It’s Time to Set Microsoft’s Ballmer Straight

This plodding run needs an endgame

By Marc Bastow, InvestorPlace Assistant Editor

Let’s just say for the sake of argument that you’re a fairly successful salesperson who has managed to string together a decent decade of steady, though slow, growth for your company. You’re doing just fine, but every year you hold out the hope to your employer of a big breakthrough: big deals, lots of momentum, a new paradigm, what have you.

Then one day, you announce you’ve got nothing. Just empty rhetoric and broken promises for your bosses.

Chances are good that if you weren’t booted outright, you’d be put on a “plan” that lays out certain targets to meet over a specified period of time to keep your job. If not … well, in the words of playwright David Mamet, “Third prize is you’re fired.”

Unless you are Microsoft (MSFT) CEO Steve Ballmer, in which case you apparently get to keep doing your job without bother. And that shouldn’t be the case.

Let’s quickly recap some financial highlights of Ballmer’s last 10 years of his 13-year run as CEO:

  • Average Annual Revenue Growth: 9%
  • Average Annual EBITDA Growth: 9.2%

Wow. Not particularly stellar. Especially when you consider Apple (AAPL) grew revenues and EBITDA a respective 44% and 117% annually, and Google (GOOG) did so at clips of 51% and 58%.

Over that same period, the S&P 500 earnings have averaged just over 29% even after a massive plunge of 77% between 2007-08.

Also consider the most important measuring stick for investors: stock performance. During the past decade, Microsoft stock has provided a total return of nearly 63%. Just for giggles, compare that to the broader market via the S&P 500 (72%) or the tech-heavier Nasdaq (110%).

Whatever you do, don’t compare that to AAPL or GOOG. That’s just depressing.

And you can thank Ballmer’s reign — one of missed opportunities, rudderless leadership and very little vision — for most of that.

All three criticisms start and end with 10 years of wasted time: MSFT’s first foray into the mobile world was in 2000 when it introduced its Windows Mobile (Pocket PC 2000) operating system. MSFT had mobile cellphones well before Apple’s iPhones and devices running Google’s Android OS hit the shelves. But that head start got Microsoft nowhere — its Windows Phone platform is so far behind that it’s practically a statistical outlier.

Forget tablets, too. Despite an operating system that still runs most of the world, Ballmer hasn’t been able to use Windows to any real benefit; Windows-based tablets make up under 2% of worldwide shipments, according to IDC. The rest of the tech world created that market right under Microsoft’s nose, and by the time Ballmer figured it out, well it was — and maybe always will be — too late.

Mind you, this is all happening during a period in which the PC-centric world is deteriorating, and fast. MSFT’s struggles are mirrored by Hewlett-Packard (HPQ) and Dell (DELL) — and to a lesser extent, Intel (INTC) — who have been varying degrees of lacking in their own mobile initiatives.

For all the years Ballmer has talked the talk of a mobile world, fully interconnected, all running on Windows-based platforms, he has yet to walk the walk.

And it’s not that MSFT is entirely without its good points.

Microsoft has managed to become the leader of the console gaming market with its Xbox segment, which the company now hopes it can turn into a home portal for nongamers. And MSFT has managed to steer the Windows bell cow into the new decade, pumping out billions of dollars in cash to support a dividend and buybacks. MSFT has more than doubled its payout in the past five years, in fact.

But that uptick in income doesn’t really justify the opportunity cost of investing in tech growth stocks like Amazon (AMZN), which is up more than 300% in that same half-decade.

No, it’s just not enough.

Microsoft’s recent reorganization might be a brand-new start to foster cooperation among formerly competing segments and provide a focus on new product development to take it into the next few years.

But that reorganization should include a plan for Ballmer to either get the company moving by the start of 2015 with some targeted tangible results, or enjoy a separation package.

Marc Bastow is an Assistant Editor at As of this writing, he was long MSFT and AAPL.

Article printed from InvestorPlace Media,

©2018 InvestorPlace Media, LLC