Steve Ballmer’s resignation from the Microsoft board this week is the latest change for a group that has experienced a major shakeup over the past year — including a new chairman in John Thompson; a new CEO in Satya Nadalla; the addition of an activist shareholder in ValueAct’s Mason Morfit; and the appointment of a wireless veteran, John Stanton, positioned to help guide the company in mobile technologies.
In the short run, the move could give Nadella more leeway to make significant changes without his predecessor looking directly over his shoulder. Ballmer championed the acquisition of Nokia’s smartphone business, and Nadella has already been making cutbacks and changes in that area, as one example.
Bill Gates stepped down as chairman but remains on the board and is working with Nadella as a strategic adviser.
Overall, the changes also have some investors and analysts licking their chops at the prospect of larger dividends or share buybacks.
In a note to clients this week, longtime analyst Rick Sherlund of Nomura Research said the board’s short-term focus is likely to be on “fixing the business,” but he’s hoping that Microsoft will consider returning cash to shareholders in a bigger way.
“It may be too early to expect a bold move from the Board on the return of cash to shareholders, but we think the dynamics of the Board are likely changing in a way that could facilitate this over the next year,” Sherlund wrote. He noted that Gates and Ballmer have historically been conservative in their desire to grow the company’s cash position,” with the exception of the company’s big $3/share special dividend in 2004.
Microsoft’s balance of cash and short-term investments stands at $85.7 billion as of June 30. Sherlund has suggested a “bold move” of a 10 percent share repurchase, which translates into about $38 billion, but acknowledges that could be a stretch in the short run.
For now, Microsoft’s board is set at 10 members. The company isn’t expected to make any further changes prior to the shareholders’ meeting in November — which promises to be a very interesting gathering.
