Microsoft Loses Mulally and Leads Dow Lower

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

It's another strange day on Wall Street, but what else should we expect at this point? Economic data out today showed improved GDP growth (3.6% in the third quarter) and the second-lowest initial jobless claims figure since 2009 (298,000 last week), but the Dow Jones Industrial Average (DJINDICES: ^DJI  ) is off 0.38% in late trading.

The drop was caused by fear of the Federal Reserve slowing its $85 billion per month bond-buying program, which could happen as early as this month. At the end of the day, pulling stimulus from the economy would be a good thing, but short term the market often loses sight of that.

Microsoft sinks
One stock that isn't helping the Dow today is Microsoft (NASDAQ: MSFT  ) , which ironically was the best stock in the index yesterday.

Microsoft has fallen 2.8% today after Ford (NYSE: F  ) board member Edsel Ford II said "Alan is staying [at Ford] through the end of 2014." There had been hope that CEO Alan Mulally would jump ship to revive Microsoft's stagnant business.

Was Mulally really the savior?
The hope from Microsoft's perspective is that Mulally could perform the kind of magic on Microsoft that he did with Ford, but they're very different businesses. Mulally spent most of his career at Boeing, where he got a foundational manufacturing background. That transferred well to Ford, where he was an auto industry outsider but not entirely new to labor negotiations, supplier networks, and manufacturing.

Microsoft would be a different world. It is primarily a software company, and that's way out of Mulally's wheelhouse. While he may have been a popular, high-profile name, Mulally's background alone suggests he probably wouldn't be the best person to lead Microsoft.

Microsoft needs its own Mulally
Finding a leader like Mulally would be great for Microsoft, but the fit for Ford's Mulally is a stretch. So while the stock may falter on a day when it appears Mulally won't join Microsoft, long-term shareholders should probably see it as a good sign.

Investors should really be hoping that Microsoft can find its own Mulally.

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  • Report this Comment On December 05, 2013, at 4:37 PM, emilykulish wrote:

    I am neutral about Mulally. It is not guaranteed to do better than Steve Ballmer. Microsoft needs some younger person who can execute faster. Taking one example: if Microsoft released Surface RT at $299 instead of $499, and offered the type cover for $49 instead of $129 last year, they would have a huge market share on tablets. Unfortunately, the people at Microsoft did not figure out what was more urgent, and probably they have not figured out yet.

  • Report this Comment On December 05, 2013, at 4:42 PM, GameBot wrote:

    I agree with Emily ref Surface pricing.

    Talking to MS insiders they believed they were right even when faced with the facts they maintained MS priced it "about right". Given this state of delusion one is left to wonder what changes could any new CEO really make.

    The changes must come from the inside, MS is filled with people who believe they have some sort of right to success and that all they need do is produce a product and the public will buy it..

  • Report this Comment On December 06, 2013, at 12:42 AM, symbolset wrote:

    Wait 'til you see how the market reacts to Elop sitting in the big chair. It's going to be Amazing.

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