Ballmer Spotlights R&D at Microsoft Shareholder Meeting

Microsoft held its Shareholder meeting for 2008 on Wednesday, and shareholders approved all nine board-member nominees on the proxy slate. Shareholders also approved two executive compensation measures, ratified Deloitte & Touche as Microsoft's independent auditor and defeated three shareholder-initiated proposals.

In response to a question, Microsoft CEO Steve Ballmer nixed the idea that Microsoft is planning to acquire Yahoo. Ballmer said Microsoft was "done with all of these [acquisition] discussions with Yahoo." However, he added that Microsoft is "very open" to doing some sort of search collaboration deal with the company.

The theme of the meeting, if there was one, was an appeal by Microsoft to preserve its long-term investment initiatives, particularly its research and development spending.

Ballmer said that Microsoft is still investing in research for the long term, and touted the benefits. He gave the example of Microsoft's expansion into the enterprise market, which many said Microsoft couldn't pull off. The decision to go that direction was made 20 years ago. Today, Microsoft's server and tools segment is a $13 billion business, he said.

Ballmer also pointed to Windows Azure, Microsoft's "operating system" in the cloud that was announced last month at the company's Professional Developers Conference. Ballmer described Windows Azure as the result of a multiyear investment, adding that it was "started out by two guys working on something."

Microsoft is in a leadership position, Ballmer said, despite the current troubled economic climate. He noted that "revenues jumped 18 percent last year to pass $60 billion." He added, "Operating profits are at 21 percent to $22-and-a-half billion, which makes Microsoft amongst the two or three top operating-income companies in the United States." He said Microsoft returned $16.5 billion to shareholders through stock buybacks and dividends.

"Our strong financial position allows us to reinforce our competitive advantage by continuing to invest in R&D, continue to make carefully targeted acquisitions and continue to take a long-term view of the investment required for future growth," Ballmer said.

He said that Microsoft is also looking at reducing its costs, utilizing its resources more and "reducing the head count for this financial year and the next financial year." However, its R&D investments will continue.

Microsoft's Chairman Bill Gates also spoke at the shareholder meeting. Gates noted that digital technology is becoming smaller, more powerful and more affordable. He said we are moving from the one billion people who use PCs today to broader use on mobile platforms, reaching many more people.

Gates also announced the retirement of Jon Shirley from Microsoft's board. Shirley, a past president at Microsoft, had joined the company in 1983, when Microsoft's sales were at $100 million. With Shirley off the board, the board now shrinks from 10 members to nine members.

Shareholders approved an executive officer compensation plan that would set an incentive pool at "0.35% of the Company's operating income for the 2009 fiscal year."

The proxy statement provided interesting compensation figures -- including salary, bonuses, stock awards and other compensation -- for the fiscal year that ended on June 30, 2008:

  • Ballmer received $1.4 million;
  • Chris Liddell, Microsoft's senior vice president and chief financial officer, received $3.5 million;
  • Kevin Johnson, Microsoft's president of the Platforms and Services Division, received $6.8 million;
  • Jeff Raikes, president of the Microsoft Business Division, got $7.6 million; and
  • Kevin Turner, Microsoft's chief operating officer, took in the most at $10 million.

An amendment to Microsoft's director compensation plan for nonemployees was approved by shareholders. It increases "the maximum number of shares of common stock that may be awarded to eligible non-employee directors from 10,000 to 20,000" shares, according to Microsoft's proxy statement.

Shareholders defeated all of the investor-proposed social measures. One of them was a proposal to strengthen Microsoft's efforts against the censorship of speech over the Internet, as carried out by some governments. A representative for the New York City Pension Funds said that Microsoft's recently announced anticensorship effort had been rejected by the human rights group Amnesty International as having too many loopholes.

The effort in question is called the "Global Network Initiative," which Microsoft announced it had joined in late October.

A second measure proposing a Board Committee on Human Rights at Microsoft was rejected as well.

Finally, a measure to better disclose company charitable contributions of $5,000 or more to various organizations was defeated. The argument in favor of doing that was somewhat rambling, but the shareholder proposing it appeared to oppose funding gay rights organizations.

The Webcast and proxy materials for Microsoft's 2008 Annual Meeting of Shareholders is available at the Microsoft Investor Relations page here.

About the Author

Kurt Mackie is senior news producer for 1105 Media's Converge360 group.