Influential hedge fund manager David Einhorn has called for Microsoft Corp chief executive Steve Ballmer to step down, saying the world’s largest software company’s leader is stuck in the past.
“His continued presence is the biggest overhang on Microsoft’s stock,” Einhorn said in reference to Ballmer.
The comments by outspoken Einhorn, who made his name warning about Lehman Brothers’ financial health before the investment bank’s collapse, are the most pointed yet from a high-profile investor against Microsoft’s leadership.
Microsoft shares, which have been static for more than a decade, gained 0.87 percent in after-hours trading after Einhorn’s comments, the most of any Dow Jones industrial average component.
The software giant, which was the largest US company by market value in the late 1990s, has since been overtaken by Apple Inc and IBM in market value, and is no longer seen as a dominating force in technology after a failure to capitalize on new Internet and mobile computing markets.
Speaking at the annual Ira Sohn Investment Research Conference in New York on Wednesday, Einhorn said it was time for Ballmer — who succeeded cofounder Bill Gates in 2000 — to step aside and “give someone else a chance.”
A Microsoft spokesman declined comment on Einhorn’s remarks.
Einhorn’s Greenlight Capital hedge fund has been a recent buyer of Microsoft stock, which at under 10 times expected earnings is regarded by many as undervalued. Greenlight held about 9 million shares in Microsoft, or 0.11 percent of the company’s outstanding shares, at the end of the first quarter, according to Thomson Reuters data.
Einhorn also said it was time for Microsoft to consider strategic alternatives for its money-losing online business, which has so far failed to win share from online search leader Google Inc.
The online services unit, which runs the Bing search engine and MSN web portal, had a loss of US$726 million last quarter and has now lost US$7 billion in four years.
Bing has made some progress, raising its US Internet search market share to 14 percent from 8 percent in the two years since launch, but has not taken any share from Google, which has held on to its 65 percent share, according to research firm comScore.
Einhorn declined to comment further.
Separately, Baidu Inc (百度), owner of China’s most popular search engine, said it might expand its partnership with Microsoft as it steps up plans to offer services outside its home market.
Baidu “won’t rule out” further collaboration with Microsoft, with which it has an existing agreement on the Bing search engine in China, Shen Haoyu (沈浩宇), senior vice president at the Chinese company, said in an interview in Beijing yesterday. He declined to elaborate.
Working with Microsoft may help Baidu speed up its overseas expansion after the Beijing-based company overcame competition from Google to dominate the industry in China. Baidu is developing products in 12 foreign languages, said Shen, who declined to say when they would be rolled out.
Google accounted for 19.2 percent of China’s search market by revenue in the first quarter, declining from 19.6 percent three months earlier, according to research company Analysys International.
Baidu’s market share rose to 75.8 percent from 75.5 percent, while Microsoft Bing has less than 1 percent market share, according to Analysys.