EXCLUSIVE - Microsoft investors push for chairman Gates to step down

NEW YORK/SEATTLE Wed Oct 2, 2013 6:17am IST

Bill Gates speaks during Peterson Institute 2013 Fiscal Summit on Facing the Future in Washington, May 7, 2013. REUTERS/Yuri Gripas/Files

Bill Gates speaks during Peterson Institute 2013 Fiscal Summit on Facing the Future in Washington, May 7, 2013.

Credit: Reuters/Yuri Gripas/Files

Stocks

   

NEW YORK/SEATTLE (Reuters) - Three of the top 20 investors in Microsoft Corp (MSFT.O) 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 (AAPL.O) and Google Inc (GOOG.O) 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)

FILED UNDER:
  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Tobacco Control

Tobacco Control

India moves toward ban on loose cigarettes to deter smoking   Full Article 

Modi at SAARC

Modi at SAARC

Modi gives Buddha a miss as SAARC leaders flock to Nepal.  Full Article 

Reuters Insight

Reuters Insight

In Modi’s India, green shoots of reform from Rajasthan.  Full Article 

Investing in ETFs

Investing in ETFs

U.S. investors elevate India over other emerging markets  Full Article 

J&K Elections

J&K Elections

Kashmiris turn out to vote as BJP bids for power  Full Article 

Trade Talks

Trade Talks

India, U.S. hold first trade dialogue in four years  Full Article 

Modi's Wife

Modi's Wife

Modi's estranged wife unhappy over round-the-clock security  Full Article 

Global Economy

Global Economy

OECD sees gradual world recovery, urges ECB to do more  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage