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September 13, 2006

Nadella replaces Burgum in Microsoft Business Solutions hot seat

Posted by David Hunter at 10:54 AM ET.

Nearly a year ago Microsoft moved Doug Burgum into an an odd job as Chairman of Microsoft Business Solutions while they looked around for an executive to actually run the troubled agglomeration of small and medium business applications that they had assembled in a burst of acquisitions starting five years back. It looks like yesterday they finally found a volunteer in their own Satya Nadella:

Microsoft today announced that Corporate Vice President Satya Nadella has been selected to succeed Doug Burgum as the leader of Microsoft Business Solutions (MBS). For the last five years, Nadella has been responsible for MBS research and development (R&D) worldwide.

Burgum will leave the company at the end of the fiscal year in June 2007, but for some observers it isn’t soon enough:

According to his assessment (unbiased of course), the division is in “great shape”, having managed a whopping $24M profit this year (eeked out – conveniently – in the final Q of the fiscal year before ceasing to be a separate reporting entity) versus a $170M loss the year previously. Putting aside that I can’t recall a departing exec ever saying their division wasn’t in “great shape”, I guess Doug isn’t a math major because at that rate of profit, it would take some 44 years just to payback the initial $1.1B MSFT expended to purchase Great Plains (a company he founded and was CEO of). And of course, the Bus Sol buying spree didn’t end there and we’ve had years of significant ongoing losses.

So 3-4 years later, we’re left with another of those wonderful “shareholder value creation” stories that Ballmer is so fond of mentioning. Only, as usual, no obvious value has been created, but management has managed to chew through another $3-4B of shareholder money and detract from earnings (until recently) – thereby actually hurting EPS and the share price. Worse, it doesn’t appear to be on a trajectory that would alter that equation, or even just provide a payback, any time soon.

There’s more pointed commentary by following the link, but Mr. Burgum did fine in building Great Plains Software and selling it to Microsoft and he isn’t the first executive who had a hard time handling a mixed bag of companies assembled in a misguided corporate shopping spree. The blame for that has to go higher up.

Finally, as alluded to in the quote above, Microsoft Business Solutions results are no longer broken out separately in Microsoft financial statements, so outsiders will never really know if it ever turns the corner.

Filed under Doug Burgum, Executives, Jeff Raikes, MBS, Microsoft, Satya Nadella, Steve Ballmer

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