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Brier Dudley offers a critical look at technology and business issues affecting the Northwest.

October 2, 2013 at 3:28 PM

Surprise, surprise: 7 percent of big Microsoft investors are testy

It sounds pretty exciting when you hear that big investors are trying to force Bill Gates off Microsoft’s board, so they can really shake things up in Redmond.

Exciting enough that Microsoft’s stock rose 33 cents on a day when stocks in general were falling.

Rattling the cage made some folks a little richer, but don’t count on Gates being shoved out anytime soon.

Which is just as well, because Gates may be the strongest voice left on the board for preserving the complicated and profitable web of software businesses that Microsoft has woven over the years. Pulling out a few choice strands may generate quick returns and a nice midsize software company or two but it will reduce the overall company’s strength and reach.

Reuters broke the story that three of Microsoft’s top 20 investors want Gates to step aside because they think he’s holding up big changes at the company.

The report said the three hold “more than” 5 percent of the company’s stock, which means they probably hold less than 6 percent, or they would have used a bigger number. Five percent is the key threshold since Gates holds 4.5 percent; it suggests this alliance has more clout than the co-founder.

Reuters didn’t name its sources, and abided by their request to keep the three cranky investors anonymous.

If there’s a surprise here, it’s that such a tiny fraction of Microsoft’s institutional shareholders are frustrated enough to call for a new chairman.

Perhaps the rest of the big shareholders are satisfied by the huge steps Microsoft took in recent months to ease their concerns.

First the focal point of shareholder angst, Chief Executive Steve Ballmer, announced his retirement. Then the company responded to criticism that it’s weak in mobile devices by acquiring one of the world’s largest phone producers at what looks like a bargain price. Then it pledged to return $40 billion to shareholders through stock buybacks.

Apparently that wasn’t enough.

There are 1,917 institutional investors holding 69 percent of Microsoft’s outstanding stock, according to Nasdaq.

Three of them — representing about 7 percent of the institutional holdings — want Gates gone, presumably so they can break the company apart.

Perhaps that’s ultimately the best course for Microsoft. There’s widespread frustration with Microsoft’s weak stock performance over the past decade, although that’s a partial and flawed measure of the company’s overall success and contributions to the world.

But first we need to hear from the investors trying to pull the strings here. The thousands of other Microsoft investors — and the billion people who rely on Microsoft products — would like to hear their plans to continue growing the company for another 40 years.

Perhaps it’s also time to hear from Gates and his supporters. Has he grown complacent or not?

Meanwhile the Microsoft story — on Wall Street, at least — is being shaped by a few self-interested investors whose motives are questionable, especially if they’re just throwing rocks from the shadows.

Microsoft has its annual shareholder meeting in November. I say it’s time to air things out and have a show of hands.



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