REDMOND, WA – On Wednesday, the USA Today reported that a number of Microsoft’s (NASDAQ:MSFT) large shareholders who pushed for the retirement of Steve Ballmer are now pushing for Founder and Chairman Bill Gates to resign. According to the report, three of Microsoft’s top 20 shareholders, representing roughly 5 percent of outstanding shares, are pushing for Gates to leave the company he started.
At issue is improved capital allocation which Dan Ferris, investment analyst at Stansberry & Associates Investment Research says that when ‘Gates announces his resignation, the stock will rally. Ferris added that ‘if both Gates and Ballmer are out, and better capital allocators are in, Microsoft’s stock will hit $40 within the next several months.’
The report noted that many of the shareholders and upset that Gates would prefer to nominate someone similar to Ballmer as the next CEO. According to the shareholders the company has become too conservative and under Ballmer’s leadership has passed on several growth opportunities including a handful of M&A deals that would have delivered double digit returns.
A change in direction might be just what Microsoft needs. The company has enjoyed healthy profits with its Windows Operating System and Microsoft Office. In the last fiscal year, revenues were more than $ 73 billion in the last fiscal year, and the company has nearly $ 70 billion in cash and cash equivalents sitting offshore.
Furthermore, analysts broadly agree that the dominance of the personal computer is coming to an end as mobile, tablets, and cloud computing gain momentum – as such, Microsoft should begin to take more aggressive actions now while they are still in a position of relative strength.
According to sources, at least two of the shareholders who want Gates to follow Ballmer view poor capital allocation as one of Microsoft’s primary problems. Ballmer has spent almost $ 22 billion on the acquisitions of aQuantive, Skype, and Nokia.
“If good capital allocators take over the top two spots at Microsoft, the whole world will wish it listened to me one of the few dozen times I recommended the stock since I first started covering it in 2006,” says Ferris.
Shares of Microsoft opened Wednesday at $ 33.36.