Few will mourn his passing. Under his leadership Microsoft has slipped from undisputed leadership in the industry to a position where it is playing catchup in most of its product areas. Its strength was built on the PC market, which is now in decline.

It has been unable to match rivals like Google, which is surfing the Internet wave and Apple, which evolved so successfully beyond PCs that it defined entire new markets – media players, smartphones, tablets.

Microsoft has tried to match its competition in all these areas, but it has always been too little, too late. Its core Windows operating system and Office desktop software product lines remain market leaders, almost monopolies, but that market is stagnant.

Ballmer announced a major reorganisation last month, which must now be seen as a preparation for this announcement. It was the company’s biggest ever restructure, s belated attempt to reposition it for the challenges of a very different competitive environment. But it is probably too late.

Many regard Microsoft’s problems as Ballmer’s fault, for lacking the vision to make the big decisions. But that is perhaps a little too harsh – it was Bill Gates in the 1990s who famously underestimated the impact of the Internet.

At Comdex in 1994 he said that he didn’t believe the Internet would have any commercial potential for ten years, and in his inappropriately named 1995 book The Road Ahead, Gates barely mentioned it. Microsoft was going to control the future. It’s called hubris.

Microsoft became so rich and powerful on the back of its PC software that it could afford to pursue its own path and ignore the critics. It has moved into many other areas, and is now a major enterprise software player. Its SQL Server database is a market leader along with Oracle and IBM.

But the shine has gone, and so too – soon – will be Steven Anthony Ballmer, the son of a middle level manager at Ford in Detroit. His academic field was mathematics – he is one of the few people ever to have scored a perfect 800 in maths in the standard US SAT (Scholarship Aptitude Test).

Ballmer, 57, has been CEO of Microsoft since 2000, when he replaced founder Bill Gates, who remains Chairman. He joined Microsoft in 1980 as the company’s 30th employee and first business manager. When the company was incorporated the next year, he owned 8% of the shares. He is now the 50th wealthiest person in the world, with a net worth exceeding $15 billion.

The market is happy Ballmer is going. Microsoft shares rose 7% on Friday, to $34.75. That was one of the largest rises in a single day's;strading..

Microsoft’s stock has been very stable for all of Ballmer’s tenure, trading mostly at $25 to $30. At the peak of the tech boom in December 1999 the stock briefly went above $58, which gave it a market capitalisation of over half a trillion dollars, and it slumped to $15.28 in March 2009 at the start of the GFC. Microsoft's capitalisation has basically stood still for more than ten years, while Apple's has increased twentyfold. Google wasn't even a public company when Ballmer become CEO of Microsoft, and now it has an almost identical maret capitalisation (US$289 billion).

Ballmer's Wikipedia entry, which is worth a read, talks of his “energetic and exuberant” personality. Yes, well. He is known for on-stage antics at Microsoft’s launch events, many of which have gone viral on YouTube (there are even some ‘best of’ clips). Who can forget the Monkey Boy dance?

Microsoft has not announced a successor, but has said it will start looking for one immediately. Ballmer’s replacement may well come from outside the company, which may be necessary to shake up Microsoft’s notorious tunnel vision.

Read Microsoft’s announcement on the next page

Microsoft’s announcement in full:

Microsoft Corp. today announced that Chief Executive Officer Steve Ballmer has decided to retire as CEO within the next 12 months, upon the completion of a process to choose his successor. In the meantime, Ballmer will continue as CEO and will lead Microsoft through the next steps of its transformation to a devices and services company that empowers people for the activities they value most. 

“There is never a perfect time for this type of transition, but now is the right time,” Ballmer said. “We have embarked on a new strategy with a new organization and we have an amazing Senior Leadership Team. 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. We need a CEO who will be here longer term for this new direction.”

The Board of Directors has appointed a special committee to direct the process. This committee is chaired by John Thompson, the board’s lead independent director, and includes Chairman of the Board Bill Gates, Chairman of the Audit Committee Chuck Noski and Chairman of the Compensation Committee Steve Luczo. The special committee is working with Heidrick & Struggles International Inc., a leading executive recruiting firm, and will consider both external and internal candidates.

“The board is committed to the effective transformation of Microsoft to a successful devices and services company,” Thompson said. “As this work continues, we are focused on selecting a new CEO to work with the company’s senior leadership team to chart the company’s course and execute on it in a highly competitive industry.”