In a statement, Microsoft (MSFT) said that Ballmer will retire once the board finds a new chief executive to replace him. The search process will be overseen by a special committee appointed by the board of directors, and will include Microsoft chairman and former CEO Bill Gates.
"We have embarked on a new strategy with a new organization and we have an amazing Senior Leadership Team," said Ballmer in a statement. "My original thoughts on timing would have had my retirement happen in the middle of our company's transformation to a devices and services company. We need a CEO who will be here longer term for this new direction."
That "new strategy" refers to a restructuring announced by the company last month, which will include dividing the company into four primary engineering divisions.
And while it's kept its head above water on the strength of its Xbox and Office businesses, there are signs of danger ahead: Its next generation console, the Xbox One, didn't go over well with gamers when it was announced in the spring.
We put Ballmer on our list of endangered executives for 2013, and now it seems the company's struggles have finally caught up to him. Microsoft shares are already soaring on the news, opening the morning up 8 percent.
And much like Andrew Mason, who saw his holdings of Groupon stock soar in value upon his ouster from the company, Ballmer will also see a windfall from his retirement. According to one report, Ballmer has 333 million shares of Microsoft, so the share price bump resulting from his retirement has made him richer by more than $600 million -- though the share price is still bouncing around as the market processes the shake-up.
Matt Brownell is the consumer and retail reporter for DailyFinance. You can reach him at Matt.Brownell@teamaol.com, and follow him on Twitter at @Brownellorama.