After successfully kicking Ballmer out, the sharks want more blood

While Microsoft Corp. (MSFT) was riding on an epic sales streak in the Windows 7 era, shareholder infelicity was slowly amounting as weak stock prices failed to reflect Microsoft's strong earnings.  Disruptive investor David Einhorn first called upon CEO Steve Ballmer to resign in early 2011.  At the time the board defended the boisterous Mr. Ballmer.  But then came Windows 8 and the biggest percentage drop in PC sales in history.  Now Mr. Ballmer is out, and that could be just the start.

Now three of Microsoft's top 20 investors have set their eyes on a new target -- William Henry "Bill" Gates III.  Since stepping down as CEO in Jan. 2000, Bill Gates -- who cofounded Microsoft in 1975 -- has continued to serve as Chairman of Microsoft's board.

The investors reportedly want a more radical departure from Microsoft's current path and are afraid Bill Gates could stand in their way.  They're particularly upset about Bill Gates being allowed to lead the committee that's hunting for Microsoft's next CEO.  Thus they're reportedly internally calling for Mr. Gates to resign as chairman of the board.

Bill Gates
Three top shareholders reportedly want Bill Gates to resign early from his chairman position at Microsoft. [Image Source: Getty Images]

While the investors represent only 5 percent of the total share pool, the attack on Mr. Gates is a sign that shareholder outrage has reached a new level.  Todd Lowenstein, a portfolio manager at HighMark Capital Management, did not disclose whether his hedge fund was part of the campaign against Mr. Gates, but at the very least he sounded quite supportive of it.  In a comment to Reuters he stated, "This is long overdue.  Replacing the old guard with some fresh eyes can provide the oxygen needed to properly evaluate their corporate strategy."

Other investors aren't so supportive of the attack on Mr. Gates' position of leadership.  Kim Caughey Forrest, senior analyst at Fort Pitt Capital Group -- another major shareholder -- comments, "I've thought that the company has been missing a technology visionary.  Bill (Gates) would fit the bill."

Fortune forecasts Microsoft to make $17B USD in profit this year, and calls it the world's 110th biggest company in terms of revenue -- up from 119th in 2012 on a profit of $22B USD.  But Microsoft's market capitalization (based on share prices) has fallen from first place in the world in 2000, to seventh place this year.  That's the same place as Microsoft occupied in 2008, but is down from the third place mark Microsoft managed to achieve in 2010 amid Windows 7's booming sales.

Steve Ballmer
Mr. Gates' chosen CEO successor, Steve Ballmer, was recently driven out by the board.
[Image Source: Getty Images]

Mr. Gates currently spends most of his time and effort on his $38B USD Bill and Melinda Gates Foundation.  Mr. Gates plans to donate his entire fortune to charity by the time he dies and has inspired other billionaires -- including Facebook, Inc. (FB) CEO and founder Mark Zuckerberg to do so as well.

The calls for Mr. Gates resignation come at a time whens his own ownership of Microsoft is waning.  Mr. Gates owned 49 percent of Microsoft shares when the company went public in 1986, but entered a plan to sell off his holdings on a pre-set basis, selling about 80 million shares a year.  Sales to date have reduced Mr. Gates' stake to 4.5 percent of current shares, or about $12.4B USD worth of stock.  The share sales plan will eliminate Mr. Gates' ownership entirely by 2018, at which point he would presumably step down as board chairman -- a spot reserved for a top investor.

Thus whether or not the angry shareholders get their wish, Mr. Gates will likely be leaving what is likely his final position at the company he cofounded within the next five years.

Source: Reuters

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