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May 31, 2006

Ballmer offers cold comfort to Microsoft investors

Posted by David Hunter at 1:56 PM ET.

Microsoft CEO Steve Ballmer’s excellent adventure on Wall Street got off to a predictable start today. Daisuke Wakabayashi at Reuters:

Under pressure from Microsoft Corp. investors to return a portion of the company’s $35 billion cash reserve and revive a flagging share price, Chief Executive Steve Ballmer on Wednesday defended the company’s “first-class problem” of having too much cash.

Ballmer, speaking to investors at the Sanford C. Bernstein Strategic Decisions conference, said Microsoft prefers to have the cash on hand in order to take risks on new technology and other things important to the company’s operations.

“It is likely I will continue to have to discuss with you for many years why we have as much cash as we do,” Ballmer said on a Web cast. “At the same time, I think it’s fair to say we want to return cash to shareholders.”

While he didn’t break out Microsoft’s wallet, he did remind the audience of past largesse:

Ballmer noted that Microsoft has returned $87 billion in cash to shareholders since June 30, 2001, but said he understands shareholder wishes to see more of the company’s cash through dividends and share buybacks.

Microsoft began paying a yearly dividend to shareholders in 2003 for the first time since it went public in 1986, and in 2004 paid out $32 billion in a special dividend of $3 a share.

“At the end of the day, the cash belongs to the investors. We are not going to blow that. We are not going to screw around with that,” Ballmer said in a rare appearance at an investor conference.

I believe that is the equivalent of “all our bets pay off,” but then Mr. Ballmer is always exuberant.

Practically, it’s once again the argument of whether Microsoft is a growth stock or a value stock. Management says “growth” and investors are saying “value.” Since the chances of the investors replacing top management are low, the disconnect between the two likely implies that the share price will continue to languish. In the long run, we’ll get to see who’s right.

Disclaimer: If you somehow view any of the above as investment advice, you shouldn’t.

Update 6/14: I just discovered Mitch Ratcliffe’s interesting analysis of the whole Ballmer gestalt which is indicative of the credibility problems that Microsoft executive management is currently facing with investors.

Filed under Executives, Financial, General Business, Investor Relations, Microsoft, Steve Ballmer

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2 Responses to “Ballmer offers cold comfort to Microsoft investors”

  1. Ballmer’s take on Google’s Dell deal -- Microsoft News Tracker Says:

    [...] Todd Bishop spots a Steve Ballmer response at yesterday’s Sanford C. Bernstein investment conference that confirms my take on Google’s Dell deal: “The cost of online customer acquisition is going up. I think I had a little footnote there. And everybody has got to decide at what level they want to pay–play, pay to play. So that was–bravo. … “This is a case where you could say we decided that the return to our shareholders was not there in the business deal that could be done.” It may be a seller’s market in eyeballs, but the buyers needn’t go nuts. Filed under Executives, Coopetition, Steve Ballmer, Google, Dell, Microsoft   [Permalink] [...]

  2. Microsoft beats the street; announces share buyback -- Microsoft News Tracker Says:

    [...] The company also announced a plan to buy back $20 billion worth of shares by Aug. 17 and authorized the purchase of $20 billion more through June 2011. … Microsoft reported sales of $11.8 billion, a 16 percent increase over the year-ago quarter; analysts expected $11.6 billion. Microsoft expects much the same income in the current quarter on lower revenues. Press release is here. As far as the share buyback goes, I guess that despite all indications, Steve Ballmer really was listening to the grumpy investors although the buyback isn’t as big as some of them wanted. Filed under General Business, Financial, Investor Relations, Microsoft   [Permalink] [...]

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