Thursday, May 26, 2011

Microsoft's Ballmer: Should He Stay or Should He Go?

David Einhorn, whose Greenlight Capital owns .11 percent of Microsoft's stock, wants CEO Steve Ballmer to step down. Einhorn called Ballmer "stuck in the past" and wants to "give someone else a chance." Under Ballmer, Microsoft's stock dipped 58 percent while IBM, Apple and Google exploded. But an analyst said Ballmer has made strong moves.

Should he stay or should he go? That's the question surrounding Microsoft CEO Steve Ballmer.

David Einhorn, a hedge fund tycoon perhaps best known for his connections to Lehman Brothers, kicked off the debate. He accused Ballmer of being "stuck in the past" and suggested he step down, according to Reuters. Indeed, Einhorn had strong words about Ballmer, comparing his management style to Charlie Brown from the Peanuts comic strip.

"His continued presence is the biggest overhang on Microsoft's stock," Einhorn, president of Greenlight Capital, said at the Ira Sohn Investment Research Conference in New York on Wednesday.

Microsoft's Valuation Slide

Although some observers expect a battle that Ballmer won't back down from, other news reports suggest the Microsoft chief has something that will guarantee him success: Support from the board of directors. CNBC cited an unnamed board member who said Ballmer has the board's support Relevant Products/Services.

Greenlight Capital is a Microsoft investor and owns about nine million shares of Microsoft stock. That equals .11 percent of the company's outstanding shares, according to Thomson Reuters data Relevant Products/Services. Although he feels Microsoft stock is undervalued, Einhorn nevertheless wants Ballmer to "give someone else a chance."

Microsoft has lost ground under Ballmer's watch. Last May, Apple officially overtook Microsoft as the most valuable technology Relevant Products/Services company in the world, thanks to its mobile Relevant Products/Services devices. And just last week, IBM surpassed Microsoft in value.

Then there's Google Relevant Products/Services. Despite Microsoft's Bing search alliance with Yahoo, Google continues to dominate the search market.

Looking at sheer numbers, Microsoft's stock has dipped 58 percent since the early part of the century while IBM, Apple and Google stocks have exploded.

Don't Fix What Ain't Broken

Michael Disabato, managing vice president of network Relevant Products/Services and telecom for Gartner Relevant Products/Services, isn't sure the notion of a Ballmer exit is a worthy debate. As he sees it, Microsoft has made some strong moves under Ballmer's watch.

"Microsoft brought out SharePoint -- arguably one of their best products -- and they brought out Windows 7, which is probably the best operating system they've developed," Disabato said. "Windows Phone has a better shot at becoming popular than Windows Mobile ever did. Wall Street shouldn't be running these companies."

Wall Street valuations are not a reason to get rid of CEOs, Disabato said. If Ballmer started to perform incompetently and consistently launched poor products, he added, that would be a reason to call for his resignation.

"Ballmer has fixed Windows -- and I can't even believe I'm saying that," Disabato said. "Wall Street can complain about the stock price. Let's see what the technicians have to say about the products."

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