Here is my assessment of Ballmer’s legacy and how Microsoft as an organization responded to Gate’s 1995 Internet Tidal Wave memo and the Department of Justice 2000 antitrust case. Hopefully you’ll find some new insights and let’s start with my grades for Ballmer:

Strategic D: After becoming CEO in 2000 he correctly prioritized the importance of tablets/touch screens, mobile software/smartphones, smart watches, gaming and Internet portals (msn.com). With the exception of the (still unprofitable) XBOX, he either executed poorly or prematurely eliminated projects in all these areas, directly causing Microsoft’s current problems.

Leadership/Top Management Development & Succession C-: During the past decade three top Microsoft executives Ray Ozzie (Chief Software Architect), Rick Belluzzo (Corporate President/COO) and Steven Sinofsky (Windows President) all quit or were asked to resign. The lack of an obvious 2013 successor is not good, but understandable in light of these past failures. As a point of comparison, everyone knew the likely candidates when Intel’s past CEO resigned in November 2012. When the successor was announced in May 2013, no surprises, no turmoil, no confusion.

Financial C: Sales and profits grew significantly under Ballmer but this is much more a reflection of Gates, product pipeline and broader global economic growth. The ultimate financial criteria for a publicly-traded CEO is stock price and on this measure he failed.

Technology D: Everything started to go downhill with Windows Vista, Ballmer’s first major update without Gates’ involvement. More recent product upgrades got good reviews but unfortunately it seems like too little too late.

To help determine what Microsoft should do now, in 2013, it is useful to go back to Gates’ 1995 Internet Tidal Wave memo. Click here for the full memo; here is one insightful comment, “The Internet is at the forefront of all of this and developments on the Internet over the next few years will set the course for our industry for a long time to come.”

So Gates, Ballmer and Microsoft got the Internet right almost 20 years, but are now languishing. Why?

First, in the late 1990’s Microsoft focused primarily on the browser (the Netscape wars) and not as much on the applications/websites driving browser usage. Though people do forget that Microsoft launched Expedia in-house before spinning it off as a separate company.

Second, the 2000 Department of Justice antitrust action seemed to drove out not only Gates (“I’m worth $100 billion; do I really need a bunch of government lawyers telling me what to do???”) but also the creative spirit within Microsoft. The Internet Tidal Wave urgency and creative passion was gone.

So what should Microsoft do now?

First, cannibalize your existing cash cows – get people moved to Office 365 from Office 2013 now, before they switch to Google Apps.

Second, give away tablets and smartphones for free (in the United States at least), but lock these devices into Bing search for at least a year.

Third, stop stupid investments like $300 million into Barnes & Noble’s Nook, just because you are scrambling to compete against Google, Amazon and Apple. Instead of wasting this money, you could have given every single one of Microsoft’s 100,000 employees a $3,000 bonus.