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Summary:

Nomura Group analyst Rick Sherlund sees rising shareholder activism — led by Value Act — ahead for the software giant, which continues to struggle in its new device business.

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Dell isn’t the only major PC-era power likely to face increasing pressure from activist shareholders. Microsoft —  which just wrote down $900 million for its new devices business — is likely to be hearing more and more from dissatisfied shareholders as well, according to Nomura Group analyst Rick Sherlund, a long-time Microsoft watcher.

Sherlund’s longer-range thesis is that Microsoft’s recent reorg ain’t fixing what ails the company. In his research note, Sherlund wrote:

“The recent reorganization does not fix the tablet or smartphone problem, it may help focus better on new opportunities and on transitioning to the services and devices market, but yikes, the devices opportunity just received a $900 million hardware write-off for Surface RT and investors may not even like the idea of wading deeper into this territory and the services business just put a damper on near-term growth in an already sluggish market.”

Speculation about shareholder irritation centers on Value Act, which took a $2 billion stake in Microsoft this spring.

Sherlund posits that Value Act may seek a seat on Microsoft’s board and try to convince independent directors that shareholders want to see change. Value Act holds a 1 percent position — it’s probably the 17th largest shareholder — so alone it doesn’t have enough sway, but Sherlund believes it is talking to other shareholders and former Microsoft executives in preparation for seeking a seat at the table.

Reaction to the latest reorganization, which puts the company’s products into four engineering buckets, is that it does little to dilute the grip CEO Steve Ballmer has on the company and it is that control that irks some of these shareholders.

  1. BenjaminGilead Friday, July 19, 2013

    Steve Ballmer has to go.

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  2. Basically I don’t think these shareholder groups will get much say other than people like Bill Gates humoring them. Bill and others just own way too much stock to be affected by these activist groups.

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    1. James McRitchie Sunday, July 28, 2013

      9% isn’t a controlling interest.

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  3. Dave Roberts Sunday, July 21, 2013

    The baton has passed. Microsoft is not a technology leader. What they should do to maximize shareholder value is slow the pace of development of Windows and Office–stop changing them just to change them–and harvest the benefits of their monopoly. That’s enough to provide huge profits on slimmed-down costs. And drop all of the me-too efforts to follow others, such as the phone and the tablet. You can’t be a success if there are already two innovative titans who already own the market.

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  4. Cody Skidmore Wednesday, July 24, 2013

    On July 1st, Microsoft abruptly closed their TechNet program. This enraged corporate IT professionals, consultants, and developers. The community’s reaction is documented here and elsewhere.

    http://chn.ge/16uLiRA

    Enterprise services are one of the few bright spots on Microsoft’s recent financials. Under the circumstances, alienating Microsoft’s strongest advocates is ludicrous.

    We expect to reach 10,000 signatures soon. We believe this event is largely unknown outside the IT Professionals community. We are raising awareness of the cooling effect this has on Microsoft’s relationship with the corporate IT community.

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  5. James McRitchie Sunday, July 28, 2013

    Looks like the deadline to submit a proposal was 6/18/2013. I’d be happy to work with others on proposals to be submitted in June 2014. Let’s compare notes. Find me over on Sharegate.com at https://www.sharegate.com/forums/view_thread/?thread_id=964

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