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I Invested In Microsoft But I Have More Than A Few Words For Steve Ballmer

12 Value Stocks profile picture
12 Value Stocks

Dear Steve Ballmer,

Let me start by giving credit where credit is due. I have to say that you are one of the most successful executives in the world, and in fact, a brilliant human being. Rumor has it that you scored a perfect 800 on the mathematics section of the SAT. No doubt you have a serious brain.

I certainly don't have enough space here to list all of your achievements, but I've selected a few that I felt were worth mentioning in this article:

  • You came to Microsoft (NASDAQ:MSFT) as the 30th employee and you are now the CEO (and one of the richest men on the planet)
  • Under your tenure as CEO, Microsoft went from $25 billion in revenue to $70 billion, while net income has increased 215 percent to $23 billion
  • You led and built incredible businesses at Microsoft such as the .NET framework, the data centers division ($6.6 billion in profit for 2011) and the Xbox entertainment and devices division ($8.9 billion). Not bad at all

But if there is anything I have learned throughout my life, it is that brilliant people can also be wrong, sometimes very wrong.

Your career has been outstanding and based on the results that I listed above alone you have been one of the best CEOs of all time, with a 16.4% annual profit growth at Microsoft you have crushed the record of Jack Welch, with 11.2% at General Electric (GE). But Mr. Ballmer, since you became CEO, times have changed and there are other geniuses behind you waiting for an opportunity. As Steve Jobs once said, "Death is very likely the single best invention of Life. It is Life's change agent. It clears out the old to make way for the new." This is evolution and regardless of your amazing brain and leadership

This article was written by

12 Value Stocks profile picture
I consider myself a value investor, this investment philosophy boils down to investing undervalued, under-researched and unpopular companies; reasons for one of these three elements can be different: special situations (spin-off, turnarounds, arbitrage), analyst coverage (low or very negative coverage), investor fatigue (because of earnings misses), misunderstood parts of the business (e.g. in case of holdings), and cyclicals. You can subscribe to my mailing list at www.12valuestocks.com I believe value and growth should not be considered as two different approaches since value investor also need earnings powers, pricing power and earnings growth. Every investment should start with the inherent risks and not with the return. A sufficient margin of safety should be provided with every investment you make. This way, investors might lag the market or the hot money stocks in the short term. In the long run however, they will win.

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Comments (38)

timddeb profile picture
Monopoly on Office? The moat has a large leak!
I have one word: QUIT
I would wish this to get to Steve Balmer. If he woun't leave maybe he could be hypnotized to do a better job.
Global Guy profile picture
A really great and BALANCED editorial. Thank you! I agree with it all (except that maybe W8phone may take off) and I admire you for writing so carefully! You did not whine or overreact, but really stuck to the facts. As others have said, I hope your letter goes to MSFT's board. I still think this company has great potential, but it has not been unleashed. I can't comment on Ballmer as a CEO/individual, but I do know that corporate culture starts from the TOP, and I agree that MSFT's corporate culture has not lived up to its ROOTS. Can you imagine how Microsoft of the 80s would act today??? That is what shareholders are looking for.

Instead, we have a kind of utility, where we can safely invest for a yield but not much of a future. I have a little MSFT in my portfolio, but I am reluctant to increase my holding. INTL is another utility, but with better upside. I have bought more INTL this past year.

Mr. Ballmer, who are your successors? What is your vision for MSFT? Will MSFT become a server company and game console player with a monopoly on Office, but nothing else, or can MSFT lead the way into the mobile world where we will see an evolution of 5" smartphones (Sony Xperia Z) and mini-tablets?

Look to IBM in the 1980s and Apple in the 1990s. Which will MSFT be? A solid utility or a leading market innovator?
timddeb profile picture
Ballmer, educated idiot. Clever, no street smarts, and isolated from customers
freed0m profile picture
No matter how much people hope Microsoft to be Apple, or Google, the reality is that it is Microsoft. There are far more companies destroyed by their own quick success. Microsoft, in all these years, has been standing there and getting much stronger.

Apple is going to face or facing the same problem as Microsoft in the 1990s. With too much success and money, but there is not much to invest. Apple will slowly go the same way of Microsoft or be destroyed and forgotten by the world. I am wondering what Apple will do to its 100+ billion to make more money. With smartphones and tablets maturing, I am eager to see what Apple can pull out of its hat.

Google eventually, will go the same way.
What a great article. I hope you can further this with Steve Balmer and the stockholders. Any chance of talking at the Micropsoft meeting. I assume Bill Gates has eyes, ears, and stock in the company. WHY is he not taken a stand?
Thank your for a well-balanced and objective opinion. I hope that Healthcare CEO's/Administrators would find this very instructive to their industry. In every organization, there are folk with varied talents/experiences, who could take the organization to higher heights. However, it appears that fear of either failure, or loss/reduction of end-of-year perks and in some instances not wanting to defy the wishes of certain board members, do contribute to these disappointing outcomes.
In view of your non-destructive approach to this article, I will invest in MSFT, bearing in mind your observations.
so easy to write this type of an article.tougher to become a ceo of a billion $ co.the bod will always protect their seats at the table.very easy to become an ex shareholder.day traders dont do much for the economy.buy low,hold & collect dividends or use drips.it worked great for me.2008 was a bonanza for me.example-i bought GE @ $7.61 along with other great cos @ really great prices.
295star profile picture
Article says it all. And I agree Ballmer an intelligent guy to a point. And bottom line is that I as an investor want to make a profit and it just is not happening with this stock. And the dividend is somewhat nice, but still not what MSFT could/should be.
anil92691 profile picture
The jest of the article is that Ballmer should leave because there are other intelligent people waiting in line. Understood.

Ballmer as a CEO makes decisions or maybe sometimes just provides a budget for ideas from the geniuses in waiting. It would have helped if the article provided information on the geniuses in waiting that were part of the team that succeeded or failed.

As I see it. Microsoft was hurt badly due to the dot.com bust. Billions of dollars of investments just vanished. And we did not have blogs and today's internet to discuss that. We did have companies that vanished or nearly vanished to discuss. This period weighed onto Microsoft and still does today because the person who bought stock at 58, will never come back. Was this era that of Ballmer or Gates?

As the CEO, Ballmer has done what a CEO does, grows revenues, profits, dividends and value of the company. Not value market cap, that is done by the shareholder.

Replacing Ballmer is a challenge. Who next? And what if that person will not raise the stock price.

I am sure Ballmer knows better, but I would buy all the Microsoft stock with the cash Microsoft has. This will get rid of the shareholders who don't want to be long term shareholders.
chanella profile picture
I agreed with everything you say in this article. You are more lucky than me because you just bought MSFT shares. I bought MSFT for my son future education at $34 when my son was in highschool. My son now in grad school and MSFT at $28. So much for investing for college. I could not wait for MSFT to be back to $34 to get out. It hurts to sell at loss after over a decade. So, not only I understand everything you say. I FEEL it.
Doesn't Bill Gates own mega-million shares of MSFT, and isn't BG on the board and aren't BG and SB buddy-buddies.....some... smells!
Matthew Dow profile picture
Gates actually only owns about 5% of the company now I read the other day.... so still a lot of course, but nothing like he used to.
Matthew, Bill owns billions of dollars worth of Microsoft shares.
let's face it, Steve B is not going anywhere unless it is a basketball game.

as for Nokia Lumina phone, it is better than the iPhone....it is heavier, I can use it as a weapon as well.

to the board of directors of MSFT, you guys are a bunch of idiots not recognizing the problems listed here and do something about it....a bunch of ass kissers....
Jon sings profile picture
Your letter really slammed the nail on the head. You know, sometime stepping down is harder than stepping up and I truly believe Mr Balmer should consider the first action. As and aside, I really believe the Nokia Lumia series phones are going to be a big hit and if Microsoft does not screw up the relationships with Nokia I feel good things will come of this product. My wife bought a Lumia 822 recently and I have had an Apple 4S for almost 2 years. I have used them both for the last several months and I want to tell you that, in my opinion, Lumia is right up there with the Apple and in some areas ahead of the Apple. That's my opinion and thanks again for you great article.
This is simply a post where the writer is ignoring the real world and exploiting history by leaving out the major events.

Yes Steve has made massive mistakes, but many of the points are simply BS.

MS has a long history of working with young companies, but perhaps the OP got left out and is bitter.

MS did not grow ie6 , because the history with the EU. far too long to explain here, but those of us who understand what happened; also understand MSFT would not exist today if ie 6 was not left to rot on the vine. But I really doubt the OP gets this.

As to Steve leaving after win8, many would say "thank god", he was driving away the best people and crushing those who fought back.
Sure he improve structure but at what cost, many of the best people simply left rather than be beaten up day after day.

Steve B, is not the best CEO. He completely ducked up on mobile and should be replaced. But the OP is just grinding an axe and looking for clicks. Much of the post is just junk echoed and losing meaning as it bounces around the interwebs...

Frightening to see so many poorly informed punters think this is a great post, but I suppose if you keep hearing the same BS sooner or later you believe it.

Me? I am long GOOG NOK MSFT and have every reason to see Steve b replaced but this story goes too far in painting Steve as an ass, where as in fact the roots of the issue can be found with Bill Gates, he was the butthead who could not swallow his pride and made MS the whipping boy of the world.
But hell that does not make good press what with Bill also being the man who has done more to redistribute the west's wealth than any man before him.
GREAT article! The Board of Microsoft should read this along with all the big wigs at MSFT. Clearly laid out. It's a shame that such a wonderful company can't reach it's potential due to Ballmer and his poor decisions.
What could possibly be the correlation between a person's ability to score 800 on the SAT math test and that same person's ability to run a company?

You may recall the movie "Rainman" and the protagonist's mathematical capabilities vis-a-vis his ability to dress himself upon awakening. Then, perhaps you'll agree to the questionable nature of your implied correlation.

The Rainman was incapable of formulating an original thought. The protagonist of your article similarly has failed to demonstrate this capability; I would suggest that therein lies the problem.
garuda11 profile picture
Literally what every Microsoft ex-admirer and ex-stock owner wanted to say for this long! You should forward this to the execs at msft and ask them not to ruin, what was once upon a time a great company.
Microsoft has been utterly inept at everything it has done for the past 15 years. I can't think of anything that's come out of Microsoft that wasn't a complete abortion. Whilst there remains some love for the Xbox, this was just because Microsoft threw ungodly amounts of cash at it and managed to buy itself some market share through its' shear ability to burn more cash than the competition. (Personally, I dislike the Xbox too).

Is there anything Microsoft does well? Will it ever? It's despised by the IT crowd and if it wasn't for its ability to abuse its total monopoly on the desktop it would have been dumped in a heart beat and very quickly forgotten about in popular culture. It's not Google, it's not Apple.

Microsoft is a dinosaur. Scratch that. It's a zombie, and will stumble about from market to market over the next decade burning its' piles of cash until somebody finally puts a bullet in it.
And nothing of value was lost..
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