by Charles Cooper, CNET
Armchair critics of the world rejoice. It’s time to select the year’s best and worst tech CEOs. It’s a judgment that some no doubt will lambaste as arbitrary, even biased. On both counts we plead guilty. So if you have candidates for either category, or take issue with our choices, add your voice in the talkback section below.
Steve Jobs and Tim Cook
Skip to the next section if you’re thoroughly sick of reading about how Apple keeps hitting the ball out of the park. Truth be told, it was more fun in the mid-1990s when Apple was Silicon Valley’s running soap opera. Nowadays the company operates with the sort of steamroller efficiency epitomized by the 1927 New York Yankees led by Babe Ruth and Lou Gehrig. And for that, you have to credit the CEO tandem of the late Steve Jobs and his successor — and alter ego — Tim Cook.
Tim Cook sitting at Steve Jobs’ right at an event in 2007 (Credit: James Martin/CNET)
Jobs may be gone but his influence at Apple remains in the management team and product design philosophy that he left behind. Even though illness forced Apple’s legendary co-founder to relinquish the reins to Cook in late August, his half-year as CEO was still better than full-year performances turned in by most of his peers. This wasn’t an overnight handover. Whenever Jobs needed to take a step back, Cook was in the unique position of receiving extended on-the-job training, and whatever rough patches he might have encountered were well hidden behind Apple’s carefully constructed PR screen. All the while, Cook got to learn first-hand from the tech industry’s master marketer how it’s done.
What a shame Jobs wasn’t healthy enough to introduce the iPhone 4S. How the fan boys would have swooned when he offered them the first look at Siri. Cook’s not a matinee idol and he doesn’t try to be. Maybe that explains the relatively muted reaction to what was otherwise a very successful product debut. Some quibbled that the lines in front of Apple stores were smaller than for previous releases. But the bloggers and reporters who get hung up by the different style are making a big deal out of the trivial. Like Jobs, Cook has offered the leadership that you’d expect from a strong CEO. He more than justified Jobs’ confidence as Apple’s iPhones, iPads and iMacs continued to sell at a torrid clip in the second half of 2011, sending the company’s shares are up more than 17 percent year-to-date, beating both the Nasdaq index and S&P 500.
The question everyone is asking is whether Cook can muster the magic on his own now that he’s flying solo. Maybe we’ll find out the answer in 2012. But so far, this rates as one of the most seamless managerial handovers in corporate history. And one of the most successful.
President Obama chats with Facebook CEO Mark Zuckerberg in February. (Credit: The White House)
Here’s one way to think about how entrenched Facebook has become in the cultural lexicon: When someone decides they actually want to leave everyone’s favorite social network grid, this now qualifies as “news.” That is no small accomplishment. Even though Google now offers its own rival service, Facebook remains by a wide margin the preferred social network for revelers, revolutionaries, and just plain folk posting their musings, pictures, and videos uploads.
Wall Street has apparently decided that Facebook is not of this world, according it a pre-IPO valuation now north of $80 billion. But somehow the peanut gallery remains reluctant to give Mark Zuckerberg his full due for building a magnificent platform. Yes, he’s profiled in business magazines and gets sought out for interviews by everyone from Charlie Rose to “60 Minutes.” But when you listen to discussions of the great CEOs of Silicon Valley, you’re more likely to hear mention of John Chambers, who had Cisco buy the company that makes the Flip video camera for $590 million and then shut the division less than two years later. The worst Zuckerberg ever did is get sloppy with privacy controls, a faux pas that some within the blogosphere may never forgive.
But as 2011 closes, it’s time to give it up for the Z-man. Through the years he has remained true to his vision and resisted sundry offers to sell out. Back in 2006, when he was approached with a $750 million offer, more than a few people thought he should take the money and run. Who was Zuckerberg and what was Facebook to think they could outrun then-juggernaut MySpace? But five years later, MySpace is irrelevant, while Facebook has over 750 million active users and earned $500 million on $1.6 billion of revenue during the first half of 2011.
Like Bill Gates, an entrepreneur who managed very well as CEO at a young age, Zuckerberg is growing into the role (helped in no small part by his able No. 2, Sheryl Sandberg.). The best example came this fall when he put a potentially distracting privacy fight with the government in the rear view mirror instead of venting publicly about government persecution. He’s familiar with Microsoft’s less than happy experience battling Uncle Sam and wisely ordered Facebook to strike a deal with the Federal Trade Commission that should put this issue to bed.
Zuckerberg can’t go on auto-pilot. His biggest immediate challenge, of course, comes from Google, which launched its Google+ service in July and passed the 40 million user mark in October. Facebook has to keep pushing. It did a nice job with Timeline, the new profile design that finally went live last week. And with an eye toward avoiding further complaints about user privacy, Facebook also rolled out a useful tool called Activity Log which may go down as one of the site’s most important additions since the inclusion of the News Feed.
The coming IPO, presumably sometime in 2012, will be a barometer of Zuckerberg’s success, as well as the event of the year’s tech calendar. And who knows what the future holds? Is it altogether nutso to imagine Facebook bringing out its own search technology, one that could sort through a gold mind of data about social interactions? Zuckerberg is aiming high, and Facebook is already a good part of the way there. This is how legacies get created. If it all works as Zuckerberg hopes, then maybe that $80 billion valuation will turn out to be on the low side. Scary but true.
From left, Google’s Eric Schmidt, Larry Page, and Sergey Brin.(Credit: Google)
“Google is not a conventional company. We do not intend to become one.”
A bit full of himself, sure, but now that the proverbial buck stops at his desk — he became CEO in April — Page has had an opportunity to back up his words. Though his brief reign, this much is clear: While he may not be an unconventional CEO, Page has ably handled the awesome responsibility that he sought out. He set the company on a new course with the blockbuster announcement of a $12.5 billion deal for Motorola Mobility (a deal that gives Google more than 17,000 patents and will prove useful now that Apple is trying to nuke Android in a court case). Meanwhile, Android continues to grow by leaps — according to Nielsen, it now powers about 40 percent of smartphones — while Google’s search dominance remains unquestioned. The company also made a successful entry into social networking with Google+, which finally offers Facebook its first serious competition for advertising dollars and user attention. Wall Street likes what it’s seen. On the day Page took over, Google’s shares closed at $587.68; with less than a couple of weeks left in the year, they’re hovering around the $630 level.
By all accounts, Page’s accession to the top job — technically this is his second turn as CEO, though his first as the head of Google as a public company — has been annotated by drive and energy. He wants to accelerate Google’s corporate DNA, and in the near term, that may be his biggest challenge. The flip side of being big and successful is the spread of corporate sloth (as both Microsoft and IBM veterans can attest). With around 25,000 employees at Google, this is no longer a scrappy startup and it’s become tougher than ever for good ideas to bubble up from the ranks and get proper consideration. That’s why Page has winnowed the number of projects Google’s engineers are working on, focusing their efforts on the areas where he thinks there’s the best chance for the biggest returns.
OK, how difficult can it be to sit at the top of the mountain, take in your immense kingdom, and bloviate in SEC docs about being unconventional? In fairness, it’s not as easy as it looks, so give Page deserving kudos for not screwing up what continues to be one of the most vibrant tech companies around. We’re often reminded of the spectacular success stories registered by the likes of Bill Gates and Steve Jobs (his second time at the helm more so than his first go around) but any fair recording of CEO-founders includes no shortage of flameouts. Remember George Shaheen at Webvan.com, Philippe Kahn at Borland, and Ted Waitt at Gateway, to name a few? All were smart guys and their companies were once the toast of the town. Then the good times ended and they couldn’t reverse the slide. If Page turns out to be as good as we think, Google’s CEO won’t ever find himself facing that sort of predicament.
THE GOATSReed Hastings
Yesterday’s hero can turn into today’s goat in the amount of time it takes to launch a press release. Just ask Netflix CEO and founder Reed Hastings, who must still be wondering if it was all a nightmare.
Netflix founder Reed Hastings at one of the company’s warehouses in Silicon Valley.(Credit: CBS)
Up until this year, Hastings was an Internet rock star, lauded for having changed the way we consume movies and television shows. Netflix was an easy-to-use service priced at the sweet spot. Consumers flocked to it. Wall Street sang its praises. But it all came a cropper in September when Hastings executed the sort of maneuver that one might have expected from F-Troop.
It wasn’t just the 60 percent price hike on one of Netflix’s most popular plans that got peoples’ dander up. Netflix also planned to split into two parts: One unit named “Qwikster” would mail DVDs to subscribers, while the other would continue to focus on streaming movies over the Internet.
This turned out to be a public relations disaster. Even though the price increase would impact only subscribers who used both the streaming and mail-order sides of the business, the announcement left Netflix loyalists steamed. Two separate websites with two billing systems and two names? If there was a higher logic at play, it escaped most people. The reviews were uniformly lousy and Netflix became the butt of late-night TV hosts’ jokes. Wedbush Securities analyst Michael Pachter summed up the general reaction with this icy observation to a reporter from USA Today: “They raised prices. They offered lower-quality content, and they made it more complicated.” Within three weeks Hastings reversed the Qwikster decision and publicly apologized for having “slipped into arrogance” (though Netflix kept the price increase in place.) But the apology was too late to repair the damage. During the third quarter, 800,000 subscribers responded to the Qwikster fiasco by dumping the service. Shares of Netflix, which earlier in the year poked above $300, have since fallen to the $70 range.
People have short memories and this isn’t necessarily the end of the world for Netflix. Fans do return. Think Bob Dylan and his move to electric guitar. After the initial freak-out, most of the faithful got over it. Nothing here rules out that kind of rebound for Hastings — as long as he avoids hitting another sour chord. At that point, Neflix really could be left blowing in the wind.
Leo Apotheker and Meg Whitman (Credit: Graphic by James Martin/CNET)
In our quiet moments, it’s reasonable to wonder whether some mischievous warlock left the curse of the cat people on Hewlett-Packard.
Carly Fiorina’s years were marked by corporate drift and tumult. Her replacement, Mark Hurd, was ousted in an expense-fudging scandal involving a former soft-porn actress. In between, there was a bizarre novella in which corporate officers trying to plug a leak ordered investigators to spy on journalists.
But nothing — and I mean nothing — compares with the brief and utterly feckless tenure of one Leo Apotheker, hired in November 2010 to replace Hurd.
Apotheker was a highly regarded software executive who had been chief executive of SAP AG. Although he had little experience as a hardware executive, the company hoped he could take the management skills he had picked up over the course of his long career and apply them to the job at hand. It was only much later on that we learned most members of HP’s board of directors had never even met Apotheker before voting to hire him. That’s what you get when the company is overseen by what a former board member has described as the “worst” board of directors in the history of business. But I digress.
After 11 months as CEO, Apotheker got the boot and HP, once one of Silicon Valley’s storied company, was reduced to a laughingstock. The chronology played out over the summer, when Apotheker announced that HP would kill off the TouchPad tablet computer, which had only recently debuted. He also canceled a crop of phones and products based on Palm’s WebOS operating system. He was also convinced HP would be better off selling the PC business, a $30 billion division which at the time still enjoyed big market presence.
His plan now is easy to mock. But Apotheker had a strategy to remake HP into something resembling his former company and specialize in catering to enterprise-sized companies. On the surface, at least, it was intriguing. After all, the idea of jettisoning low-margin businesses to focus on software and service worked wonders at IBM under Lou Gerstner and Sam Palmisano. But it took time for those two to get all the pieces in place and plan IBM’s exit from the commodity stuff.
In contrast, the clock was ticking for Apotheker right from the start. And with HP missing its financial targets, Apotheker quickly lost credibility with the financial community, making investors even antsier as HP’s stock lost 40 percent of its value. He also lost credibility with another key constituency as the board grumbled at his poor communications skills (starting with the decision to kill the TouchPad) as well as the company’s product direction. Rightly or not, Apotheker was labeled a zig-zagger with little feel for HP’s hardware business. The board executed a mercy killing in September, replacing Apotheker with Meg Whitman. The former eBay CEO has since announced that HP would keep the PC business.
You can’t make this stuff up.
RIM co-CEO Mike Lazaridis shows off the BlackBerry PlayBook.(Credit: BlackBerry PlayBook, Mike Lazaridis)
Jim Balsillie and Mike Lazaridis
After their company’s latest earnings debacle, Research In Motion’s co-CEOs James Balsillie and Mike Lazaridis announced they would take just $1 in salary. Given the collapse of this one-time tech darling, some shareholders may grumble these two are still being overpaid.
It’s hard to believe how quickly RIM has collapsed. The company’s stock has lost more than three-quarters of its market value in the last year while a myriad of app-hip mobile handset rivals have prospered. That’s all the more remarkable given how we’re talking about what once was the premier mobile device maker for businesses. Now RIM is a company that can’t seem to keep up. With every new Android and Apple update, RIM promises a next-generation BlackBerry phone — sometime in the second half of next year. Meanwhile, its PlayBook tablet has been turned into a bargain-bin product with RIM offering massive discounts.
Cue up Clayton Christensen and the perils of the innovator’s dilemma, where one-time market leaders fail to capitalize on new waves of innovation. In the meantime, here’s Lazaridis trying to explain why the on BlackBerry 10, the upcoming product RIM has touted as the basis for its superphone, is going to be delayed:
We need a highly integrated dual-core LTE platform.The processor we selected offers industry-leading power and efficiency, and also allows us to deliver the industrial design, that we believe is critical to the success in this market segment. This chipset will not be available until mid 2012. And as a result of this and certain other factors, we now expect our first BlackBerry 10 smartphones to reach markets in the latter part of calendar 2012. In the meantime, we believe that our strong BlackBerry 7 portfolio will continue to drive adoption of BlackBerry around the world.
One problem: In July, Lazaridis told shareholders that the BlackBerry 7 handsets were just “messaging” handsets compared to the “mobile computing” handsets slated to come out with the BlackBerry 10 software. Now the company’s stuck with these same “messaging” handsets while the market keeps moving along. Sanford Bernstein responded to that performance by calling management “in complete denial of the situation” while another brokerage, Robert W. Baird, said RIM’s U.S. business was “in a freefall.”
There’s a growing feeling that Balsillie and Lazardis, who share responsibilities for leading RIM, are congenitally conventional managers ill-equipped to handle an unconventional challenge. The situation has reached the point that some are even floating suggestions that RIM may need to consider dumping the BlackBerry if it’s to survive. That sounds like a stretch but at this rate the situation is impossibly grim, with investors and customers holding onto faint promises of better times ahead. The fact that RIM has even reached this point constitutes Exhibits A, B, and C for the chorus of critics demanding new leadership.
As an early user of AOL’s dial-up service, I have to confess to a twinge of nostalgia each time I watch “You’ve Got Mail.” That’s about the only warm and fuzzy feeling AOL gives off these days as CEO Tim Armstrong seeks to find on a formula that will save the company from media also-ran status.
AOL CEO Tim Armstrong.(Credit: Google)
Give the man credit for believing in a strategy. But after two years making the same pitch, the question is whether he’s got the right strategy. Armstrong is an online ad sales guy — he was Google’s president of the Americas operations — and has gone shopping for new content that AOL’s ad sales team can sell against. Like Yahoo, AOL has a legacy business in the form of its dial-up operations which, remarkably, still throws off a lot of cash each quarter. That’s allowed Armstrong to fund his bet that that content will create scale when he acquired the Huffington Post for $315 million as well as TechCrunch for a reported $30 million. It’s still too early to say how those deals are going to work out for AOL though they were grand slams for the two blogs’ creators, Arianna Huffington and Michael Arrington, who sold at the peak. The other big hope is Patch, the company’s network of hyperlocal Web sites. AOL this year has sunk $40 million into Patch on top of the $75 million that it spent on the project last year. Good money after bad? Not according to Armstrong, who has predicted that Patch will start generating a profit by the end of 2011.
But despite adding a collection of works in progress, AOL has failed to distinguish itself from the pack. AOL may argue that its content Web site pickups will help boost traffic and revenues in a meaningful way but it is unclear whether traditional remedies for a traditional media company will provide the needed fix. Wall Street has not bought the story. With Armstrong scheduled to take home a total annual compensation package of $1 million, AOL’s stock plummeted from nearly 25 earlier in the year to the mid-teens.
On top of that, Armstrong’s reputation as a leader suffered when he was unable to effectively resolve the summer soap opera involving Arrington and Huffington. After losing a turf war, Arrington very publicly left AOL; he was soon followed out the door by several key staffers – including, most recently, TechCrunch CEO Heather Harde. But that was just a circus sideshow to the central question about whether Armstrong has what it takes to turn AOL into a money maker. Already calls are coming to split the company into pieces and jettison the units that aren’t adding to growth. How long before some of those same voices begin asking why Armstrong should escape paying the same penalty exacted from Carol Bartz when she failed to revive Yahoo? After all, you can only be in turnaround mode for so long.
Charles Cooper has covered technology and business for more than 25 years. Before joining CNET News, he worked at the Associated Press, Computer & Software News, Computer Shopper, PC Week, and ZDNet. E-mail Charlie