Microsoft: Promise Has Become A Problem

Bill Maurer profile picture
Bill Maurer

On the morning of Friday, August 23rd, 2013, Microsoft (NASDAQ:MSFT) investors were pleasantly surprised that shares of the technology giant were spiking. CEO Steve Ballmer announced he was retiring. Microsoft shares had just started to recover from the July 2013 fall after the company's dismal earnings report. That Friday, shares jumped more than $2 a share, gains that were somewhat lost when the deal with Nokia (NOK) was announced. But the announcement that Ballmer was stepping aside brought hope to shareholders, and Microsoft stock which bottomed out just under $31 nearly touched $39 in early December. When Microsoft got to those high $30s, I was one who advocated shorting the stock due to valuation, but I told investors to not be too greedy as shares have come back down. On Thursday, Microsoft shares closed at $35.53, down more than $3 from the early December high. Why are shares falling so quickly? Today, I'll detail why Microsoft's short-term promise has turned into a problem for the company, and why a new short theory is in play here.

The CEO debate rages on:

Everyone wants to know who will be the next leader of Microsoft. Initially, when Ballmer announced his retirement, most were hoping a decision would be made in late 2013. However, search committee chief John Thompson has stated that Microsoft expects to finish the process in early 2014. The problem, as the link above suggests, is that a few candidates seem to be concerned about Ballmer and Bill Gates' roles going forward. Some candidates are wondering how Ballmer would react if they were to embrace a strategy different from that of Ballmer.

Microsoft shares continued to decline this week when Ford (F) CEO Alan Mulally stated that he was not leaving Ford for Microsoft. Some have suggested that the

This article was written by

Bill Maurer profile picture
I am a market enthusiast and part-time trader. I started writing for Seeking Alpha in 2011, and it has been a tremendous opportunity and learning experience. I have been interested in the markets since elementary school, and hope to pursue a career in the investment management industry. I have been active in the markets for several years, and am primarily focused on long/short equities. I hold a Bachelor of Science Degree from Lehigh University, where I double majored in Finance and Accounting, with a minor in History. My major track focused on Investments and Financial Analysis. While at Lehigh, I was the Head Portfolio Manager of the Investment Management Group, a student group that manages three portfolios, one long/short and two long only. I have had two internships, one a summer internship at a large bank, and another helping to manage the Lehigh University Endowment for nearly a year. Disclaimer: Bill reminds investors to always do their own due diligence on any investment, and to consult their own financial adviser or representative when necessary. Any material provided is intended as general information only, and should not be considered or relied upon as a formal investment recommendation.

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