Microsoft (MSFT) may yield to pressure and grant a board seat to San Francisco-based ValueAct Capital, a $10 billion activist-oriented hedge fund that invested some $1.9 billion three months ago in the company and gained a position as a top investor.

DH Kass, Senior Contributing Blogger

July 23, 2013

2 Min Read
Reports: Microsoft May Offer Activist Investor a Board Seat

Microsoft (MSFT) may yield to pressure and grant a board seat to San Francisco-based ValueAct Capital, a $10 billion activist-oriented hedge fund that invested some $1.9 billion in the company three months ago and gained a position as a top investor.

According to reports, ValueAct’s activist reputation, particularly to rally shareholders to its positions, already has surfaced as it is pushing Microsoft to de-emphasize consumer products in favor of business software and cloud services that can produce greater value.

The hedge fund, which is said to own less than 1 percent of the company but may be buying more shares, typically holds its positions for extended periods and has a history of sometimes seeking board seats.

With Microsoft fresh off a weak Q4 2013 financial performance, in which its mobile strategy showed glaring weaknesses, prompting a $900 million Surface RT writeoff for unsold inventory, ValueAct may be sitting pretty to land the board seat it reportedly covets. Microsoft’s board currently has nine members.

Sources cited in one report said should Microsoft not offer ValueAct a board seat, the investor could resort to a proxy fight to appoint a director—a scuffle that wouldn’t be decided until the vendor’s next shareholder meeting, which may be four months or so away.

According to the report, ValueAct is particularly concerned with how Microsoft is handling the mobile market and wants a person from its own organization with a direct say in matters. For example, ValueAct is said not to agree with Microsoft’s entry into the tablet-making business.

But there may be other issues at hand bothering ValueAct and other institutional investors beyond mobile strategy and execution, including a clear plan for chief executive Steve Ballmer’s eventual successor.

Whether ValueAct could make waves at Microsoft is far from certain, given the near 10 percent stake in the company founder Bill Gates and Ballmer together command. Inasmuch as its recent sweeping reorganization officially tabbed Microsoft as a devices and services company, ValueAct will face a steep uphill climb at best to redirect the company exclusively at business software and the cloud.

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About the Author(s)

DH Kass

Senior Contributing Blogger, The VAR Guy

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