By Richard Saintvilus
Say what you want about the word "conviction," but patience has its limits. This is what J.C. Penney (JCP) has just realized with Ron Johnson, who is out after two years of brutal results. Whether or not Johnson got the "quick hook" depends on your level of patience. But we can agree he didn't live up to expectations. But some investors disagree.
Coming to terms
Look, I have no problems with cheering on a company. But when it is not matched in execution, you lose the right to call yourself an investor. This pretty much sums up my relationship with Microsoft (MSFT), which I've felt has been too one-sided. Unlike Johnson, Microsoft's CEO, Steve Ballmer, has had more than enough time.
Although I no longer hold the stock, I have spent the past couple of years defending this company. Unfortunately, management has not responded in a way that suggests it cares about my support. And I no longer believe that growth is Microsoft's top priority. You might argue that Windows 8 and the Surface tablet were answers to the mobile revolution. Perhaps. But what type of meaningful traction have they gained?
According to Kash Rangan of Merrill Lynch, investors shouldn't hold their breath for greater consumer adoption of these launches, either. Kash, who recently cut his rating on the stock from buy to neutral, while also lowering his price target by $2, cited poor Windows 8 momentum. But that's not really news.
Another failed idea
The Street never bought into the hype that Microsoft could gain meaningful traction against heavyweights like Apple (AAPL) and Samsung. Besides, the track record has not been there to justify the optimism. And now, Microsoft wants more time as it pushes out its new Surface Pro tablet. But Microsoft has had plenty of time and has wasted it.
The company has been too slow to adapt. And Surface Pro has not exactly carved out a new niche in mobile, either. The Street is not holding its breath. And neither should investors. The remarkable aspect of this is that there hasn't been an outcry for Steve Ballmer's removal.
I'll give Ballmer credit for maximizing Microsoft's profits. He's also done a decent job of milking as much money as possible out of consumers and businesses for Microsoft products, primarily Windows and Office. But, Ballmer has done little to propel the company forward technologically or strategically.
It's not about the past, sort of...
For instance, since Ballmer has taken over the company, when Microsoft had reached the high point of the stock more than a decade ago, it has been failure after failure. Microsoft poorly underestimated the vitality of the search market. The company allowed Google (GOOG) to dominate the industry.
Although Bing is more than respectable, it arrived almost 10 years after Google had already seized the search market. MSFT was also outsmarted in previously strong areas of its business such as browsers, where Mozilla seemingly came out of nowhere to "outfox" Ballmer and now Google is stealing more share with Chrome.
Worst of all, though, has been the company's approach to both its core business and its biggest future opportunity. While Windows 7 and Windows 8 are stable operating systems, they will never diminish the memory of the disaster that was Windows Vista.
Tim Cook fired Scott Forstall for the underwhelming reception of Apple's Map software. Remarkably, everyone kept their jobs at Microsoft after Vista. There's a difference in expectation. Unfortunately for Ballmer, these low expectations have hurt Microsoft. Unless he's gone, the culture won't change.
Why is the company still focusing on its low-growth legacy businesses? Ballmer has instead aborted various projects that could have generated the level of creativity consumers want. Microsoft could have produced "must-have" items. While Steve Ballmer, by all accounts, is a great guy and a wonderful ambassador for Microsoft, his time is up.
Here's making sense
Unfortunately, at such a critical point in the company's history, a great ambassador is no longer what Microsoft needs. Microsoft is in dire need of someone with a methodical sense. Here's something else to consider, Apple has recently said that it is a software company. This is despite making some of the best hardware designs consumers have ever seen.
Meanwhile, Microsoft, which is great at software, wants to challenge Apple and Samsung in hardware by insisting upon products like Surface Pro. There's a reason why Hewlett-Packard (HPQ) and Dell (DELL) are falling by the wayside. Apple realizes it. As does Cisco (CSCO) - software is "the new hardware." Ballmer still doesn't get it.
Additional disclosure: SaintsSense is a team of financial writers. This article was written by Richard Saintvilus, founder of SaintsSense. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.