HEDGE FUND STAR CALLS FOR MICROSOFT CEO TO GO
By Svea Herbst-Bayliss and Bill Rigby
NEW YORK/SEATTLE |
Wed Might 25, 2011 8:57pm EDT
NEW YORK/SEATTLE (Reuters) – Influential hedge fund manager David Einhorn has referred to as for Microsoft Corp Chief Executive Steve Ballmer to step down, saying the world’s largest software program company’s leader is stuck in the past.
“His continued presence is the biggest overhang on Microsoft’s stock,” Einhorn stated in reference to Ballmer.
The comments by outspoken Einhorn, who created his name warning about Lehman Brothers’ monetary well being just before the investment bank’s collapse, are the most pointed yet from a high-profile investor against Microsoft’s leadership.
Microsoft shares, which have been static for over a decade, gained .87 percent in soon after-hours trading right after Einhorn’s comments, the most of any Dow Jones industrial average component.
The software giant, which was the largest U.S. firm by market value in the late 1990s, has considering that been overtaken by Apple Inc and IBM in marketplace value, and is no longer observed as a dominating force in technologies right after a failure to capitalize on new World wide web and mobile computing markets.
The stock is down 6 percent in the last two weeks alone right after Microsoft agreed to pay $8.five billion for World wide web phone service Skype, a move which mystified many investors.
Speaking at the annual Ira Sohn Investment Study Conference in New York on Wednesday, Einhorn stated it was time for Ballmer — who succeeded co-founder Bill Gates in 2000 — to step aside and “give an individual else a chance.”
Einhorn’s comments echo what some investors have said for some years in private.
A Microsoft spokesman declined comment on Einhorn’s remarks.
RECENT BUYER
Einhorn’s Greenlight Capital hedge fund has been a recent buyer of Microsoft stock, which at under 10 times expected earnings is regarded by several as undervalued.
Greenlight held about 9 million shares in Microsoft, or .11 percent of the company’s outstanding shares, at the end of the 1st quarter, according to Thomson Reuters data.
Einhorn also stated it was time for Microsoft to think about strategic alternatives for its funds-losing on-line enterprise, which has so far failed to win share from on the internet search leader Google Inc.
The on the web services unit, which runs the Bing search engine and MSN web portal, had a loss of $726 million last quarter and has now lost $7 billion in four years.
Bing has created some progress, raising its U.S. World wide web search marketplace share to 14 percent from 8 percent in the two years given that launch, but has not taken any share from Google, which has held on to its 65 percent share, according to research firm comScore.
Einhorn declined to comment further.
OLD FOES APPLE, IBM REVIVED
On Tuesday, Microsoft was overtaken by IBM in marketplace value for the very first time in 15 years, chiefly because of Microsoft’s static share price. Apple roared past it last year to turn into the world’s most valuable tech business.
(Graphic showing marketplace value of Apple, IBM and Microsoft over time: r.reuters.com/jaw69r )
An investor who put $100,000 into Microsoft stock 10 years ago would now have about $69,000 worth.
Einhorn, the president of Greenlight Capital, which had $7.8 billion of assets as of January 1, made his name with the prescient call on Lehman’s accounting troubles.
In the spring of 2008, Einhorn said Lehman — and its then-Chief Monetary Officer Erin Callan — had understated its own difficulties and required to raise capital to support a balance sheet peppered with risky assets.
Einhorn’s public speeches on the matter in April and May possibly 2008 — which includes 1 at the Ira Sohn conference that year — touched a nerve with other investors and are widely credited as leading to Callan’s departure from the organization a couple of months just before its collapse.
Microsoft shares, which gained 4 cents in normal trading, ended up a further 12 cents at $24.31 in right after-hours activity.
(Reporting by Bill Rigby, Svea Herbst and Edwin Chan Editing by Steve Orlofsky, Lisa Shumaker and Carol Bishopric)