5 ms·

Note: I do not hold shares in any of the below companies. Apple and Google were in their heydays during this time period. If anyone is interested in seeing a r

by Spyro7 15y ago

Note: I do not hold shares in any of the below companies. Apple and Google were in their heydays during this time period. If anyone is interested in seeing a really interesting comparison then go to finance.google.com and do the following: 1. Look up MSFT 2. Click "All" for your zoom option, this should give you from 1986 to present 3. Add GOOG and AAPL using the compare box Now look at the chart. MSFT is up 25,019.04% since it was publicly listed. AAPL is up 11102.07% since it was publicly listed. GOOG is up 394% since it was publicly listed. If we want to truly assess Ballmer's performance as a CEO using stock performance as a metric then I strongly suggest we look at the past ten and five years of performance of Microsoft and compare it to similar tech companies. Offhand, I think that IBM and Oracle make suitable comparison points. Looking at the past ten years of performance, we can see that MSFT is down about 27%, while IBM is up 49% and ORCL is up 109%. Now we can more clearly see that Ballmer has more than likely missed some opportunities along the way. When you narrow to the last five years, the picture doesn't change. I agree with the author of the blog piece - Ballmer has proven to be a mediocre CEO of Microsoft. However, we need to make sensible comparisons to get the point across. Frankly, I don't understand how MSFT could sit on 40 billion dollars in cash and short term investments without increasing its dividend to something more in line with what one should expect from a mature cash-rich business. Increasing shareholder value should be the goal of all publicly listed companies. Purchasing Skype for $8.5 Billion dollars flies straight into the face of this - it is a crazy move. Any shareholders that are not screaming about this should wake and smell the sinking share price. Edited: Formatting in the step-by-step portion of this post was messed up initially...

ars 15y ago
Link for the lazy: http://www.google.com//finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=Logarithmic&chdeh=0&chfdeh=0&chdet=1305264708932&chddm=2541109&chls=IntervalBasedLine&cmpto=NASDAQ:GOOG;NASDAQ:AAPL&cmptdms=0;0&q=NASDAQ:MSFT&ntsp=0 http://www.google.com//finance?chdnp=1&chdd=1&chds=1...
amorphid 15y ago
MSFT was the overpriced darling of the Dotcom era. Ballmer inherited an insane valuation. Meanwhile, in the last ten years, net income has gone from under 8 billion to over 18 billion. This is not a failure and will eventually be reflected in the stick price. Source -- http://www.microsoft.com/presspass/inside_ms.mspx http://www.microsoft.com/presspass/inside_ms.mspx
- Spyro7 15y ago
  An insane valuation? At the start of January 2000, Microsoft's most recent earnings per share was $0.90. It's share price was about $58 dollars. This would have given it a P/E ratio of about 64x. This was relatively tame by dot com standards. MSFT's current P/E ratio is about 10x. Just looking at that number right there, most people would conclude that MSFT was a great value play. In my personal opinion it is indeed a great value play - but not so long as Ballmer is still calling the shots. If market prices were solely set based on income then you would be right; the price would eventually rise regardless of whether Ballmer remained at the helm or not. However, market prices are more complex than this. They also incorporate expectations for the future. It is here where MSFT's current problem is. If you look at the components of MSFT's cash flow their major income sources are the Windows Operating System and the MS Office Suite. It is unbelievable that either revenue source will suddenly evaporate. The problem is that both of MSFT's core business functions are under pressure. This pressure is coming from the decreasing dominance of the PC as the digital platform of choice and the increasing prevalence of Internet-based solutions to problems that were previously solved by offline software packages. While MSFT is currently conducting expansions into a large array of industries, it is unlikely to dominate these industries to the same degree that it currently dominates the desktop sphere. In all of the industries where MSFT is trying to expand its footprint it faces vigorous competition from fairly formidable competitors. Even in its core industries, challenges are appearing on the horizon. Here's just a really quick summary: 1. Video Gaming - Nintendo, Sony, Apple? (Perhaps for "casual" gamers only, but I am not well versed enough to know how serious of a contender Apple is as of yet) 2. Tablets/Mobile - Google, Apple, HP 3. Search/Advertising - Google (Look, this is a big enough fish, I don't even need to name anything else) 4. Operating Systems - Google (ChromOS in the distant? future, Android everywhere, tablets eating market share), Apple (tablet popularity may erode Windows market share) 5. Server & Server Tools - ORCL, Linux, IBM, etc, etc, etc 6. Microsoft Office - Nothing serious yet, but GOOG is salivating at a chance to chip away at this Market prices incorporate expectations for future growth as well as performance relative to peers. In the near term Microsoft is making buckets and buckets of solid cash. In the medium term, there are threats on the horizon that are looming large. In the long term, there is a great deal of uncertainty and this uncertainty is not made any better by strange moves like acquiring Skype for $8.5 billion. I have heard some people say that acquiring Skype was a defensive move. Look, defensive moves like that are the last ditch strategy of someone that knows they are losing. There were a billion strategies that could have been taken that would have yielded a better strategic position. What Microsoft needs is a visionary leader that can turn its buckets of cash into something that can carve out a substantial, permanent, and secure foothold on one of the fronts that they are fighting. That sounds cliche, but it is what they really need right now. Microsoft is a fantastic company with an amazing amount of talent in it. I actually believe that it has some incredible earnings potential, but unlocking this potential will take bold, aggressive moves - not expensive defensive posturing. It is not my intention to bash Microsoft. I have a lot of respect for the company. However, something obviously needs to change in response to the new challenges that they are facing. The status quo is no longer good enough. Sources: Edgar online for the year 2000 10-Q filing, yahoo finance for price in 2000, http://www.betanews.com/joewilcox/article/Microsoft-Q3-2011-by-the-numbers-Record-1643B-Windows-revenue-declines/1304021955 http://www.betanews.com/joewilcox/article/Microsoft-Q3-2011-... for revenue break down. I apologize in advance for any formatting strangeness in this post. In my defense - I am new here, and it is 1:31 am.
AlisdairO 15y ago
Fantastic post - thank you. I don't believe Ballmer is a good CEO, but directly comparing to Apple and Google is nutty. Your comparisons are much more relevant.

by Spyro7 15y ago

ars 15y ago

Link for the lazy: http://www.google.com//finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=Logarithmic&chdeh=0&chfdeh=0&chdet=1305264708932&chddm=2541109&chls=IntervalBasedLine&cmpto=NASDAQ:GOOG;NASDAQ:AAPL&cmptdms=0;0&q=NASDAQ:MSFT&ntsp=0 http://www.google.com//finance?chdnp=1&chdd=1&chds=1...

amorphid 15y ago

MSFT was the overpriced darling of the Dotcom era. Ballmer inherited an insane valuation. Meanwhile, in the last ten years, net income has gone from under 8 billion to over 18 billion. This is not a failure and will eventually be reflected in the stick price. Source -- http://www.microsoft.com/presspass/inside_ms.mspx http://www.microsoft.com/presspass/inside_ms.mspx

Spyro7 15y ago
An insane valuation? At the start of January 2000, Microsoft's most recent earnings per share was $0.90. It's share price was about $58 dollars. This would have given it a P/E ratio of about 64x. This was relatively tame by dot com standards. MSFT's current P/E ratio is about 10x. Just looking at that number right there, most people would conclude that MSFT was a great value play. In my personal opinion it is indeed a great value play - but not so long as Ballmer is still calling the shots. If market prices were solely set based on income then you would be right; the price would eventually rise regardless of whether Ballmer remained at the helm or not. However, market prices are more complex than this. They also incorporate expectations for the future. It is here where MSFT's current problem is. If you look at the components of MSFT's cash flow their major income sources are the Windows Operating System and the MS Office Suite. It is unbelievable that either revenue source will suddenly evaporate. The problem is that both of MSFT's core business functions are under pressure. This pressure is coming from the decreasing dominance of the PC as the digital platform of choice and the increasing prevalence of Internet-based solutions to problems that were previously solved by offline software packages. While MSFT is currently conducting expansions into a large array of industries, it is unlikely to dominate these industries to the same degree that it currently dominates the desktop sphere. In all of the industries where MSFT is trying to expand its footprint it faces vigorous competition from fairly formidable competitors. Even in its core industries, challenges are appearing on the horizon. Here's just a really quick summary: 1. Video Gaming - Nintendo, Sony, Apple? (Perhaps for "casual" gamers only, but I am not well versed enough to know how serious of a contender Apple is as of yet) 2. Tablets/Mobile - Google, Apple, HP 3. Search/Advertising - Google (Look, this is a big enough fish, I don't even need to name anything else) 4. Operating Systems - Google (ChromOS in the distant? future, Android everywhere, tablets eating market share), Apple (tablet popularity may erode Windows market share) 5. Server & Server Tools - ORCL, Linux, IBM, etc, etc, etc 6. Microsoft Office - Nothing serious yet, but GOOG is salivating at a chance to chip away at this Market prices incorporate expectations for future growth as well as performance relative to peers. In the near term Microsoft is making buckets and buckets of solid cash. In the medium term, there are threats on the horizon that are looming large. In the long term, there is a great deal of uncertainty and this uncertainty is not made any better by strange moves like acquiring Skype for $8.5 billion. I have heard some people say that acquiring Skype was a defensive move. Look, defensive moves like that are the last ditch strategy of someone that knows they are losing. There were a billion strategies that could have been taken that would have yielded a better strategic position. What Microsoft needs is a visionary leader that can turn its buckets of cash into something that can carve out a substantial, permanent, and secure foothold on one of the fronts that they are fighting. That sounds cliche, but it is what they really need right now. Microsoft is a fantastic company with an amazing amount of talent in it. I actually believe that it has some incredible earnings potential, but unlocking this potential will take bold, aggressive moves - not expensive defensive posturing. It is not my intention to bash Microsoft. I have a lot of respect for the company. However, something obviously needs to change in response to the new challenges that they are facing. The status quo is no longer good enough. Sources: Edgar online for the year 2000 10-Q filing, yahoo finance for price in 2000, http://www.betanews.com/joewilcox/article/Microsoft-Q3-2011-by-the-numbers-Record-1643B-Windows-revenue-declines/1304021955 http://www.betanews.com/joewilcox/article/Microsoft-Q3-2011-... for revenue break down. I apologize in advance for any formatting strangeness in this post. In my defense - I am new here, and it is 1:31 am.

AlisdairO 15y ago

Fantastic post - thank you. I don't believe Ballmer is a good CEO, but directly comparing to Apple and Google is nutty. Your comparisons are much more relevant.