Microsoft investors push for chairman Gates to step down
Exclusive: Microsoft investors push for chairman Gates to
step down
By Nadia Damouni and Bill Rigby
NEW YORK/SEATTLE | Tue Oct 1, 2013 9:11pm EDT
(Reuters) - Three of the top 20 investors in Microsoft
Corp are lobbying the board to press for Bill Gates to step down as chairman of
the software company he co-founded 38 years ago, according to people familiar
with matter.
While Microsoft Chief Executive Steve Ballmer has been
under pressure for years to improve the company's performance and share price,
this appears to be the first time that major shareholders are taking aim at
Gates, who remains one of the most respected and influential figures in
technology.
A representative for Microsoft declined to comment on
Tuesday.
There is no indication that Microsoft's board would heed
the wishes of the three investors, who collectively hold more than 5 percent of
the company's stock, according to the sources. They requested the identity of
the investors be kept anonymous because the discussions were private.
Gates owns about 4.5 percent of the $277 billion company
and is its largest individual shareholder.
The three investors are concerned that Gates' role as
chairman effectively blocks the adoption of new strategies and would limit the
power of a new chief executive to make substantial changes. In particular, they
point to Gates' role on the special committee searching for Ballmer's
successor.
They are also worried that Gates - who spends most of his
time on his philanthropic foundation - wields power out of proportion to his
declining shareholding.
Gates, who owned 49 percent of Microsoft before it went
public in 1986, sells about 80 million Microsoft shares a year under a pre-set
plan, which if continued would leave him with no financial stake in the company
by 2018.
He lowered his profile at Microsoft after he handed the
CEO role to Ballmer in 2000, giving up his day-to-day work there in 2008 to
focus on the $38 billion Bill & Melinda Gates Foundation.
In August, Ballmer said he would retire within 12 months,
amid pressure from activist fund manager ValueAct Capital Management.
Microsoft is now looking for a new CEO, though its board
has said Ballmer's strategy will go forward. He has focused on making devices,
such as the Surface tablet and Xbox gaming console, and turning key software
into services provided over the Internet. Some investors say that a new chief
should not be bound by that strategy.
News that some investors were pushing for Gates' ouster
as chairman provoked mixed reactions from other shareholders.
"This is long overdue," said Todd Lowenstein, a
portfolio manager at HighMark Capital Management, which owns Microsoft shares.
"Replacing the old guard with some fresh eyes can provide the oxygen
needed to properly evaluate their corporate strategy."
Kim Caughey Forrest, senior analyst at Fort Pitt Capital
Group, suggested now was not the time for Microsoft to ditch Gates, and that he
could even play a larger role.
"I've thought that the company has been missing a
technology visionary," she said. "Bill (Gates) would fit the
bill."
Microsoft is still one of the world's most valuable
technology companies, making a net profit of $22 billion last fiscal year. But
its core Windows computing operating system, and to a lesser extent the Office
software suite, are under pressure from the decline in personal computers as
smartphones and tablets grow more popular.
Shares of Microsoft have been essentially static for a
decade, and the company has lost ground to Apple Inc and Google Inc in the move
toward mobile computing.
One of the sources said Gates was one of the technology
industry's greatest pioneers, but the investors felt he was more effective as
chief executive than as chairman.
(Editing by Stephen Coates)
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