It's Hard Out Here for a CEO

That last bit is what has Microsoft CEO Steve Ballmer taking an ibuprofen or two with his cognac (if that’s indeed what he drinks after a swanky dinner -- it would certainly be my choice) these last few months. Get this: Microsoft’s stock is the second-worst performer in the Dow Jones Industrial Average this year. That’s right; Microsoft, the New York Yankees of the technology industry, has a Kansas City Royals stock price. And Ballmer’s bosses -- institutional investors -- are starting to grumble.

Last week, Bloomberg ran a brutal story on this topic. Check out some of these barbs from Bloomberg’s piece:

“How can you have a CEO who is really indifferent to the price of the stock?” said Joseph Rosenberg, chief investment strategist at New York-based Loews Corp. “He has his head in the sand.”

Ouch.

And this:

“They are not managing the business with an acknowledgment the shareholders have changed,” said Richard Pzena of Pzena Investment Management LLC, which holds 14.3 million Microsoft shares. “People expecting 25 percent annual growth don't own the stock anymore.”

Oof.

And also, from Heather Bellini at UBS AG, who is, apparently, a real power broker:

“Previously, the problem was apathy on the stock,” she said. “Now the apathy has been replaced with anger.”

Guess so.

Some of these investors want Microsoft to spend some of its considerable cash resources to make another stock buyback -- it is currently finishing a $30 billion buyback it began in 2004 -- in order to hack away at debt and get the stock price climbing again. Ballmer wants to pump that money into MSN so that Redmond can combat Google, the masked invader that is threatening to move the capital of the technology industry from Seattle back to Northern California.

Therein lies the problem. Ballmer wants to use Microsoft’s money to fight the biggest fight of the company’s history. Investors just want their money back -- and they would very much prefer to get more out than they put in. It’s going to be tough enough -- maybe impossible -- for Microsoft to make a serious dent in Google’s domination of the Web. But trying to fight a foe as formidable as Google with one hand tied behind his back by investors will almost surely put an end to any hopes Ballmer has of making Microsoft king of the Internet.

Here is the Bloomberg article: http://www.bloomberg.com/apps/news?
pid=10000087&sid=aIkQqqOGhJPk&refer=top_world_news; the best magazine in the world not named Redmond Channel Partner has a great article on Google here: http://www.economist.com/science/displaystory.cfm?story_id=6911096.

How does Microsoft’s flagging stock performance affect you? Shoot me a line at [email protected].

As If That Wasn’t Enough
The Department of Justice wants to hound Microsoft until 2009. Whatever. First of all, Microsoft has much bigger problems in Europe, where the European Union -- truly a monument to corruption and bloated bureaucracy, but that’s another issue -- is all over it in legal wrangling that could eventually cost Redmond some serious money. Beyond that, after all the DOJ mess of the late ‘90s, and after all the money Microsoft spent to defend itself and ultimately settle its case, nothing has changed. Windows and Office are ubiquitous, and Redmond decisively won what used to be known as the browser war. In fact, the real threat to Microsoft’s hegemony now comes not from government intervention but from competition, namely Google. Go find somewhere else to meddle, DOJ -- the free market will take care of itself. Details: http://www.rcpmag.com/news/article.aspx?editorialsid=7431

Mar-Gone and Other Partner Program News
It’s the end of the Day for Microsoft’s US Partner Group, as Margot Day is ceding her position as head of the organization. Read more: http://www.rcpmag.com/news/article.aspx?editorialsid=7432

And, in other news, Microsoft is doling out money for partner certifications. Get it while you can! This story is right on the money: http://www.microsoft.com/
presspass/features/2006/may06/05-15Services.mspx

Any thoughts or insights on the leadership change? I’m all eyes at [email protected].

If I Had Bill Gates’ Money
A couple of weeks ago, I asked what you would do if you had Bill Gates’ money. Apparently, yachts, cars and round-the-world trips aren’t at the tops of your lists. Here’s what you had to say:

Jeff in California: “I've actually thought about this before, and I've come to this conclusion:

• I'd give an awful lot of it away (he already does that).
• I'd turn Windows into Open Source, a gift to the world.
• I'd keep an awful lot of money for myself and my family.
• And I'd keep the company running.”

David: “Fund the development of a rival to Windows built on a security-based platform (one with security built in from the start), like maybe Linux. Give this away free.”

So, there you have it -- it’s all about Windows. Just like with Microsoft.

Thanks to Jeff and David for your thoughts, and to those of you who have written to me on other subjects, thank you, too. And don’t worry -- you all will be reading your e-mails in this space soon as well. In future editions, we’ll hear what you have to say about Vista delays and the Microsoft-Google showdown as well as other topics. I might edit e-mails a tad for grammar and the like, but never for content. So fire away to [email protected]. And thanks for reading.

Posted by Lee Pender on May 17, 2006