Forecast for Microsoft: Shareholder activism

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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.

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