MSFTextrememakeover

Wednesday, June 13, 2007

Where is the MSFT/Ballmer outrage?

Like a lot of folks, I've been watching the evolving shareholder unrest at YHOO. In case you missed it, shareholders there are unhappy with the company and its CEO Terry Semel. In fact, they've been making that increasingly clear of late, including at a shareholder meeting today. See sample coverage below:

So what are the specific complaints? Well, the list includes poor stock performance, unclear company direction, poor CEO leadership, lavish executive compensation, etc. Hmm...sound familiar?

Reviewing the record of stock performance, certainly YHOO has not had a good time of things over the past year:

Or even over the past 3 years:

However, Semel took over as CEO in May of 2001. So let's see how he's done since then:

I don't know about you, but a greater than 160% gain for YHOO vs an almost 20% loss for MSFT looks pretty decent to me.

In the area of company direction, it is legitimate to question how badly YHOO has done versus GOOG. While YHOO still holds a position that MSFT can only dream of (despite spending more than twice as much on a relative basis in order to achieve), they've clearly failed to check the progress and otherwise keep up with GOOG - and they were in that business already. But of course, MSFT's failures in this and other businesses during the same time are legend. In fact, read this latest piece on the continuing screw-up known as Xbox, which includes this astounding admission from Peter Moore, head of Microsoft's interactive entertainment business division:

If we don't make that move, make it early and expand our demographic, we will wind up in the same place as with Xbox 1, a solid business with 25 million people. What I need is a solid business with 90 million people.

Unfreakinbelievable.

Now, in the area of compensation, Semel got paid a ton - $107.5M is one estimate for last year. Ballmer, by contrast, gets paid a rather nominal amount. But again, looking at the company overall (including the Xbox dream-team above), MSFT's executive compensation doesn't take a back seat to many people - YHOO included.

So what gives? Why are YHOO shareholders rebelling vocally and calling for a new CEO, while MSFT shareholders, who have experienced far worse returns over the tenure of the current CEO, continue to just meekly grin and bear it? Is it that MSFT shareholders somehow feel the worst is over and the company is now on the right track, whereas YHOO shareholders don't? Or have YHOO shareholders just not completely given up and settled for abysmal stock performance and sloppy leadership/execution yet?

Update: Blodget on the YHOO situation:

Update #2: Latest console sales stats:

Update #3: Semel is out as CEO:

YHOO, which was already up 3% on the regular session today, is up another 4.3% in AH on this announcement.

posted by MSFTextrememakeover at 3:54 PM

6 Comments:

  • Plain and simple it's because of Bill Gates. Not only is he a major shareholder (which has some bearing), but shareholders still have a fond place in their heart for a geeky college dropout who made himself (and many others) very rich. And now he continues to give back in philanthropy. That entire package, makes the bulk of the shareholders that would start to bellyache think twice (and thrice...loop)

    By Anonymous Anonymous, at 10:48 PM  

  • someone needs to have the balls to stand up at either the next town hall or the next shareholders meeting and demand that Ballmer step down. His time is up and its only his friendship with Gates that sees him continue in his position.

    MS is on a very slipperly slope, it needs a true leader to take control. Shoe salesmen with sweaty armpits can only motivate the troops for so long before they are found out for what they really are....just a shoe salesman.

    By Anonymous Anonymous, at 3:08 PM  

  • Hard to see in the charts, but does the performance shown include dividends? In fairness, "return" on a stock consists of both dividends and price appreciation. Not defending MS management, to be sure, but is only fair to look at their performance vs. peers consistently.

    By Anonymous Anonymous, at 5:12 PM  

  • "Hard to see in the charts, but does the performance shown include dividends?"

    Sorry, I know they're blurry and small (haven't found a better solution to resolve that yet). No, the compare doesn't include dividends (msn investor doesn't have that direct chart option but that's what those tiny red boxes you can barely see on the MSFT line denote). That said, YHOO doesn't pay dividends so their performance would be unchanged. MSFT does (obviously) and if you included all those plus the $3 one-time (which skews it significantly), you would be roughly flat over that period. So the final result would be YHOO up ~160% and MSFT flat at ~0% (vs down ~20%).

    By Blogger MSFTextrememakeover, at 5:51 PM  

  • Undoubtedly will not make a difference, but you should make sure that you're comparing apples/apples--you should be looking at Total Shareholder Return (TSR)--that matters more than just stock price. When comparing a company that issues dividends vs. one that doesn't, the one that does is wrongly penalized. It can be tricky to calculate though, as share counts change.

    By Anonymous Anonymous, at 10:25 PM  

  • I'm not all the concerned, but then again I picked up all my MSFT stock when it was sitting at the $22 mark :)

    One thing that worries me though as a stockholder is that a lot of companies turn even *more* stagnate when they become simply a "for shareholder rewards" type of organization. You get leaders in with only the idea of turning around the stock prices and they'll do it at the expense of anything innovative. I've seen it before and it looks great in the short term but it's more like a sugar high, great for a few years then it comes crashing down often worse than before.

    MSFT seems to be caught between a Google and Apple style of management. Do you go all peace and love and 20% dev time a la Google or do you go totally sociopath crazy like Steve Jobs? Either way can work but I don't think both at one time. Either a new leader needs to come in and destory all the micro-fiefdoms that every department has created or they need to be left unhampered to sink or swim in their own nutshell.

    By Blogger Shawn Oster, at 5:20 PM  

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