Analyst: ValueAct has good chance to grab a seat on Microsoft’s board

05-17-12ceosummit_ballmer_PageAs the dust settles from Microsoft’s big earnings miss last week, the attention is turning to an expected attempt by activist investor ValueAct Capital to press for representation on the Microsoft board. And one longtime analyst says the firm’s prospects are good.

Rick Sherlund of Nomura Research writes in a note to clients, “We think the chances of [ValueAct] winning a board seat are high given the dissatisfaction with how Microsoft has failed to optimize shareholder value, and we suspect Microsoft figures it is better to work through the ValueAct agenda in private rather than in a public proxy solicitation process.”

Reuters reported on Friday afternoon that ValueAct has held talks with members of Microsoft’s board about its desire to pursue a board seat, pressing the company over issues including the apparent lack of a succession plan for Microsoft CEO Steve Ballmer.

But the big short-term issue appears to be the company’s cash position, which now amounts to more than $77 billion in cash and short-term investments. ValueAct and other investors are pressing for Microsoft to return more of that to shareholders in some form.

  • Bob

    Good for ValueAct. Ballmer has had his way for far too long and we’ve seen the results. A company that once dominated has now been turned into a laggard and laughingstock and its stock price cut in half. The board should have stepped in a long ago and made a CEO change. Instead they turned a blind eye and did whatever BillG or Steveb told them to do. That’s going to change dramatically once ValueAct gets a seat. And they’ll get one either way. So MS would be smart to grant it rather than risk a public proxy. Because if they go down that road they could forfeit more than just a board seat.

    Unfortunately this shareholder activism comes almost a decade too late. Substantial declines in revenue and profits over the next few years is now likely unavoidable, as are more stock declines and major layoffs. However it might finally get the company to get rid of underperforming businesses and focus, which might lead to at least a sustainable second act.

  • Ryan Parrish

    Don’t these people get that this cash, like pretty much any multinational, sits overseas to avoid high US corporate taxes? Exactly how do they expect to get any of this money? Do they really want the company to take a big tax hit so they can get a little extra cash?

    • Guest

      Of course. They’re sophisticated investors with $B’s under management. What they don’t get, and neither does anyone else with half a clue, is what good this cash is doing shareholders by simply accumulating overseas at very low rates of interest. What you should really be questioning is why the management team, who for reasons unknown has been unable to come up with better uses for these funds that might have contributed by now to MS’s bottom line, have instead chosen to park it vs voluntarily repatriate it, pay the taxes, and return it to shareholders? The stock has been dead money for more than a decade. Don’t you think a management team that was actually focused on shareholder return would have exhausted that and all other obvious options by now?

  • Guest

    If it’s a choice between the money sitting in the bank earning low interest or being spent on things like aQuantive or Yahoo I think that it’s better off in the bank.

    • Ryan Parrish

      OUCH!

      • Ryan Parrish

        Also, does anyone register for comments around here, or are you all just anonymous cowards?