Ballmer becomes lone voice at Microsoft's helm

Steve Ballmer has been CEO at Microsoft Corp for eight years, but he will finally get to move into the corner office vacated by Bill Gates, the college friend who brought him to the company nearly three decades ago.

The pressure of leading the world's largest software maker will only escalate in the wake of a bungled attempt to acquire Yahoo Inc, a move that forced the Web pioneer into the waiting arms of Microsoft's arch rival, Google Inc.

Adding fuel to the fire has been a lukewarm reception by customers for the company's flagship product, Windows Vista.

"The pressure is certainly on," said Alan Davis, analyst at investment firm D.A. Davidson.

For the first time in his career, the 52-year-old Ballmer, whose public histrionics often overshadow a sharp intellect and a gift for numbers, must shoulder the weight of Microsoft's future without Gates, who stepped down on Friday from the company he co-founded to focus on philanthropy.

Their partnership was forged at Harvard University, where the pair formed an unlikely friendship: Gates, the middle child of a prominent Seattle family, and Ballmer, a Detroit native whose parents never went to college.

They both lived in a dormitory full of "anti-social math types," according to Gates. Ballmer, outgoing and involved in many social clubs on campus, seemed to be a study in contrast to the aloof Gates, who preferred all-night programming sessions and poker games.

However, the pair shared a love of math and bonded over their reputations as energetic guys. To this day, they still engage each other in numbers games, calling it "math camp."

After college, Ballmer went to work at Procter & Gamble Co, sharing an office with current General Electric Co CEO Jeffrey Immelt, who has said the two disliked a common boss and would pass the days playing garbage-can basketball.

Ballmer spent a year at Stanford University business school before Gates persuaded him to drop out and become Microsoft's first business manager. A month after joining, he found it was running behind on orders and its engineers were overworked.

"I decided to quit," Ballmer said at an employee event to mark Gates's last day at Microsoft. "I said, 'Jeez, I just dropped out of business school to come to a 30-person company as the bookkeeper'."

Gates persuaded Ballmer to stay at the company over dinner, explaining Microsoft's ambitious vision: to place a computer on every desk and in every home.

"SCARY" MANAGEMENT

Microsoft executives talk about Ballmer's ability to digest large chunks of data, while carefully probing business proposals for weaknesses in logic or reasoning.

Ballmer's sales and marketing prowess complemented Gates's technical acumen as Microsoft grew from a fledgling start-up into a world-beating software company.

He worked up the ranks, becoming Microsoft's president in 1998 and replacing Gates as CEO in 2000. Ballmer is Microsoft's second-biggest shareholder after Gates with a 4.3 percent stake in the company, valued at more than $11 billion.

Michael Silver, analyst at research firm Gartner, describes Ballmer's management style as "scary," but credits him for being a good listener to the needs of his customers.

"Steve's a bright, tough guy and a good marketeer," said Silver. "His personality can be very imposing."

Ballmer often grabs headlines with sharply worded jabs at competitors. He once called free Linux software "a cancer" and dismissed Web search leader Google as "a one-trick pony."

His exuberance for all-things Microsoft has also earned him viral video fame on par with lonelygirl15 or Obama Girl. Video of Ballmer's enthusiastic support for software developers has been viewed more than 1 million times on YouTube, a performance that earned him the unflattering nickname of "Monkey Boy."

"He was always the foil to Gates," said Mary Jo Foley, author of "Microsoft 2.0: How Microsoft Plans to Stay Relevant in the Post-Gates Era."

"Gates is such a serious, plodding, methodical guy and Ballmer knew that to be part of the dynamic duo with Bill, he needed to be the opposite."

Brand clout keeps United States shoe buyers loyal in slump

If you thought cash-strapped U.S. consumers would walk out on their favorite branded shoes for a bargain-priced pair, think again.

Brand power has driven sales at mid-tier footwear makers like Deckers Outdoor and Wolverine World Wide over the past year even as sellers of other consumer goods fail to woo U.S. shoppers pinched by rising fuel and food costs, falling home values and tighter lending conditions.

"Nothing's worse than an ill-fitting pair of shoes, and nothing is more emotionally disturbing than buying a pair of an unknown brand of shoes," Marshal Cohen, an expert on consumer behavior and an analyst with market research firm NPD Group, said.

Some branded footwear makers are also looking to capitalize on the fierce loyalty shown towards their brands by passing on a portion of rising manufacturing costs to customers.

Shoppers are willing to pay extra to get their hands on popular brands like Nike, Deckers' UGG and Skechers USA's Cali and Sport.

Deckers has posted better-than-expected results in the last five quarters as its core UGG brand, made famous by the company's sheepskin boots and slippers, fueled sales.

In the latest first quarter, UGG sales rose by a whopping 84 percent and contributed more than 56 percent of Deckers' total revenue even as skeptical Wall Street analysts debated whether to classify UGG as a fad or a must-have brand.

Industry goliath Nike's combined sales for its top three brands, Nike, Jordan and Converse, outperformed the industry in both March and April, analysts said.

Deckers' stock has jumped nearly 62 percent over the past year while Nike's shares have climbed nearly 22 percent. Both outstripped the wider S&P 1500 Footwear Sub-Industry Index , which rose about 3.7 percent in the same period.

"Consumers have always reached back to their favorite footwear brands because of the physical comfort factor as well as the psychological comfort factor," NPD's Cohen, who is also the author of "Why Customers Do What They Do," said.

In a recent visit to several stores in New York, JP Morgan analyst Robert Samuels observed consumers focusing on quality brand names such as Nike, Liz Claiborne Inc's Juicy and UGG at discount-oriented malls as well as their upscale counter parts.

"People are just buying less frequently and they are really being a little bit more nitpicky about what they really want to spend their dollars on," Susquehanna Financial Group analyst Christopher Svezia said from New York.

BETTING ON WINNERS

Amid the current turmoil rocking the retail industry, department stores such as Nordstrom and Neiman Marcus have made orders and reorders for proven winners, sustaining the momentum of several brands like UGG and Wolverine's Merrell and Hush Puppies.

Wolverine's market value has risen 17 percent this year on strong sales of its lifestyle brands that target different countries and consumer groups.

Retailers are also increasingly maintaining leaner inventories to avoid selling a large pile of goods at discounted prices at the end of a season.

But NPD's Cohen was skeptical of the move to trim inventories. "Consumers get very frustrated when shopping in these tough times, not finding what they want and being forced to go elsewhere.

"Loyalty becomes very vulnerable in lean times... Retailers are shooting themselves in the foot when cutting footwear inventories down both in assortment and stock per style."

Footwear companies are also trying to attract loyalists of non-shoe brands by teaming up with sellers of items like clothing, handbags and jewelry.

Skechers, whose stock jumped 22 percent this year through Wednesday, has said it will partner with Bebe Stores to design and sell Bebe-branded footwear for women. The Bebe Sport footwear line is set to launch in the United States in spring 2008 with a campaign featuring actress Eva Longoria.

And since brand visibility propels sales, footwear makers have been spending a good chunk of their annual budgets on brand-building initiatives.

"Footwear is a very emotional and relationship-oriented product. Experimenting with footwear is not an area where consumers are willing to 'play'. Apparel is less fit specific and accessories even less so," NPD's Cohen said.

Vodafone scores first deal to sell Apple's iPhone

Mobile phone group Vodafone scored its first deal to sell Apple Inc's iPhone after the UK group lost out to Telefonica's O2 to sell it in Britain.

Vodafone, the world's largest mobile phone company by revenue, has been competing with operators and retailers to secure the right to sell the iPhone the touch-screen device which combines Apple's popular iPod music player, a video player and Web browser. Vodafone will sell the iPhone in 10 countries.

O2 has described the device as a star performer which draws increased numbers of customers into its stores.

Customers using the phone have also driven up data revenues by surfing the Internet and sending emails, a key attraction to operators as the cost of making calls decreases.

"Later this year, Vodafone customers in Australia, the Czech Republic, Egypt, Greece, Italy, India, Portugal, New Zealand, South Africa and Turkey will be able to purchase the iPhone for use on the Vodafone network," the British-based firm said in a statement without giving any more details.

“Trends To Watch in 2008”

MARKETERS HIT A ROUGH PATCH

2008 will be about the economy and politics. Growth is slowing, fuel prices are high and credit is tight. That's a difficult mix for marketers to face as consumers will continue to pull in the reins as disposable income tightens dramatically. With caution flags waving, marketers will keep expectations and spending plans modest. Combined with lots of political "tax-raising" rhetoric , there will be plenty of room for nervousness. But political ad spending will more than make up for sluggish brand-marketing investments.

INNOVATION AND CREATIVITY RULE

Marketers' ingenuity will continue to expand as the competitive marketplace challenges brands to devise ways to reach their audiences online and via other "out-of-the-box" avenues. Targeting consumers using unconventional methods in creative places will be the gold standard for outstanding creative. Marketers won't run away from traditional media -- but will leverage technology and new media to accentuate message delivery to consumers and customers. There is no turning back -- and creativity will rule.

GET SERIOUS ABOUT ACCOUNTABILITY

In ANA's 2007 marketing accountability study, it was startling to find that, despite enormous efforts, 42% of marketers were dissatisfied with ROI measurements and metrics. In about half of the companies, marketing and finance don't speak with one voice or share common metrics. Enough! Recognizing the critical importance of accountability, companies will appoint a czar -- the chief accountability officer -- to lead a disciplined, internally consistent approach to marketing measurements, metrics and productivity.

DIGITAL, DIGITAL, DIGITAL (AND PORTABLE TOO)

As Steve Ballmer proclaimed at the 2007 ANA Annual Conference, all media ultimately will be created and delivered digitally. Can anyone legitimately argue with that? Naahhh. And the beat goes on in 2008. Digital offers richness in information management, communication delivery, metrics -- and portability. Simply look at the iPhone and similar devices to know consumers will have all forms of media at their fingertips 24/7. The challenge: Are marketers skilled enough to take advantage of this rapidly changing landscape?

THE 'BRAND SWARM'

Marketers will move decidedly in the direction of DDB CEO Chuck Brymer's "swarm theory" -- the notion that people and their opinions coalesce to form critical forces that massively influence marketplace ideas and concepts. "Swarm theory" will elevate social networking to new levels, confirming the immense impact that consumers have on each another. Marketers that embrace this trend can form consumer brand "advocates" and drive brand loyalty and trust to new heights -- if done responsibly.

GETTING COMPENSATION RIGHT (PLEASE)

Compensation models will evolve in 2008. Agencies and clients will work together to create mutually fair value- and incentive-based approaches. The ANA 2007 Trends in Agency Compensation study showed that only 25% of respondents were very satisfied with their compensation models. Marketers will pay well for great ideas and superb media management. The key is to get expectations right between agency and client. Perhaps Procter & Gamble's just-announced compensation model is a blueprint of things to come.

NEUROLOGICAL MARKET RESEARCH

Going beyond traditional focus groups and consumer surveys, market research will embrace scientific approaches that literally tap consumers' brains to learn how they neurologically respond to commercial messages and make brand choices. The Four A's and ARF have begun researching this topic in earnest with an intensive study, "On the Road to a New Effectiveness Model." In 2008 we will start to see practical applications of these insights as advertisers and shops begin to truly understand engagement.

EMERGENCE OF THE 'RENAISSANCE MARKETER'

A new breed of marketing professional is emerging -- individuals with a holistic view of the world and extraordinary observational powers. These "renaissance marketers" will be part humanist, part psychologist, part anthropologist and part technologist. Cookie-cutter marketing will no longer survive as marketers must take a broader view of the consumer and customer. This includes the need to be socially responsible and to embrace key trends such as green.

THE POWER OF STRATEGIC ALIGNMENT

Marketers succeed when brand messages are fully integrated and synchronized across all media channels. That requires strategic alignment -- leadership that ties everything together -- particularly when the forces of change can potentially pull them apart. Strategic alignment is one of the most important roles of the chief marketing officer, and In 2008 more CMOs will ensure organizations are strategically aligned. Lead agencies will be appointed to make sure all supporting agencies carry out the same brand message.

PRIVACY, PRIVACY, PRIVACY

In 2008, marketers will become increasingly sensitive to privacy issues. With "digital-intrusion" and identity-theft issues as paramount consumer concerns, marketers must be extraordinarily careful to respect worries of access to private information. This tug of war between consumer privacy and information access will require marketers to work hard to explain and justify the lifestyle benefits of highly individualized, personalized commercial communications.