Star Hedge Fund Manager Einhorn to Microsoft CEO Ballmer: Time to Go

[Editor's Note: When David Einhorn called for the head of Microsoft CEO Steve Ballmer this week, the star hedge-fund manager was merely vocalizing the frustration felt by the millions of investors who've spent 10 years watching the software giant's stock go essentially nowhere. For an in-depth analysis of Microsoft's travails, check out our "Leaders to Laggards" series, which appeared this week.]

Citing the stagnant stock performance of Microsoft Corp. (Nasdaq: MSFT) over the past decade, hedge fund manager David Einhorn publicly called for CEO Steven A. Ballmer to step down and "give someone else a chance."

Einhorn made his comments at the annual Ira Sohn Investment Research Conference in New York yesterday (Wednesday). His Greenlight Capital hedge fund owns about 9 million shares of Microsoft stock.

While the tech-heavy Nasdaq Composite Index has gained 34% over the past 10 years, Microsoft has slumped 25%.

Ballmer was named CEO in January 2000.

"His continued presence is the biggest overhang on Microsoft's stock," said Einhorn, who gained notoriety after betting against Lehman Brothers Holdings Inc. (PINK: LEHMQ) four months before its collapse in 2008.

Einhorn was also in the news yesterday for investing $200 million to become a minority partner in the New York Mets baseball team.

Signs of Microsoft's fall from the pinnacle of the tech mountain have become more apparent in the past year. Long-time rival Apple Inc. (Nasdaq: AAPL) passed Microsoft in market capitalization last year; earlier this week International Business Machines Corp. (NYSE: IBM) briefly did as well.

"Ballmer's problem is that he's stuck in the past," Einhorn said. "He's allowed competitors to beat Microsoft in huge areas, including search, mobile-communications software, tablet computing and social networking. Even worse, his response to these failures has been to pour tremendous resources into efforts to develop his way out of these holes."

At one point, Einhorn even compared Ballmer to the hapless Peanuts character Charlie Brown.

Einhorn is just the latest voice to knock Ballmer. Analysts, shareholders and pundits in the tech press have been criticizing his leadership for years.

But the longer Microsoft's stock languishes, the louder the criticism has become.

After Microsoft announced the $8.5 billion deal to acquire Skype earlier this month, The Wall Street Journal's Evan Newmark wrote in his "Mean Streets" column: "With Skype, Ballmer isn't just guilty of poor timing or overpaying. It's worse. He's guilty of putting Microsoft into a position where it is compelled to buy companies like Yahoo and Skype that nobody else really wants."

Even his employees have begun to lose faith in him., which has conducted CEO approval surveys at tech companies for the past two years, shows Ballmer's approval rating sliding from the high 50s in 2009 to 46% in March of this year.

And the Microsoft board gave Ballmer a slap on the wrist last fall by giving him only half of his potential bonus, citing "the unsuccessful launch of the Kin phone; loss of market share in the company's mobile phone business; and the need for the Company to pursue innovations to take advantage of new form factors."

Ballmer, 55, was hired in 1980 as Microsoft's 30th employee. He had lived in the same dormitory as William H. "Bill" Gates III, Microsoft's chairman, when both were attending Harvard University.

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About the Author

David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.

Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.

Dave has a BA in English and Mass Communications from Loyola University Maryland.

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