2The Old Guard Is On the Way Out
When Microsoft lost Ray Ozzie and after Ballmer announced he’d be moving on, something became immediately clear in Redmond: The Old Guard is on its way out. Through attrition, retirements or simply old age, quite a few of Microsoft’s most important people over the years have moved on. Now a few shareholders want to push Gates out of the company he founded 38 years ago.
3Gates Is No Longer Viewed as the Driving Force Behind Microsoft
There was a time when the very idea of Bill Gates being sent away from Microsoft was anathema to the company’s customers and shareholders. For many years there were few business and technology initiatives at the company that he wasn’t directly involved with. That’s no longer true since he stepped down as CEO and became chairman. He is seen as less indispensible now, and that makes him a target for activist shareholders.
4Activist Shareholders Are Looking for a Big Payday
Make no mistake, the three shareholders calling for Gates’ ouster are looking to maximize their own shareholder value, not necessarily looking to make great changes in Microsoft’s management or operations. It’s quite possible they are challenging Gates, hoping that the company will somehow pay them off by spending some of its cash hoard in special dividends or other financial concessions. It’s called “greenmail.”
5Major Structural Moves Might Be Next
Over the last several years, as Microsoft has remained highly profitable, its growth has slowed and it various divisions have reported uneven performance. This has led to calls for a structural change at the company. Many of those calls have suggested that Microsoft split up its operation to unlock value in its Office and Entertainment divisions and offload some of the poorly performing assets. Gates has been against such moves. It’s possible that the activist shareholders, in their desire to pad their wallets, want a new chairman who might be more amenable to their ideas about spinning off divisions and finding other major solutions to their issues.
6He’s Too Close to Ballmer
Gates and Ballmer have been the two top men at Microsoft for many years. They have worked together for 33 years. And Gates has supported the company’s product strategies and business moves since Ballmer became CEO in 2000. It makes sense that shareholders who wanted to see Ballmer retire are now saying it’s time for Gates to step down so new management can take over.
7Gates’ CEO Pick Might Not Be a Good One
It’s certainly possible that activist shareholders want a stronger say in who the next CEO will be or are arguing that any CEO accepted by Gates will only continue discredited business strategies rather than going in bold new directions. Given the company’s lackluster performance and his long support for Ballmer, Gates’ vote on a new CEO choice might be viewed as a liability by the shareholders, who have yet to be publicly identified.
8This Kind of Investor Gambit Happens All the Time
This end run on the part of the unidentified shareholders happens fairly frequently. Shareholder pressure, particularly from Carl Icahn, is the main reason Michael Dell took his company private so he could retain control of it. Icahn also had a major role in pushing for management changes at Yahoo. Now it looks like it’s Microsoft’s turn. It will be interesting to see how Gates responds.
9Gates’ Contributions Are Declining
Although it’s been more than a decade since Bill Gates has been CEO at Microsoft, during that time he certainly had plenty to say about Microsoft’s management and strategic direction. More recently, however, he’s focused on his charitable efforts and stayed out of the way of Ballmer and his executive team. If he’s already halfway out the door, why shouldn’t shareholders help him get all the way out?
10Microsoft Hasn’t Found a Way to Counter Google
Google is eating Microsoft’s lunch each and every day in the mobile market and increasingly in applications. So far, a Microsoft headed by Gates and Ballmer hasn’t demonstrated that it can revitalize its business while keeping Google at bay. So it’s not surprising that a few top shareholders are looking for a leader who can focus the company on the goal of beating Google.
11It Makes Sense to Start With a Clean Slate
It may be time for a new generation to take over at the top of Microsoft, someone with more energy and innovative ideas. It’s clear that Gates wants to focus on his charitable activities. But if he wants to remain in management control of his company, he is going to have to fend off this shareholder challenge and show that he can help lead Microsoft in new directions. However, if he decides it’s time to cash out and retire, it would allow a new management team to take over without dealing with the looming presence of Microsoft’s legendary founder.