David Einhorn, the outspoken hedge fund operator who once called for Microsoft Steve Ballmer to step down, has officially tossed in the towel on the company after seven years.
In a letter to partners, Einhorn explains why they dumped the stock, noting a comparison to beleaguered baseball player Alex Rodriguez. He also said they made a high “single-digit return” that slightly beat the public markets for the period they held the stock.
In 2006 we compared Microsoft to A-Rod, which was a compliment at the time. In 2013, the comparison is still apt, but it is no longer a compliment. Windows 8 appears to be a flop, and a decade of mismanagement has put Microsoft at risk of becoming a shrinking company. We were pleased when an activist gave the stock a boost, giving us the opportunity to exit with an annualized high single-digit return that slightly outpaced the market during our lengthy holding period.
At an investment conference in New York two years ago, Einhorn said that Ballmer’s “continued presence is the biggest overhang on Microsoft’s stock.” Microsoft’s stock is up 18 percent so far this year, and up five percent in the past 12 months.
Einhorn’s exit from Microsoft’s stock comes as ValueAct Capital presses for a board seat, something that longtime analyst Rick Sherlund siad is a possibility “given the dissatisfaction with how Microsoft has failed to optimize shareholder value.” The news also comes after a big earnings miss by Microsoft — including a $900 million charged tied to the Surface — and a recent restructuring of the management ranks.
Here’s Einhorn’s full letter via Business Insider.