Would replacing Ballmer really goose Microsoft's stock price?

Would replacing Ballmer really goose Microsoft's stock price?

Summary: It's hard to know what Microsoft could do to raise its stock price, which has been stuck in a holding pattern for the past ten years or so.

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TOPICS: CXO, Banking, Microsoft
108

It's hard to know what Microsoft could do to raise its stock price, which has been stuck in a holding pattern for the past ten years or so.

Strong earnings reports don't seem to affect the Microsoft stock price much. Nor has Microsoft's implementation of cost-control measures, including layoffs. Launching the fastest-selling consumer device didn't help. Nor did buying one of the biggest consumer brands out there.

The latest suggested quick fix for Microsoft's lagging earnings: Fire the CEO. One prominent hedge fund leader is calling for Microsoft's board to oust Steve Ballmer because he is out of touch and stuck in the past.

There were no suggestions from David Einhorn, head of Greenlight Capital -- and owner of just .11 percent of Microsoft's outstanding shares -- as to who might better fill the Microsoft CEO shoes. Instead, Einhorn echoed what a lot of former Softies and other Wall Street watchers have been saying privately, and in some cases, publicly.

As my ZDNet colleague Larry Dignan notes "Einhorn would have to rally a lot of shareholders to his boot Ballmer cause." The two biggest Microsoft shareholders are Chairman Bill Gates and Ballmer himself.

I think replacing Ballmer would be a lot trickier than many think.

Microsoft isn't a company that has a good track record of outsiders (i.e., non-career Softies) thriving. But are there any Softies at the top echelons who have the skill set, personality and cross-company knowledge to run Microsoft? Chief Operating Officer Kevin Turner is often mentioned as a possible (though not necessarily popular) internal replacement. I've seen a number of company watchers suggesting Windows President Steven Sinofsky or President of Interactive Entertainment Don Mattrick. Personally, I'm not sure either of these tech-savvy guys have the breadth of product knowledge or the business savvy needed to be CEO.

We're all nothing but armchair pundits, of course (including Einhorn).  I'm curious if any of you readers have suggestions beyond the usual Sinofsky, Mattrick ones. I have to say, even if Microsoft does replace Ballmer in the short term, I am doubtful that the move will please fickle Wall Street analysts who seem to have already decided, in large part, that Microsoft is now more of a Procter & Gamble than an Apple, Google or even IBM competitor....

Topics: CXO, Banking, Microsoft

About

Mary Jo has covered the tech industry for 30 years for a variety of publications and Web sites, and is a frequent guest on radio, TV and podcasts, speaking about all things Microsoft-related. She is the author of Microsoft 2.0: How Microsoft plans to stay relevant in the post-Gates era (John Wiley & Sons, 2008).

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108 comments
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  • You can get a CEO, but they still will be part of the board

    Just saying... remember that both Gates and Ballmer have been around for long and they are going to be the bosses of the next CEO!
    samunplugged
    • Gates/Ballmer don't own a majority

      @samunplugged ... and the whole point of bringing in an outsider is to do what an insider cannot - fundamental reform of what the company is. The majority of the shareholders get to decide on whether they want that, not just Gates/Ballmer.

      If you don't want to change anything, and just want to continue merrily going along on the trajectory of the last ten years, with Bings and Bangs and Zunes and Kins and a great deal of dead weight at the company, then no point in making any management changes at all.

      If you're an unsentimental shareholder, or collection of them, and you want the stock price to double and double again, you need to get rid of the current management.
      HollywoodDog
      • RE: Would replacing Ballmer really goose Microsoft's stock price?

        @HollywoodDog
        Only a CEO like Linus or Stallman can right the M$ ship!
        Linux Geek
      • Gates owns 8% of Microsoft and Ballmer owns 4% ...

        @HollywoodDog ... between them they certainly have controlling interest! By comparison, Einhorn (the guy calling for Ballmer's exit) is considers a significant investor and he holds a mere 0.11% of Microsoft's outstanding shares.

        Ballmer may be a buffoon but, unless Microsoft begins to lose market share in its core offerings, I see no reason to fire Ballmer.

        Microsoft stock may not have appreciated much in the last ten years but many companies have done worse.

        Fainlly, as companies like MS get bigger, and as they saturate their own market, the value of their shares is likely to stablize as a matter of course.
        M Wagner
      • Gates and Ballmer ownership - 12%

        @HollywoodDog ... 12% < 51%
        HollywoodDog
      • While your math is correct, your logic is not...

        @HollywoodDog

        it would be a [i]whole[/i] lot harder to get the multitude of people who own that 51% to agree, than it would for the 2 people that own the 12%.
        SonofaSailor
      • Yep good point

        @HollywoodDog ... and Gates and company at least have the value of being the founders, and there's a great deal of deference paid to them because of that.

        That will work for a long time. Until someday it doesn't, maybe many years from now. When it does happen people will say, 'my goodness it happened so suddenly.'
        HollywoodDog
      • Weird description of &quot;trajectory.&quot;

        @HollywoodDog

        Why are Zune and Kin more representative of Microsoft's trajectory than Win7+, Azure, Xbox, Kinect, and WP7? You were right to include Bing, but I've never heard of Microsoft Bang.

        Microsoft's problem isn't dead weight, it is inefficient utilization of their impressive talent. But the past few years have shown that when they get behind something, they deliver in a big way.
        Lester Young
    • RE: Would replacing Ballmer really goose Microsoft's stock price?

      @samunplugged
      Nobody wants Wp7... Its the biggest Fail.
      Sultansulan
      • Hardly. You live in dreamland.

        @Sultansulan

        Why is it people just think that its cool to throw out some moronic comment like "Nobody wants Wp7" when in fact plenty want it. I mean, where does something like that kind of comment even come from, except from someone who simply has a hate on for Microsoft and wants to display it in the most ludicrous fashion?
        Cayble
      • RE: Would replacing Ballmer really goose Microsoft's stock price?

        @Sultansulan
        except, of course, for the 350+ million who already bought it. Funny though, I don't hear too many complaints.
        Major Plonquer
    • RE: Would replacing Ballmer really goose Microsoft's stock price?

      Personally, I feel Stephen Elop would have been an excellent CEO. If it is still possible to re-hire him, that would be a great fit for Microsoft since he has some very provocative thinking and is always IN for changing company culture (like he did with Nokia in his short stint so far)
      webmihir@...
      • RE: Would replacing Ballmer really goose Microsoft's stock price?

        @webmihir@... May yet happen. If the Nokia thing goes well, one might imagine MS buying Nokia and then Elop being groomed to take over from Ballmer..
        bitcrazed
    • Message has been deleted.

      Over and Out
    • RE: Would replacing Ballmer really goose Microsoft's stock price?

      @samunplugged

      Aaaah the myth of the CEO.

      While you may think it makes a difference, it really doesn't.
      tonymcs@...
      • Fire him and don't replace him then

        @tonics silly comment.

        MS needs to get better value for it's expenditure. They need to release more products. Maybe one day they'll get it.
        Richard Flude
    • RE: Would replacing Ballmer really goose Microsoft's stock price?

      Microsoft's problem is not dead weight, it's inefficient usage of their impressive talent. However the past couple of years have proven that after they fall behind something, they deliver inside a large way.
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      scoty67y5
  • RE: Would replacing Ballmer really goose Microsoft's stock price?

    As I tweeted just before you posted this, "Watching the synergy of Microsoft's various arms increase, maybe Ballmer's smarter than people give him credit for". Of course, it may be happening despite rather than because of him, but there's a definite and deliberate move towards making all the bits work "better together", and as the depth of integration increases, it makes it more likely that a customer using Office or Xbox or Windows Phone or Live Mail or whatever will be drawn towards using the other Microsoft products. They're not quite as inexorable as they used to be, but I still think you'd be brave to bet against their strategy paying off in the long term.
    MarkXA
    • RE: Would replacing Ballmer really goose Microsoft's stock price?

      @MarkXA I agree. <br><br>Seriously, what does a hedge fund manager know about running a company like Microsoft? <br><br>iPod and Xbox were launched in around 2001 and Microsoft could not have started manufacturing another device just to compete with Apple's mp3 player. Microsoft developed a solid platform in Xbox and now its the highest selling console*. Kinect is the best gadget out there. The new preview of WP7 is gaining attention. Both Xbox and WP7 are great platforms for developers. Tablets are a different niche and soon people will ask for same applications to on tablets that they use on desktop. MS has ditched tablets to focus on next version of Windows that can run on both tablets and pc. <br><br>Finally, I hope Mr. Einhorn realizes that MS stock still pays dividends! He should look for another job!

      *Source: http://asia.gamespot.com/news/6313539/xbox-360-tops-april-console-sales-kinect-library-to-triple-in-2011
      samunplugged
      • RE: Would replacing Ballmer really goose Microsoft's stock price?

        @samunplugged
        <i>Microsoft developed a solid platform in Xbox and now its the highest selling console.</i>
        Sources please, everything I have read indicates that the xbox 360 is in last place out of the three consoles. I am talking out active installed base, not simply units shipped.
        Rick_K