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Microsoft's Destruction Of Shareholder Value

|About: Microsoft Corporation (MSFT), Includes: AAPL, GOOG

As a Microsoft Investor, you've experienced significant destruction in shareholder value. Microsoft used to be the dominant force in technology. Now, it just reacts to the market. In my opinion, it lacks "strategic" vision. For example, look at Microsoft's initial reaction to the Smartphone: the Kin.

Supposedly, the executive responsible for the development and roll-out of the Kin Smartphone now advises Steve Ballmer and Peter Klein on Corporate Development / Strategy. I'm not trying to disparage anyone, but if this is true, it looks like Microsoft needs better advice in Corporate Development / Strategy.

After the US and European governments prosecuted Microsoft for anti-competitive behavior in the late 1990s, I believe the company lost its strategic vision: "a Microsoft Operating System on every computing device." On the other hand, the government's anti-competitive prosecution had merit, because monopolies stunt human development at the end of the day. And free markets demand healthy competition.

As a result of the prosecution - and Bill Gates stepping aside - Microsoft has produced a significantly, risk-averse culture. In fact, it pervades the organization. So, as an investor, you have to question the value within Microsoft?

The anti-competitive complaint against Microsoft was filed by the U.S. Government on May 18, 1998. On 12/31/1999, Microsoft (NASDAQ:MSFT) had a market capitalization of approximately $601 billion. On 12/31/1999, Apple (NASDAQ:AAPL) had a market capitalization of $17 billion. Google (NASDAQ:GOOG) had a market capitalization of ZERO. Compare these values to the current market capitalizations: MSFT $265 billion, AAPL $380 billion and GOOG $269 billion.

In other words, Microsoft has lost $336 billion in market capitalization since 12/31/1999. But Apple has gained $363 billion in market capitalization. And Google has gained $269 billion. This illustrates a lost opportunity cost for Microsoft of approximately $968 billion. In my opinion, the main reason for this significant destruction of shareholder value in Microsoft: the organization lacks a clear, comprehensive, strategic vision, especially in Corporate Development.

Incredibly, Microsoft still possesses the most attractive assets within technology, including Apple and Google. Sadly, however, Microsoft hasn't recognized this value yet. As an investor, I have put together a Corporate Development / Strategy which significantly utilizes Microsoft's incredible capital: both intellectual and financial.

As an investor, I'm asking for help from other investors. I realize it might sound grandiose, but I'm only asking for an opportunity to present my Corporate Development / Strategy to Steve Ballmer and any other interested investor. It's a good plan, and I'm confident it'll create significant shareholder value for Microsoft.


Ken Copley

Capital Executive LLC

Disclosure: I am long MSFT, GOOG, INTC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.