Microsoft’s Strong Quarter, an Appropriate Farewell to Steve Ballmer

Microsoft posted a profit of $5.24 billion, or $0.62 a share, on revenue of $18.53 billion. In the same quarter a year ago, the firm earned $4.7 billion, or $0.52 cents a share, on $16 billion in sales. Wall Street rewarded the company by pushing is shares up 5% to $35.42. Shares finally have reached the point at which their performance since Ballmer took over has come close to the performance of the Nasdaq over the same period.

Ballmer’s Achilles’ heel — Windows — failed him again, as revenue at the unit that represents its sales fell. He has never been able to get the product releases for the operating system just right. This did not change with Windows 8. Combine that with the fact he was largely blindsided by the rise of tablets and smartphones, and the decisions that dogged him in the flagship part of the company are ones from which he could not recover.

However, Ballmer’s push into business and server software has been an unqualified success. The divisions that contain the revenue from these barely existed in 2000. They now produce an outsized portion of Microsoft’s sales, and effectively compete with huge enterprise software companies led by Oracle Corp. (NYSE: ORCL) and SAP A.G. (NYSE: SAP). Investors looked at these operations as afterthoughts compared to Windows. Nothing could be further from the truth.

Ballmer’s work to move Microsoft into hardware will be remembered for two things — the large success of the Xbox, which the company spent billions to support until it did well, and Surface — a lame attempt to mimic Apple Inc.’s (NASDAQ: AAPL) iPad. Whether Ballmer’s risky buyout of dying Nokia Corp. (NYSE: NOK) will work will not be known for several quarters, it is a desperate attempt to enter the smartphone market and will not work.

Finally, there is Bing, Ballmer’s quixotic run at Google Inc.’s (NASDAQ: GOOG) search business. Its revenue was actually higher last quarter, but it continues to be dwarfed by its larger competitor. That will never change. Bing fell well short of its goals.

So, Ballmer’s mixed legacy will stay as just that — even if he began to turn Microsoft in the right direction at the end of his tenure.