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Saturday, October 05, 2013, 05:23 pm PT (08:23 pm ET)

Poor Windows 8, Surface RT performance means pay cut for Ballmer

Microsoft CEO Steve Ballmer saw his pay docked this year as a result of the disappointing performance of the company's Windows Division over the past year.



The Microsoft head received $1.26 million in compensation for fiscal 2013, with $697,500 of that in base salary and $550,000 in bonuses. Ballmer's "incentive plan award" for 2013, which is calculated by the Microsoft board, was only 79 percent of the total he could have gotten, while in 2012, Cnet notes, the Microsoft chief received 91 percent of his eligible incentive award.

The reason for the pay dock: the continuing poor sales of devices running Windows 8 the spectacular failure of the company's Surface RT device. Microsoft's latest operating system has underperformed since its launch, and the firm's fiscal 2013 proxy statement points to those shortcomings.

The report cites "weakness in the consumer PC market," a continuing issue for Microsoft as consumers increasingly turn away from traditional PC form factors in favor of smartphones and tablets running iOS or Android. Microsoft has sold more than 100 million Windows 8 licenses since the platform's launch, but that is well below what the company had expected.

Adding to the Windows Division's woes, the Surface RT device Microsoft rolled out last year met with middling reviews and virtually nonexistent consumer demand. Microsoft eventually wrote down $900 million worth of unsold inventory. The company has since shown off new versions of its tablet devices, but the poor performance of the last generation still dragged on Ballmer's compensation.

All told, the sales woes for the PC market and product launch costs for Windows 8 and Surface resulted in an 18 percent decline in Windows Division operating income.

The report is not entirely negative regarding Ballmer, as it notes that "the Committee and Board believe Mr. Ballmer is underpaid for his role and performance." That feeling, though, was insufficient to earn the Microsoft chief his full incentive payment. A number of other Microsoft managers received 100 percent of their incentive payments, including COO Kevin Turner and CFO Amy Hood. The head of the Servers and Tools unit received 105 percent of his eligible award, as that division pulled in more than $7 billion.

Ballmer shocked the tech world some weeks ago by announcing that he will leave Microsoft within the next year, and the company's search for a successor is ongoing.