This isn't the first time that David Einhorn has been right. The famous hedge fund guru called for Microsoft (NASDAQ:MSFT) CEO Steve Ballmer to step down years ago, saying, "His continued presence is the biggest overhang on Microsoft stock." Now former Microsoft exec Joachim Kempin is chiming in, giving his inside account of why Ballmer needs to go.
Kempin recently released a book on his time at the software giant, which spanned nearly two decades, from 1983 to 2002. During that time, Kempin worked directly with Bill Gates and Steve Ballmer as Windows rose to ubiquity. Kempin led Microsoft's OEM division and spearheaded negotiations with hardware partners, squeezing out more incremental revenue by cross-selling different bundled products.
According to Kempin, Ballmer intentionally ousts any executive that he sees as a threat to his CEO seat. Any ambitious manager that Ballmer perceives as a possible threat to his power is inevitably removed, and Kempin cites numerous past examples, such as Kevin Johnson, who left to become CEO of Juniper Networks.
The most prominent example still fresh in investor memory is Steven Sinofsky, who was ousted just three months ago. That departure was quite notable because Sinofsky was head of Microsoft's important Windows division and Windows 8 had just launched a few weeks prior. Sinofsky had reportedly presented Ballmer with an ultimatum to either acknowledge him as a successor CEO or he would quit. Needless to say, the latter materialized.
Kempin recalls how Microsoft saw the major shift in computing to smartphones and tablets, which makes it inexcusable why it's such a laggard in those key markets. The company had tablets and smartphones in development back when Windows XP was released, but simply "never followed up properly."
The former executive feels like a shake-up is needed, since Ballmer isn't CEO material. Unfortunately, the board is a "lame duck board" that lacks the conviction to do what's necessary. Investors seem ready for a change, as shares rallied as much as 3.5% back in 2011 just on Einhorn's suggestion.
Ballmer's one saving grace may be that he's actually compensated rather modestly, in part because he voluntarily declines equity compensation. On the other hand, sometimes you get what you pay for.%sfr%}
Fool contributor Evan Niu, CFA, has no position in any stocks mentioned. The Motley Fool owns shares of 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. The Motley Fool has a disclosure policy.
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