Is It Time for Microsoft's CEO to Step Down?

Listen now on Fool.com

On today's edition of "MarketFoolery," the daily podcast from The Motley Fool, we discuss the following topics:

Influential hedge fund manager David Einhorn called on Microsoft (Nasdaq: MSFT  ) CEO Steve Ballmer to step down. After more than a decade at the helm, is it time for Ballmer to go? And how much blame for Microsoft's performance should be laid at his feet?

Of Microsoft's main competitors -- Apple (Nasdaq: AAPL  ) , Google, (Nasdaq: GOOG  ) and Facebook -- which company ranks as the greatest threat? Our analysts each choose a company and make their case.

Shares of Tiffany (NYSE: TIF  ) were up big today after the company reported strong earnings and raised its guidance for the year. Which international market is the key to Tiffany's success, and can it be sustained?

Listen now on Fool.com

Chris Hill owns shares of Microsoft. The Motley Fool owns shares of Apple, Google, and Microsoft. Motley Fool newsletter services have recommended buying shares of Microsoft, Google, and Apple. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Motley Fool newsletter services have recommended creating a diagonal call position in Microsoft. 

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Besides, it makes arguing more fun. The Motley Fool has a disclosure policy. To the best of our knowledge, the Smurfs do not.


Read/Post Comments (8) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 26, 2011, at 8:22 PM, Henry3Dogg wrote:

    Many years past.

    About the time when he announced that there was no need for Windows 2000 users to upgrade to XP.

  • Report this Comment On May 26, 2011, at 8:48 PM, Klippenstein wrote:

    Ballmer is doing a good job. Just because Apple happens to make sexy devices right now what people (mainly Americans) will buy at almost any price, does not mean that they will not have big problems growing down the road. In contrast, Ballmer's Microsoft has slowly, methodically, made itself an increasingly indispensible part of both the back office and front office technology infrastructure AND done in very profitably. During the last 11 years of Ballmer's stewardship, Microsoft is on track to have increased its sales by almost 3x and its earnings by 4x. That is close to a 15% annual earnings growth rate (compounded), a great financial performance -- indeed stellar -- by any measure for a company this size. I was curious to know how Mr. Einhorns hedgefund has performed over the same period, but found no record on his website (https://www.greenlightcapital.com/) -- only speeches. Given how underwhelmed his is with Ballmer's performance, Einhorns' hedgefund's performance must be more stellar still. Modesty should not keep him from sharing his greater success with the rest of us.

    Ballmer must be measured first and foremost on how he is maintaining and building on Microsoft's profitability. By that measure, he is doing an excellent job. The price the stock market puts on the stock of the company is another topic (problematic yes, but another topic). Maybe the company is just a screaming buy!

    In addition to this, Ballmer's Microsoft has paid some $60 billion of these profits back to shareholders via dividends -- unlike Apple, Google, Cisco, Dell and most other tech companies that pay no dividend (you have to add that payout back into any comparison of company values). Also, unlike these companies, Ballmer's Microsoft tolerates no shareholder dilution via stock options.

  • Report this Comment On May 26, 2011, at 9:08 PM, TheDumbMoney wrote:

    Klippenstein, we have been on the same side of many things Microsoft, but you're wrong on this one. Ballmer needs to go. May the stockholder non-dilution continue after he is gone.

    My own belief that he needs to go has nothing to do with Microsoft's stock price. I think Microsoft is very cheap right now (it is my second-largest or largest position). SO DOES EINHORN, who owns 0.11% of the company.

    Yes, Ballmer has been a good steward of Windows and Office. But he has also poured $7 billion down the online MSN/Bing rathole, including over $700 million last quarter. Even more damningly, when they were introduced he publicly denigrated as silly the two most significant consumer electronics innovations of the last five years, the pad and the smartphone. The fact that people are willing to overpay for Apple versions of these simply makes his mistake worse. The fact that sixty-five-year old managers in my company are berating the IT department about why we can't get Word on an iPad is a perfect encapsulation both of why Microsoft is a buy, and why Ballmer has to go. And nearly four years after the iPhone was first sold, four years (!), Microsoft still has no credible challenge in place. That is pathetic. Google meanwhile developed Android and did something like $1 billion in profit on ads, even though they give the thing away. Pathetic.

    It is possible both to be a bull on Microsoft, because of its pre-Ballmer Windows/Office (which he has so-far largely maintained), and because of the success it truly has had growing earnings over the last decade, and also think that Ballmer is no longer the right guy for the job. He has forfeited his credibility, in my view.

  • Report this Comment On May 26, 2011, at 9:30 PM, Klippenstein wrote:

    dumberthanafool --

    Brilliant as usual -- very good points all. Yes, they have delayed, stumbled or been dead on arrival in areas one would expect more, a whole lot more. The smart phone is certainly an example. But what about Kinect, Azure? (not too mention Windows 7 ... since it is legacy ... but still huge profit center). And they do have a nice smartphone product now and isn;t the Nokia deal significant? Maybe he has now got himself going in the right direction. But then again, maybe Ballmer should be fired for "giving away" Kinect instead of charging juicy Apple-like margins. I'm think Microsoft is a tough company to run. Who could do it better? Any suggestions?

  • Report this Comment On May 26, 2011, at 10:47 PM, techy46 wrote:

    Microsoft, under Steve Ballmer's leadership, owns the enterprise ecosystem for desktop server based private and public clouds including Exchange, Sharepoint and SQL Servers and integrated development with Visual Studio. That enterprise ecosystem franchise generates $16b of free cash flow a year and will ultimately allow Microsoft to successfully compete in the mobile consumer ecosystem. Go read Steve Sinosky's biography to grasp what Microsoft has overcome in the last 10 years. Microsoft, under Steve Ballmer, needs 12-18 months to demonstrate that their recently adpoted strategy, Windows 8 for ARM and Intel plus Nokia, Skype and WP8 will bear ROI. If this does not become clear than a major leadership change will be warranted that includes Steve Ballmer relinquishing the CEO position.

  • Report this Comment On May 27, 2011, at 11:19 AM, TheDumbMoney wrote:

    Klippenstein,

    Ideally I would like Bill "don't let us become a dinosaur" Gates back in charge every day. I would also shake up the board. Why does Microsoft have a board of directors with Gates, one tech academic, one genuinely cool tech person, the CEO of Netflix, and then a bunch of people whose background has nothing to do with tech, including major executives from Bank of America and JP Morgan? Pathetic.

    Kinect is great. Do you know what would also be great? If Microsoft fully exploited the technology to make it a real profit-driver by licensing it to put it, for example in every television made in the next ten years (and thereby end the remote control), license it to Intuitive Surgical for use somehow in the da Vinci systems, license it to Northrop or Lockheed for defense applications, I could think of more; that is Minority Report technology if done right. These people think so frigging tiny. That technology is way bigger than a game system. Instead, it appears Microsoft is going to "pull a Xerox" with the Kinect technology, by failing to exploit its possibilities, just as they did when they developed a pad some five or more years ago. Pathetic. Pathetic Pathetic.

    The Nokia deal is great. The fact that they had to pay Nokia god-knows-how-many millions or even billions is not great. Did Apple have to pay a phone maker jillions? Did Google? No. They made money from nearly day one. Do you know what the opportunity cost of that money is? Do you have any idea how pathetic it is that Microsoft had to do that deal at all? Of course you do, you're a smart person. That said, the deal looks necessary now, and will probably be helpful. Nokia is great at hardware and integration.

    tech46, well-said. I would be willing to give him about 12-18 months. That said, if their strategy doesn't work in that time, it's time to dump the stock, not just dump Ballmer.

  • Report this Comment On May 27, 2011, at 12:10 PM, TheDumbMoney wrote:

    I don't mean to imply it should be a 100% tech board. But I don't think MSFT needs people from both BAC and JPM.

  • Report this Comment On May 27, 2011, at 12:27 PM, TheDumbMoney wrote:

    Techy, I noted your article rec, now read this, it's like the guy is inside my brain:

    http://contrarianedge.com/2011/05/10/microsoft-just-pulled-a...

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1500237, ~/Articles/ArticleHandler.aspx, 9/17/2014 9:56:36 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement