ValueAct negotiating for seat on Microsoft board: Report

ValueAct negotiating for seat on Microsoft board: Report

Summary: Reuters is reporting that ValueAct Capital is trying to secure a seat on the Microsoft board, a day after the company issued a weak Q4 earnings report.


On the heels of Microsoft's weak Q4 FY2013 earnings disclosure, Reuters is reporting that ValueAct Capital is negotiating for a seat on the Microsoft board.


Microsoft officials declined to comment on the July 19 Reuters report about the San Francisco-based fund's alleged activities.

ValueAct Capital's founder Jeffrey Ubben, took a $2 billion stake in Microsoft in April of this year. At that time, as the Wall Street Journal noted, ValueAct held less than one percent of Microsoft's total stock outstanding. (Reuters today said it's about 0.4 percent, but claims ValueAct may be buying more.)

While some have interpreted ValueAct's move as evidence that activist shareholders would try to unseat Microsoft CEO Ballmer, Ubben never has indicated (at least publicly) that this was his goal. Instead, Ubben indicated that he believed investors haven't fully appreciated the future importance of Microsoft's enterprise software and back-end infrastructure powering the cloud.

Some company watchers have indicated Microsoft's $900 million write-down of its Surface RT devices is evidence that Ballmer's attempt to remake Microsoft as a devices and services company is ill-advised and floundering. Some others (like me) believe it's too early in the makeover to claim it's a failure.

Microsoft officials haven't said how many Surface RT devices they've sold since the company launched them in October 2012. And they aren't saying how many they've made or how many are in inventory. (I have heard from a few of my sources that estimates of 6 million still remaining in the channel are considerably off.)

Ballmer recently told the Seattle Times there is a succession plan at Microsoft, but declined to discuss the particulars and/or the date he plans to leave his CEO post. (There's been speculation for years as to who would make the best, next Microsoft CEO.) Ballmer was a visible presence at the company's internal sales conference, known as MGX, in Atlanta this past week, from the few tidbits I've heard/seen.

Ballmer's last official pronouncement on his planned retirement date was in 2008. He said at that time he planned to stay at Microsoft until his youngest son was off to college, which would mean some time in 2018.

Microsoft's far and away largest shareholder, Chairman Bill Gates, is seen as a big Ballmer backer and close personal friend.

Microsoft's shares were down more than 11 percent today after yesterday's earnings report.

Topics: Microsoft Surface, Cloud, Microsoft


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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  • Shareholders Need To Force A Devolution Of Microsoft's Internal Empires

    There is currently too much use of new businesses to prop up the hegemony of existing ones, and this is what is crippling the mobile platforms, in particular, in their attempts to compete against Android. They need to be run as independent business units, free to tread on existing toes if that's what it takes to make a profit.

    A wise businessperson once said, if you don't cannibalize your own product lines, somebody else will. Wouldn't you rather be the one to make the profit from this, rather than leave it to someone else?
  • Not. Gonna. Happen.

    Bill Gates seats Microsoft board members, and nobody else. Founder privilege.

    Between them Bill Gates and Steve Ballmer still own more than enough stake to make the ValueAct investment look like a trivial nuisance. Between them those two lost more money on their Microsoft stock TODAY than this investment has in total capital. If ValueAct didn't like how the company was run they should have learned more about the company before investing - or at least brought 20x as much money as they have.
    • Bill Gates is a co-founder of Microsoft

      Paul Allen is the other Microsoft co-founder:

      He's a billionaire too. Interesting that Mr. Allen has been selling off his Microsoft shares in an effort to diversify his very substantial portfolio.

      As far as ValueAct getting a seat on Microsoft's Board goes, they'd have to remove one of the mannequins sitting at the table in the board room. And the mannequins are so old that Macy's won't take them back.
      Rabid Howler Monkey
      • Not sure where you're going with your reference to "Paul Allen"

        Paul Allen's money is in Vulcan. The fact that he's a "co-founder" doesn't have anything to do with his investment in MSFT. He hasn't been either a significant direct holder of Microsoft stock or managed an institution with a significant investment in MSFT for more than a decade so I don't know what your point is.
        • Well, it's not rocket science

          The OP stated that Bill Gates is the founder of Microsoft. That's untrue as Mr. Gates is a 'co-founder'. The other co-founder is Mr. Allen. Capice?

          In addition, I never stated that Mr. Allen is currently a significant direct holder of Microsoft stock. In fact, I stated that "Mr. Allen has been selling off his Microsoft shares in an effort to diversify his very substantial portfolio" (I even provided a reference for this statement). Your link does, however, indicate how far Mr. Allen has gone with his portfolio diversification.

          Not exactly a vote of confidence from Mr. Allen towards today's Microsoft, is it? That's why I used the word 'interesting' to describe his selling off Microsoft shares.
          Rabid Howler Monkey
      • While we realize that you understand Paul Allen selling some of his shares

        of stock in Microsoft is not saying he has no faith in the stock, you should mention why he sold what he did: It takes capitol to build the yacht he owns, as well as purchasing 2 professional sports teams, among other things. He has many investments in many different areas, and this all requires capitol, which he acquires from the sales of stocks, not limited to Microsoft stock alone.

        To claim that "Not exactly a vote of confidence from Mr. Allen towards today's Microsoft" is a disservice towards Paul Allen, as you should have some fact before making such assertions.

        Could it not be argued for the one simple fact that it is his most valuable, and plentiful stock, with a large base of people willing to purchase it?
        John Zern
        • John Zern: "you should mention why he sold what he did"

          I did, diversification. From my original post: "Mr. Allen has been selling off his Microsoft shares in an effort to diversify his very substantial portfolio". Don't kid yourself, yachts, to people such as Mr. Allen and Larry Ellison, are just as much investments as they are toys. And sports teams are investments too.

          As for Mr. Allen not having a lot of confidence in today's Microsoft, have a look at this link, especially the last few paragraphs:

          "Paul Allen: Ballmer doesn't dispute facts in memoir

          Complacency? Slow to act? Not competitive enough?
          Rabid Howler Monkey
    • True but not directly because he's a founder

      Founder or not, he's the Chairman of the Board & owns more of Microsoft shares than any other individual OR institution. More than powerhouses like Vanguard, more than State Street, more than Bank of NY. So yeah, he's got that going for him. (/s)

      Meanwhile, you're right: While I'm sure ValueAct's losing their minds & someone in the executive suite is throwing a tantrum after not having understood the long term ramifications of getting into the low-margin business of hardware production that the company has undertaken, keep in mind that ValueAct isn't even a top 20 investor. There's probably 50 odd funds & old school institutions smirking at ValueAct saying, "A board seat? That's cute, kid. Join the club. Now get to the back of the line while the adults talk."

      Short term investors need to get off the bandwagon. The moment Microsoft became a blue chip in the 2000's that should have been obvious. Now even more so with their transformation into a devices & services company.
  • What I believe MS needs to do

    I wish MS would put Windows / Surface RT on the back burner, and focus on making and selling x86 / x64 based PCs: from Atom to Haswell based PCs. MS' current Windows customers are the likely buyers of new PCs, and they almost all need backwards compatibility.

    MS also needs to control the retail experience. Retail stores seem clueless or unconcerned about how to present and sell PCs in today's environment. The difference between how MS stores sell PCs, and how Best Buy e.g. sells PCs, is the difference between night and day. MS presents and sells touch based PCs with compelling designs first, while other retail outlets sell PCs of yesteryear's (non-touch) form factors first. And you can see the subtle bias in the salespeople in retail stores, as most of them are young, and tend to steer customers to devices they think are cool: which are touch based Android and iOS devices. MS needs to address the retail situation ASAP with stores in stores, and salespeople dedicated to only moving Windows products.

    Finally, a Metro version of Office is really, really important! When people see the desktop software Office 2013, they see relatively little user experience innovation over the years in the PC environment. That is why people are generally content to not upgrade their PCs. When MS brings out Office with a new user experience based around touch, people will see this as a signal that real innovation is taking place in the PC market, and that the software is worth the upgrade - in order to take advantage of the new touch oriented features in particular.

    The PC is suffering from a perception of lack of innovation. People generally perceive innovation as user experience innovation. Until the PC is able to bring user experience innovation to productivity oriented activities, it is going to be hard for it to get out of the rut that it is in. Therefore the Windows ecosystem is going to have to produce Metro versions of MS Office, Adobe software (e.g. Photoshop), Autodesk software (e.g. AutoCAD), etc. in order to move the sales of mid to higher range Windows PCs. There is a good chance however, that lower to mid range systems will take off fairly quickly, by selling touch systems first, and controlling or heavily influencing the retail experience.
    P. Douglas
  • Micrsoft future is super bright.

    The RT setback is a temporary phenomenon, Windows 8 will mature by this holiday season and so does Surface class devices including RT. The Surface RT price was too high for average Joes' to bite...but now that is sorted...and a new class of 7/8 inch devices in the pipeline Microsoft's devices business is very bright....

    Its the right time to buy some MS shares... hugely undervalued....Bing, Windows Phone, Azure and Xbox are the dark horses.... MS platform changes is almost complete.... all they need to do is some final polishing....
    • Re: The RT setback is a temporary phenomenon

      Einstein's definition of insanity: trying the same thing over and over, hoping for a different outcome.
  • are shareholders really good for Microsoft?

    I doubt if more involvement of shareholders are good for a tech company. Somehow, I think it might block innovation, for their want of more and more profit. It may work for the near future, but likely not on the long-term.
    • Re: I doubt if more involvement of shareholders are good for a tech company

      Who else are they going to get investment money from?
  • Vultures

    3 different objectives, B Gates and profiteers looking for any angle to make a killing.