Server Chief Out At Microsoft, Is Steve Ballmer Next?Server Chief Out At Microsoft, Is Steve Ballmer Next?

What's most disconcerting, to the extent that market caps reflect investors' faith in a company's growth prospects, is that the defections indicate that those with the most to gain from a run-up in Microsoft's share price—top managers who hold millions of dollars in stock options—don't believe any such thing is going to happen.

And why should they? Another point I raised in last week's column, which was published prior to Ballmer's keynote speech at the Consumer Electronics Show, was that the company must develop a tablet-specific operating systtem to compete with the iPad and Google Android in tech's hottest market. I fully expected Ballmer to announce something to that effect during his keynote in Las Vegas. After all, signs indicate that 2011 is the year of the tablet.

No such words were issued. Instead, Microsoft now says it will have an operating system for ARM-based tablets with Windows 8. Windows 8? That's more than a year away. In the meantime, Apple and Google will be carving up the tablet market like Belgium and France divvied up the Congo.

Here's what Goldman Sachs' Laura Friar, in a Jan. 5 research note, had to say about Microsoft's tablet timing. "We still believe that the success of the iPad demonstrates that a full OS is not required for the major usage cases of a tablet. In addition, allowing another full year for other OSes to gain momentum could further hinder Microsoft's ability to gain significant market share," wrote Friar, whose 12-month price target for MSFT is a whopping $29.

So here we are in the second week of January, and it's already looking like 2011 could be a repeat of 2010 for Microsoft. A confused, belated, and underwhelming mobile strategy? Check. More top-level defections? Check. Languid stock price? Check.

At some point, it all comes back to Ballmer, the CEO. The question now is how long Microsoft's institutional shareholders, and its board (which cut Ballmer's bonus in half last year following the KIN debacle) will let this go on.