14 DAY TRIAL // ValueAct, the company that spent no less than $2 billion (€1.5 billion) to take over a 1 percent stake in Microsoft back in April, is pushing for some big changes within the Redmond-based company, a top Microsoft analyst says.
ValueAct is still pursuing a seat in the company’s board of directors, a report by BizJournals claims, with Nomura analyst Rick Sherlund indicating that more important changes are likely to take place soon.
Sherlund, who recently upgraded Microsoft’s stock to a “buy” rating, wrote in a note that ValueAct is very likely to receive the support of other shareholders when it tries to get a seat in the board, especially because the investment group is not the only one that wants to get rid of Steve Ballmer.
According to the analyst, ValueAct might look to replace the company’s CEO because his strategy “inspires little confidence,” but no other name that could take over his position has been provided.
At this point, the company’s administration seems to have no other choice than to give ValueAct a board seat, as the investment firm might otherwise launch a public war on Steve Ballmer and Microsoft that would in the end have much more serious consequences.
On the other hand, if ValueAct gets the board seat, Sherlund writes, everything happens behind the closed doors.
“A decision by the board at Microsoft to offer a nomination for a board seat could keep the activist agenda behind closed doors and take longer for shareholders to see potential benefits,” Sherlund wrote.
In addition to letting Steve Ballmer go, ValueAct might also try to get rid of the Xbox division, as the new shareholder believes that Microsoft would do better without it. Selling it to another tech company would allow Microsoft to focus on its key products, including Windows, the analyst explained.
“Xbox is cool, but by our estimates Microsoft has not made money at this,” Sherlund concluded.