A bum rap for Ballmer? Microsoft CEO defends profit growth during his tenure

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Outgoing Microsoft CEO Steve Ballmer listens to a question at this week’s shareholders meeting.

What about the stock price?

That’s the perennial question from the floor at Microsoft’s annual shareholders meeting, but in his final appearance at the meeting as CEO, Steve Ballmer came armed with a pair of statistics designed to counter those who criticize his tenure as the company’s leader.

It’s “hard to predict share prices, but at the end of the day, they have to have something to do with profit,” he said in response to the question from a shareholder at the meeting Tuesday morning. “Our stock price is 60 percent, maybe, of what it was when I took over as CEO. Profits are three times what they were when I took over as CEO. Now, I don’t know how to answer your question. But what I do know is, if we continue to make the investments that lead to valuable products that people will pay for in a way that generates profit, the stock price responds to that.”

Checking Ballmer’s math, Microsoft’s net income was, in fact, $7.8 billion in 1999, the year before he became CEO, and $21.8 billion in fiscal 2013.

He’s also in the ballpark on the share price over the past 13 years. More recently, Microsoft’s stock is actually up more than 34 percent this year, but that’s due in part to news of Ballmer’s impending departure and investor speculation about major moves that could be taken by his successor.

Responding to another shareholder’s question, Ballmer did acknowledge and take responsibility for the company’s failed $6.3 billion aQuantive acquisition. “Certainly our aQuantive acquisition is not going to go down on the record books as a success. It wasn’t, and I take responsibility for that.”

He defended the pending $7.2 billion Nokia smartphone acquisition as critical for Microsoft’s move into devices, saying the company should be mindful and cautious as it makes acquisitions, but not fearful about doing larger deals to expand its business.

Previously on GeekWire

  • Mark B

    I liked him in “Young Frankenstein”

  • Bob

    Ballmer can talk about revenue and profit growth, R&D spent, shares bought back, dividends paid, etc. The bottom line however is that a person who invested in MS when Steve became CEO lost money on a net basis over thirteen years. While it’s true the market often misprices companies short term, it’s not typical for a company’s stock to crash and then flat-line for more than a decade. Ballmer (and MS’s board) chose to mostly ignore that, even going as far as to tell their employees that the stock price “didn’t matter”. Well, it took a long time but I guess they’re finding out it did matter after all. And, as the first of what likely will be many consequence to follow, Steve is now out and for the first time in MS history an activist investor was able to demand and secure a future board seat.

    And of course what Steve doesn’t want to acknowledge is the erosion of competitive position, indeed one of the most epic reversals of said in business history with Apple now twice the size of MS, which occurred on his watch. Investors don’t tend to pay up for companies who are getting their asses handed to them by competitors while their management teams are busy denying it’s happening. They instead buy the winners, which in part explains why Apple and Google shares have multiplied many times over during the same timeframe that MS lost 40%.

    • Guest

      Profits matter to investors.
      Stock price matters to traders.

  • Ted

    I think Balmer made the Microsoft more rich than in Gates period

  • arcompan

    quote from an ex-microsoft research VP – mistakes made 10 years ago.

    Microsoft “top management refused to embrace the easily
    predictable future for tablet PCs and eReaders that xxx so engagingly
    promoted, foolishly disbanding these product groups just before the market
    proved itself. In truth, we gave them a 10 year jump on both Kindle and
    iPad, and they chucked it away like garbage. When eBooks and Tablet PCs were slow to sell at first, as might have been expected, politically motivated
    scoundrels at the company selfishly argued there was no future for such things… because they wanted our resources and headcount. And management stupidly agreed.

    Ballmer is a decent guy and he’s milked the old cash cows as well as anyone
    could. But he’s more salesman than tech leader, and he clearly can’t
    judge things to come very well. Mundie, whose job is to see such
    possibilities, must be the blindest visionary at any high tech company, without
    much to show for 20 years and specifically without the wit to see what was so
    close in slate form factors. And Sinofsky, more than any of them, truly
    hated the idea of tablets and openly insisted a machine without a keyboard
    could never sell. Yeah, that was right.

    Had they simply stayed the course we put them on, and spent maybe $20 million annually to move the ball ahead, I am sure they would have dramatically
    improved the initial products and become the key player in these new forms, as the technology improved and the market developed. That would have added about $200 billion to the MSFT market cap — $50b for ebooks and $150b for tablets that you can now see on the valuations of Amazon and Apple. It could have doubled the current Microsoft stock price and opened up all sorts of possibilities for innovation that now lives elsewhere.”