Microsoft (MSFT) shares are rallying on the news of Steve Ballmer's "retirement," which I put in quotations because I believe he is stepping down this way instead of being fired. In its latest quarter, Microsoft announced a $900 million tablet inventory write-down, while greatly missing revenue and earnings expectations. Ballmer's position at the top of Microsoft has seemed shaky recently. Just yesterday, Nomura analyst Rick Sherlund put Microsoft back on his Buy list on the basis of "anticipated benefits of shareholder activism." ValueAct, which started a small position in Microsoft, may be looking to grab a seat on the board, but you have to wonder if Sherlund knew something was up with this announcement less than 24 hours later. Sherlund appeared on CNBC early Friday morning, and stated it was unclear if Ballmer was forced out. There doesn't appear to be a successor lined up, but remember that Intel (INTC) spent several months looking for a new CEO after the retirement of their leader, Paul Otellini.
Microsoft is up more than 7% this morning on the news, but it is interesting to note that shares are still below the $35.19 close before that latest quarterly report, and nearly 5% off their 52-week high. Investors seem to like this move, and it appears that early on, an outside candidate might be chosen. With Apple (AAPL) shares recently rallying after its huge buyback announcement, along with continued discussions between Apple CEO Tim Cook and activist investor Carl Icahn about a larger buyback, one must wonder if a new candidate will be looking to leverage Microsoft's huge cash position. Unfortunately for shareholders, Microsoft's cash pile is even more offshore-based than Apple's is. According to Microsoft's latest 10-K filing, $69.6 billion of the company's $77.0 billion in cash, cash equivalents, and short-term investments are held overseas. Investors are also looking for a dividend raise from Microsoft within the next month or two. I recently was looking for Microsoft to do something to wake up this sleepy stock, and it appears that this news has done just that.
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