Exec VP Reflects Microsoft's Strategy Shift on Business Dealings
By Matt Day. Updated January 18, 2017.
Peggy Johnson was less than a day into her new job at Microsoft in 2014 when a daunting assignment landed on her desk.
"I want to say (it was in) the first hour," she recalls. "It was like, 'Hey, we have something we want you to focus on.' "
That task: brokering peace with Samsung, the giant South Korean electronics maker.
The two companies, off and on partners for three decades, weren't on speaking terms.
Microsoft's purchase of Nokia's handset business earlier that year had put the companies into competition in the smartphone-manufacturing business. Dueling patent lawsuits followed.
Talks to resolve the issues broke down, and the dispute was about to get messy, with a trial scheduled to start in federal court in Manhattan.
Johnson [pictured above], who had dealt with Samsung extensively during her 24 years at smartphone chipmaker Qualcomm, reached out.
A few months later, the companies announced a surprise end to the litigation, and promised new joint business ventures. They didn't say if any cash changed hands to end the dispute, and Johnson didn't have anything to add to that in an interview.
"I am a fan of trying to understand areas of (cooperation), rather than focusing on challenges," she said. "When you dig in, two big titans clashing, what good is that? It's not good for either of us, it's not good for the industry."
Microsoft's once-notorious reputation as a company that's hard to play with has undergone a transformation.
The rise of smartphone and web-based computing has pushed Microsoft from its perch atop the technology world, forcing the company to find more creative ways to exert its influence on rivals and potential partners. A company that used to offer all-or-nothing options during its Windows heyday is trying to remain relevant to a new generation, in part by better linking its software to tools built by others.
Chief Executive Satya Nadella gets a lot of credit for Microsoft's new approach.
But a large factor has been Johnson, Microsoft's executive vice president of business development and one of the few women with top executive powers at the company.
She was Nadella's first big executive hire, arriving in Redmond in September 2014.
Johnson, 55, grew up in Alhambra, just east of Los Angeles, the second youngest in a family that came to include 15 children.
She went to San Diego State University in the early 1980s, initially planning to study business until a chance visit while delivering mail to the engineering department.
Two female department assistants, excited to see a prospective female student in the halls of the overwhelmingly male department, made an earnest pitch for engineering.
Johnson changed her major to electrical engineering the next day.
"With a short conversation, those two ladies changed the course of my life," she later wrote.
After graduating, she found work at General Electric in San Diego, working on anti-submarine warfare technology.
In 1989, she took a job as a software engineer at 4-year-old Qualcomm.
Johnson rose through the ranks, ultimately trading engineering for sales and business development.
In 2001, she was tapped to lead the newly formed Qualcomm Internet Services. A decade later she was leading global market development for Qualcomm, which had grown into a chipmaking giant that powered most of the world's smartphones.
The Microsoft job was Johnson's first outside of Southern California.
She settled in Medina [Washington], scooping up a waterfront home a short walk away from Nadella's, moving with her husband, Eric, and the youngest of their three children.
Despite a significantly rainier climate than her previous home outside of San Diego, Johnson remains an avid runner.
At Microsoft, a $7.8 million signing bonus made Johnson the company's second highest paid executive in 2015.
Her role is the product of a 2013 reorganization that redrew Microsoft's structure around business functions, instead of independent, competing product groups.
The team looks at strategic deals and ways to jump-start growth across the company.
A sister organization, led by Microsoft strategy chief and company veteran Kurt DelBene, focuses on the competitive landscape and coordinating efforts that stretch across engineering teams.
"We actually work almost as one team," Johnson said. "He's been great for me, because I don't have the long history at Microsoft that he does. I come from the outside with my crazy ideas, and he's got that history in place."
The goal is partly to keep Microsoft's engineering groups from going on autopilot and missing the big picture, current and former employees say.
Engineering units can sometimes spend years plugging away on detailed business plans without heeding the wider world. That phenomenon cost Microsoft dearly when the massive Windows Vista engineering effort sucked up much of Microsoft's resources just as competitors were making advances on smartphones and Internet applications.
Johnson has tried to insert new voices into Microsoft's thinking, luring Nagraj Kashyap away from Qualcomm to run a new Microsoft Ventures unit focused on investing in and taking the pulse of early-stage technology companies. The group has made about 20 investments, and last month announced a fund that would target companies working on artificial intelligence.
"We were missing that" before, Johnson said. "We had the ability to invest, clearly, but we didn't have the signal. And that's what (Kashyap) and his team are bringing, kind of that over-the-horizon look at technologies."
Meanwhile, Johnson has been instrumental in the talks that led to business deals with Xiaomi, a Chinese telecommunications and electronics giant, and her old shop, Qualcomm. She also piloted a reboot of Microsoft's efforts to sell its products to the auto industry.
Her philosophy in those kind of deals, she says, is to start small. At big companies, the temptation with business alliances is to look for every potential avenue for collaboration and start drawing lines between business units on a whiteboard.
"But if you can initially focus on one single thing, it tends to build a lot of new areas of collaboration around it," she said. "Do one thing well, and then build from there."
Of course, small isn't the only way the company can grow.
The biggest deal in her time at Microsoft, one negotiated primarily by Nadella, was the $26.2 billion purchase of LinkedIn.
Johnson says the deal didn't tap out Microsoft's ability to make large acquisitions. The company's balance sheet, which as of September held more than $136 billion in cash and short-term investments, agrees with her.
'"Really, we don't look at deals as big or small, we look at things that will solve a problem for us," she said.
And no matter the deal, she says her inclination is to at least keep the lines of communication open, even with once-hated rivals.
"Particularly if we're competitive, I have a lot of respect for that, because somehow they've broken through," she said. "Rather than fear that, I want to learn from that, respect it, and then find ways that we can still engage."