Who Will Be Microsoft's Next Online Chief? McAndrews? Miller? BoomTown?

Published on July 24, 2008
by Kara Swisher

BoomTown was all busy trying to think of execs to replace Yahoo CEO Jerry Yang, as pressure mounts on him to right the troubled Internet company.

But now, Yang’s position feels safer than ever and it’s his nemesis–Microsoft– that needs a new leader for its long-stumbling online services business.

Microsoft (MSFT) was already cracking, according to sources, and had a wish list of internal and external candidates that CEO Steve Ballmer is now considering.

Ballmer noted in his memo to company employees yesterday the departure of Platforms and Services President Kevin Johnson and the reorganization of that massive division, that he would “create a new senior lead position and will conduct a search that will span internal and external candidates.”

Many think, given the turbulence, that Ballmer will pick a trusted internal Microsoft veteran, especially since he probably should move quickly.

Sources said Brian McAndrews (pictured here), who came to Microsoft via the $6 billion aQuantive acquisition last year, is the leading insider for the job.

SVP Satya Nadella, who will run search, MSN and ad platform engineering efforts in a new reorg, is less likely.

But Strategic Partnerships Senior Vice President Yusuf Mehdi, a longtime exec who has previously led online businesses at Microsoft, is also in the mix, the possible dark horse due to his past experience. As strategy “wingman” to Johnson, he might want a more operational job again now that Johnson is gone. Mehdi is also well liked in Silicon Valley and in media circles.

More interesting perhaps is one of the top outside candidates on the list, former AOL head Jon Miller (pictured here), who is poised to be added to the–wait for it–Yahoo (YHOO) board, as part of its recent proxy fight settlement activist investor Carl Icahn.

Miller, who was bounced out of AOL unfairly several years ago, is now running an investment firm with former Fox Interactive Media head Ross Levinsohn.

(And, adding to the hijinks, Levinsohn was on Microsoft’s alternate board in its own abandoned proxy fight against Yahoo.)

Other execs on the list are also more experienced in the Web space, such as former CNET head Shelby Bonnie, who is currently working on a start up called PolticialBase.

Microsoft sources said someone like former Yahoo COO Dan Rosensweig–now in private equity at the Quadrangle Group–is also the type of exec the company is looking for. Of course, he is deeply loyal to Yahoo (and his name has also been bandied about as a possible future Yahoo CEO too).

Of course, the company’s fondest desire is probably to get an even bigger Web or media exec like News Corp.’s (NWS) Peter Chernin or former eBay (EBAY) head Meg Whitman. (News Corp. is the owner of Dow Jones and of this Web site.)

Having been around when Microsoft first dipped its toe in Internet waters back in the mid-1990s, I’m sorry to say that whoever the software giant picks has small shoes to fill.

After years and years of losses, while Google (GOOG) and Yahoo made bank and grabbed share, Microsoft has not.

In its recent quarterly report, for example, while revenues for the online business rose 24 percent to $838 million, losses from Platforms and Services doubled to $488 million.

Ouch! That’s gotta hurt.

Because of the continued inertia, Johnson’s large unit–which includes the powerful Windows division, as well as the online services business–will be reorganized into two parts.

The Windows and Windows Live online service will be one part and other will be made up of online advertising, search and MSN.

That division needs to bulk up the software giant’s efforts in the Web space, especially in the online advertising arena where Google now rules.

In an attempt to make an end run around the search behemoth, Microsoft tried to buy Yahoo, the No. 2 player in the search and search-advertising space, and then tried to grab only its search business–efforts that have so far yielded nothing.

In any case, this reorg of a previous reorg (Ballmer united the Windows and online services business three years ago) is a clear signal of the unrest and even a bit of chaos at Microsoft resulting from the Yahoo battle.

There is definitely a lot of ire aimed directly at Johnson (pictured here) as the key executive in charge of the effort besides Ballmer, because of his failure to make a deal.

Worse, the bid forced Yahoo into the arms of Microsoft archrival Google, via a controversial search-ad outsourcing deal.

Microsoft must obviously do something.

Its market share in the search market, for example, has persistently stayed under 10 percent, despite a range of efforts to differentiate itself.

Re-energizing Microsoft’s Web efforts is most definitely a thankless job.

And whether replacing Johnson and bringing in a new leader who can push the reset button will work this time is unclear, as are many things having to do with Microsoft’s Internet strategy right now.

Please see this disclosure related to me and Google.

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