ValueAct Hedge Fund Takes $2 Billion Stake in Microsoft: Report
Microsoft may soon be facing renewed pressure to deliver its Office productivity suite on competing platforms like Apple's iOS and Google's Android mobile operating systems.
Describing ValueAct Capital as an "activist investor," Reuters reported on April 22 that the hedge fund's CEO, Jeffrey Ubben, disclosed that his firm had taken a $2 billion stake in Microsoft. Shares in the software company shot up 4.8 percent to $31.18 following the news.
Shares in Microsoft (NASDAQ: MSFT) are trading at $30.60 as of this writing.
Statements made by Ubben offer clues on where he expects to derive increased value from his investment, particularly in light of the continued plunge in PC sales.
"Ubben said at the conference that the firm will not do any public campaigning to affect Microsoft's strategy. But he did say that the world's largest software company should make Office, its most profitable product, more widely available outside of Windows," reported Reuters.
Ubben also appears to have its eyes on Microsoft's enterprise product lines. "At the investor conference in New York on Monday, Mr. Ubben said investors have unappreciated parts of Microsoft, particularly the back-end corporate software it sells to power computer servers and number-crunching databases," wrote The Wall Street Journal's Emily Glazer and Shira Ovide.
Currently, questions remain about how much change, if any, ValueAct can effect at Microsoft.
Reuters noted, "At Friday's closing price of $29.77, a $2 billion stake would represent about 67.2 million Microsoft shares. That represents less than 1 percent of Microsoft but would be enough to make ValueAct a top-15 investor in the company, based on Thomson Reuters data."
By comparison, Microsoft chairman and co-founder Bill Gates, owns 5 percent of the company, and CEO Steve Ballmer is sitting on 4 percent.
Microsoft has faced criticism in recent months for not releasing Office apps for iOS and Android.
According to Morgan Stanley analyst Adam Holt, the company is failing to jump on a billion dollar opportunity by ignoring Apple's iPad. By his estimates, Microsoft is losing out on $2.5 billion a year by not publishing native Office apps for iOS.
Redmond's mobile- and cloud-friendly Office 365 product does little to remedy the situation, added Holt.
Office 365 "is currently not available for use on iOS or Android-based devices" wrote Holt in a research note. Users want a native, purpose-built Office experience on their tablets. "In our recent survey work, over 60 percent of respondents suggested Office was the most important feature to consider for a tablet, and there is clearly demand for Office on the iPad," he continued.
Microsoft has long been rumored to have iOS and Android versions of Office in the works.
References briefly to such products appeared on Microsoft's French support site. Remarks made by Petr Bobek, product manager for its Czech subsidiary, also offered clues but were quickly dismissed by Microsoft as inaccurate.