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May 12, 2006

Microsoft shareholders are restless

Posted by David Hunter at 1:04 PM ET.

Some major investors feel that as long as Microsoft management is breaking into the piggy bank to fight Google, maybe they ought to help out the shareholders with a stock buyback too. Bloomberg News:

At least two significant shareholders are meeting with Microsoft officials to seek a stock repurchase of as much as $60 billion, to bolster both the price and per-share earnings.

“How can you have a CEO who is really indifferent to the price of the stock?” said Joseph Rosenberg, chief investment strategist at New York-based Loews Corp. “He has his head in the sand.” Rosenberg has managed money for the Tisch family, which controls Loews, for more than 30 years.

As Microsoft is nearing the end of a $30 billion buyback announced in 2004, Ballmer is spending in areas to help compete against Google Inc., owner of the world’s most-used search engine.

Rosenberg said he told Microsoft officials the company should use $30 billion of its cash to repurchase stock and take on debt for the first time, to the tune of $30 billion. He is seeking an immediate tender for about 2 billion shares.

The calls for a buyback exemplify the new pressures that Ballmer, 50, and Chairman Bill Gates face as they try to balance shareholder demands with a desire to fuel growth.

Microsoft’s declining share price during the past five years has attracted value investors, who seek companies with steady growth and returns from buybacks and dividends. After the stock’s 11 drop this year, they are growing impatient to get a return on their investment.

Microsoft needs to show it is acting to boost the stock and appease shareholders, said Heather Bellini at UBS AG in New York, who is ranked the No. 2 software analyst by Institutional Investor magazine.

“Previously, the problem was apathy on the stock,” she said. “Now the apathy has been replaced with anger.”

More commentary from insistent institutional investors by following the link.

Filed under Financial, General Business, Investor Relations, Microsoft

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2 Responses to “Microsoft shareholders are restless”

  1. Steve Ballmer does Wall Street -- Microsoft News Tracker Says:

    [...] Shares of Redmond, Washington-based Microsoft are trading near their lowest in 3 1/2 years. The stock is the third-worst performer in the Dow Jones Industrial Average in 2006. We’ve mentioned the desire for a buyback previously, and some suggestions from fund managers quoted in the article include Microsoft taking on $40 billion in debt for a $75 billion total buyback or using the yearly $15-17 billion free cash flow plus more for annual buybacks. That’ll certainly put a dent in even Microsoft’s piggy bank and would be an impediment to management’s desire to use the loot for capital expenditures and expenses in their self-declared Web war with Google et al. Here’s the net: “Microsoft isn’t a private company, and they need to worry about the stock price,’’ Holland said. “If Ballmer is dismissive of the idea, it’s a bad sign.’’ More details on the Ballmer agenda by following the link. Filed under Executives, Coopetition, Steve Ballmer, Google, General Business, Financial, Investor Relations, 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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