John Gruber ever-so-succintly nails the reason for Ballmer’s
No one is arguing that Ballmer does not deserve credit for leading Microsoft to huge profits. That’s undeniable. But their weakened position today, more legacy company than technical innovator, is entirely his fault.
Microsoft has stubbornly rested on its laurels — the entrenchment of Windows and Office in the desktop PC market — but mobile is where the industry is now. They’re way behind Apple and Google in the space that matters most. Microsoft’s Board knew it too.
See also: Kara Swisher's piece for All Things D which includes backstory on Ballmer's "retirement".