Hedge fund takes $2bn Microsoft stake, wants Office on non-Windows devices

Hedge fund takes $2bn Microsoft stake, wants Office on non-Windows devices

Summary: A hedge fund whose purpose is to influence boards sees potential in Microsoft and wants it to bring Office to more platforms.

TOPICS: Cloud, Microsoft, Windows

Microsoft's share price spiked after a US hedge fund took a $2bn stake in Microsoft, and called for Redmond to make Office available outside of Windows.

According to reports, Jeffry W Ubben, founder of ValueAct Capital Management, announced the stake yesterday, saying Microsoft's enterprise business was undervalued.

While declining PC sales may pose a threat to Microsoft's desktop Windows business, Ubben sees potential in Microsoft's Azure cloud services, currently trailing market leader AWS, and its server and database platforms for the enterprise.

Within three to five years "Microsoft could be the largest cloud company in the world," Ubben said, according to the Wall Street Journal

"It is a dominant software company... and in the long term it will win out," he added.

ValueAct's decision to take a stake in Microsoft is interesting given the company likes to gain significant ownership in a small number of businesses that it perceives are undervalued. As ValueAct states on its website, the goal in each investment is to influence the strategy of its target's management or board to maximise returns for shareholders.

According to Thomson Reuters data, based on Friday's closing price of $29.77, ValueAct's stake would make it one of Microsoft's top 15 investors. However, it's not clear that where its one percent stake is large enough to hold signifcant influence over the company.

Ubben said he will not publicly campaign to influence Microsoft's strategy, but did add he believes Microsoft should make Office available beyond Windows.

Microsoft has so far resisted supporting Office on Apple's iPad and Android devices, which instead can use OneNote.

According to some analysts, supporting the iPad alone could raise $2.5bn — more than Microsoft would gain if Windows 8 took an 11 percent share of the tablet market.

While Apple's 30 percent commission is reportedly preventing Microsoft from selling Office licences through the App Store, the company is also moving towards a subscription model with Office 365, which ZDNet's Ed Bott recently noted would not incur Apple's fee.

Microsoft said in a statement: "Microsoft's board of directors and management team welcome the perspectives of shareholders. We are committed to enhancing value for all shareholders, and will continue to take actions that we believe will enable us to achieve this objective."

Topics: Cloud, Microsoft, Windows

Liam Tung

About Liam Tung

Liam Tung is an Australian business technology journalist living a few too many Swedish miles north of Stockholm for his liking. He gained a bachelors degree in economics and arts (cultural studies) at Sydney's Macquarie University, but hacked (without Norse or malicious code for that matter) his way into a career as an enterprise tech, security and telecommunications journalist with ZDNet Australia. These days Liam is a full time freelance technology journalist who writes for several publications.

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  • Forcing Microsoft To Pursue Business Opportunities Rather Than Hegemony!?

    What kind of radical thinking is this? Next thing they'll say that Microsoft should be working for the benefit of the shareholders, not the management!
    • Wait - All I heard the ABMer's say is that

      NOBODY needs or wants MS Office with all the better "free" alternatives out there. :)

      Next they'll be forcing Apple and Google To Pursue Business Opportunities Rather Than Hegemony!? A novel concept, ldo17?

      William Farrel
      • I don't think Microsoft has the ability to put their Apps on other OSs

        Microsoft is struggling as it is to make a decent OS. Windows 8 is a failure and they are working the best they can to make it better. The $2 billion will help though but I don't see people buying Microsoft products except that they come packaged with Windows.

        I could not imagine a Linux programmer or Apple user saying "I think I'll download and install Microsoft Office for $499." They are schrude and will download LibreOffice for free.
        Tim Jordan
        • Yet, there are so many iPad owners wishing to get Office on their devices,

          and many corporations which do support iPads, are also wishing for Office on iPads.

          Perhaps you haven't been following the discussions?

          Furthermore, people won't be "downloading" Office for $499 or any other price. They'll be subscribing to the "equivalent" online properties which Microsoft will "rent" for a monthly price. That could be an easier way for the iPad owners to finally get their wishes granted.
    • I never thought that I would agree with you anytime ldo17

      but this is the first time. I think everything has to start at somepoint right?
      Ram U
      • Check again. Ido17 meant his comments as an attack, accusing MS of

        preferring to be a "hegemony", rather than a company to benefit a wider array of people and needs.

        Yet, a hegemony only thinks of itself, and doesn't get adopted with billions around the world.
  • Investors push company for short term gains?!?!?

    Seems about right.
  • Maybe they also realised

    That the only think of any future value that Microsoft currently holds is the office…everything else is replaceable and the way Windows goes...it as good as dead already.
    • thats a lot of word

      To explain why you're a troll
      Throw All The Things
    • Mil7

      Your brain is as good as dead already. Go troll on a Google blog and tell them how the worlds biggest "internet" company can't make a dime from anything but running crap ads and pulling in half of what MSFT does.
      And yeah, I recall you and your braggadocio about Firefox and adblock. You must HATE google.
      • Earnings reports be damned!!!

        I'm sure that you are the person we should really believe!!!
        • Don't believe me, the earnings were just posted.....

          MSFT is well above GOOG in latest earnings.
          Go look for yourself instead of hurling exclamations about who to believe.
    • Oh Really?

      MS Server, MS SQL, IIS, Hyper-V, Azure, SharePoint, Exchange, etc. Not to mention the majority of the world runs on Windows...not Linux, not OSX, Windows.
      • not true

        The majority of he world does not run on windows.

        Check your facts.
        • The world does run on Windows, and that's proven everyday,

          in the enterprise, and in personal usage of Windows machines.

          The Android usage is for Facebook and Twitter and e-mail and texting/sexting and for playing games. Most of that is time-wasting tasks, and not to "run" the world.
    • ZDNET shows it's stand. with 8 flags....

      mil7, one of the biggest ABM trollers has not been converted to anonymous.
      But in reality that's exactly what he is.
  • This should be funny

    As if Ballmer would listen to them.

    Ballmer is still stuck in his predatory monopoly mindset- he wants to leverage Office to keep people locked into MS OS's.
    • MS profits

      are still in the billions.
  • Best guess

    Real (you know what I men by 'real', right?) OFFICE outside WINDOWS will only be released if MSFT loses the tablet and smartphone war.
    It's Plan B.
    Plan A is to get it on expensive Surface RT hardware or a workstation with an expensive software subscription.
  • Self Cannibalization

    The market changes are forcing Apple and MS to confront the issue of market cannibalization. Apple decided to make devices in other markets fully aware this would probably hurt Mac sales. But they realized tablets and smartphones were going to do this so they should do it to themselves. MS is facing the same problem. As more non-Windows devices are sold users will need various apps and if they do not have any MS apps they will use another. MS has refused so far to release apps for iPad or Android. It appears the Windows market is being cannibalized by the tablet market so the issue is whether to make a big bet on Windows or move as much of the other apps to the current tablet OS. W8 appears to be a bet on Windows and if this fails in the tablet market MS is high and dry. If they port apps to iPad and Android then the financial damage would be minimized and if Windows is small player in other markets they still get some money.

    I do not know if many current tablet owners really want a Windows based tablet. My understanding is tablets are used for content consumption (I do not have a tablet). These activities can be OS independent or the OS specific apps are less important. So the lack of a Windows OS to run Windows only apps is not very critical. In essence Windows is being displaced by other OSes so MS' best bet may be to port/build apps that can be run on other OSes.

    A scary longish term problem is the potential migration of tablet OSes to the desktop/laptop market (probably with a different GUI). If this happens MS could be in real trouble unless they are actively porting apps to the other OSes.