Clippy Would be Proud: Ex-Microsoft CEO Ballmer Reportedly Buys Clippers for $2B
May 30, 2014 10:11 AM
Deal is still tentative, must be approved
Steven Anthony "Steve" Ballmer, 58,
served 14 years
as Microsoft Corp.'s (
until late last year
failure of Windows 8
triggered the board to
pressure him into an early retirement
I. Ballmer Beckons
The Wall Street Journal
whether he would stay on as the director
of Microsoft's board, Mr. Ballmer remarked:
It really as much as anything depends on how I see rest of my life playing out. I get to find some new set of things to be passionate about. I’m going to take some time and really figure it out.
Well apparently it didn't take him long to find at least one new gig that he seems very passionate about. In a surprising move, Steve Ballmer
a massive $2B USD bid to
buy the Los Angeles Clippers
Steve Ballmer, former CEO of Microsoft [Image Source: You Digital Space]
The payment is a record for an NBA team, grossly eclipsing the
$550M USD paid for the Milwaukee Bucks
earlier this month. It is extremely rare for an NBA team with a winning record in the playoffs to be sold, a key reason why the valuation was record setting. Mr. Sterling's original purchase of the Clippers is far more typical -- wealthy investors buying a struggling team.
The massive bid by Mr. Ballmer barely misses setting a record for American professional sports, which belongs to the $2.1B USD paid for the LA Dodgers in 2012. Some believe Mr. Ballmer seriously overpaid;
valued the franchise at $575M USD
The LA Clippers currently play at the Staples Center. [Image Source: Santa Clara Daily Briefs]
The team spends nearly 2/3rds ($80M USD) of its total revenue ($128M USD) on player, coaching staff, and employee payrolls. The team has an estimated annual operating profit of $15M USD before tax and debt payments.
II. The Fall of Sterling
The Clippers are currently owned by Donald Sterling, 80, and his estranged wife Rochelle "Shelly" Sterling, whom he married in 1954. A personal injury trial lawyer turned real estate mogul, Donald Sterling and his wife joined the ranks of National Basketball Association (NBA) owners when he
paid $12.5M USD
to acquire the struggling franchise back in 1981. At the time the Clippers played in San Diego. In 1984 he moved the team to Los Angeles, but the move didn't produce immediate results. Until 1991 the Clippers failed to have a winning season.
Donald Sterling, back in the 1980s [Image Source: AP]
But after moving to the Staples Center during the 1999-2000 season, the Clippers began to drastically improve, eclipsing the Lakers in their current incarnation over the last couple years. Mr. Sterling clearly coveted the team and relished the role of ownership.
For years he had a strained relationship with the NBA's league office, over various rules violations and over rumors that he was acting as a slum landlord and accusations of racism from former employees, including Hall of Famer Elgin Baylor.
But the NBA always tolerated Mr. Sterling until the event the events of last month. In a rant -- over a picture that she posted to Instagram of her posting with Hall of Famer Earvin "Magic" Johnson, Jr. -- Mr. Sterling is heard saying to his girlfriend:
It bothers me a lot that you want to broadcast that you're associating with black people. You can sleep with [black people]. You can bring them in, you can do whatever you want... the little I ask you is ... not to bring them to my games.
Donald Sterling (right), with his alleged girlfriend (left) [Image Source: NYPost]
The tapes sparked an immense amount of controversy, and the rest -- as they say -- is history. An NBA investigation culminated with new NBA commissioner Adam Silver calling Mr. Sterling in a short phone call, in which Mr. Sterling admitted that it was his voice in the leaked tapes.
With the LA Clippers bleeding sponsors and with the team's players and coach openly protesting and on the verge of strike, Mr. Silver fined Mr. Sterling the maximum amount possible under the NBA's "constitution" (contract) -- $2.5M USD. He also delivered a lifetime ban, calling on Mr. Sterling being banned from attending at any NBA game, function, or facility -- an unprecedented punishment against an owner in American professional sports history.
Pressured to save face, the league owners encourage Mr. Sterling to sell. A provision in the NBA constitution allowed the NBA owners to vote to force a franchise owner to sell if their behavior was extreme enough to damage the league. A 3/4 vote among owners would be required; it was largely thought that the votes were there to execute the forced sale.
III. Ballmer Draws Comparisons to Allen, Cuban
wrote a letter last week
saying he would sell the team. Then in an abrupt about face, he turned around and said he would not sell. But most believe that Mr. Ballmer's massive bid will be sufficient to convince Mr. Sterling and his wife (who also didn't want to sell her 50 percent stake) to drop their complaints and bow out.
Mr. Sterling is currently the longest-standing owner in the NBA. If he sells the team, the longest-standing owner will be Indiana Pacers owner Herbert Simon (who bought in 1983). Like Mr. Sterling, Mr. Simon, 79, is a former real estate magnate.
hand picked successor of Microsoft's cofounder and first CEO
William Henry "Bill" Gates III, Mr. Ballmer was known for his unnaturally high energy levels, plain speech, and unusual speaking voice which seemed to at times channel the late Chris Farley. He saw some of Microsoft's historic highs -- Windows XP and Windows 7, for example -- and some of its lows -- Windows Vista, and the latest Windows 8 woes.
Steve Ballmer loves basketball almost as much as developers. [Image Source: Man.com]
Mr. Ballmer was Microsoft's 30th employee and today holds
333,253,907 shares of Microsoft stock -- roughly a 4.04 percent stake in Microsoft. At current share prices that stake is worth roughly $13.4B USD. Forbes' latest Fortune 400 rankings list him as the 21st richest person in the world, with roughly $18B USD in wealth.
He bears some similarities in personality -- from an observer's perspective, at least -- to telecommunications mogul Mark Cuban, who bought the Dallas Mavericks for $285M USD back in 2000. Here's Mark Cuban fired up:
And here's Mr. Ballmer fired up:
Okay, maybe Mr. Ballmer is a little more energetic.
Mr. Ballmer and a group of other investors had in Jan. 2013 made an exploratory offer to buy the Sacramento Kings for $500M USD. The plan was to buy the team and move it to Seattle. The deal eventually collapsed after other team owners
voted not to allow the franchise to move
Mr. Ballmer lives in Hunts Point, Wash.
If the fellow owners allow it, Mr. Ballmer will likely attempt to relocate the Clippers -- who currently share the Staples Center building with the LA Lakers -- to Seattle, Wash. Seattle was home to the Seattle Supersonics from 1967 until 2008, when the team moved to Oklahoma City after a deal for a new publicly funded arena in Seattle fell through. The Supersonics won a single NBA championship in 1979.
Mr. Ballmer's fellow coworker, Microsoft cofounder Paul Allen, also is the principal owner of an NBA team. He purchases the Portland Trail Blazers in 1988 for $70M USD, having
left Microsoft in 1982
to receive cancer treatment.
The LA Times
"I f***ing cannot play Halo 2 multiplayer. I cannot do it." -- Bungie Technical Lead Chris Butcher
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