securing and maintenance, with over one million views per month. He is a technologist and analyst specializing in semiconductors, system and network architecture. As head writer of, he regularly advises writers, analysts, and industry executives on technical matters and long lead industry trends. Charlie is also available through Guidepoint and Mosaic. FullyAccurate