TheDumbMoney (59.34)

Einhorn Says Ballmer Must Go

May 26, 2011 – Comments (6) | RELATED TICKERS: MSFT , GOOG , AAPL

In case you missed it, Einhorn, the famous head of long-short fund, Greenlight Capital, and a major Microsoft shareholder, called at the Ira Sohn Conference for Ballmer to get the heave-ho at Microsoft.  See here, third item has a bunch of links. 

This is a major development for shareholders, and it is likely not a coincidence that the stock is up over 2% today.

Einhorn is most famous for saying Lehman was going to go belly-up a few months before it did.  He also famously has feuded with Berkowitz about the viability of St. Joe's, with Einhorn on the short side.  He has been a Microsoft fan for at least five years.

The reasons are not surprising, and have been laid out by many on this website:  Ballmer derided both pads and smartphones PUBLICLY when they were first released.  Microsoft had a pad idea years ago, and it was under Ballmer's leadership that it withered on the vine.  Einhorn calls Ballmer the main drag on Microsoft, and a man stuck in an old era. 

So what is newsworthy about this?  Greenlight Capital owns something like 0.11% of Microsoft's stock, and Einhorn is THE VERY FIRST major shareholder to call publicly for Ballmer's ouster.  I happen to agree with him, so I am very pleased by this development.  If Einhorn's call leads to the replacement of Ballmer, that could be a very good thing.  While Ballmer has grown Microsoft's cash flow and has maintained its margins, being that publicly derisive of the two things that are probably the top two developments in consumer electronics in the last five years is incredibly damning for a tech-CEO.  Get him gone.

Two further comments are in order however: 

 1)  Bill Gates is best-buds with Ballmer, as far as anyone knows, and Ballmer has been with Microsoft since pretty much the beginning.  Gates also owns something like 6 or 7% of Microsoft (and if I recall, still holds a board seat and may even be board chairman).  So if Gates does not want Ballmer to go, Ballmer won't go.  While Gates is famously business-minded, he may have a very hard time pushing Gates out the door.  At the very least, Gates will have to remain publicly unopposed for it to happen; 

2) Getting rid of Ballmer poses significant risks.  Ballmer, whatever else he has done, has been a fairly effective steward of Windows and Office, while some new dude or dudette might decide to shake things up in some crazy way that quickly and permanently weakens those franchises.  This raises the point that the best way for Ballmer to go would likely be for Gates to return.  One of Gates' last major famous public statements as CEO was:  "don't let us become a dinosaur," when Netscape arose.  Remember that?  Well, in many ways, Ballmer has, not because of Netscape, but because of Google and the resurgence of Apple.  To some extent it is not Ballmer's fault:  antitrust inquiries arising from what Microsoft did to Netscape neutered a lot of Microsoft's competitive spirit and ability -- for example, I'm sure Microsoft would have loved to pre-load a search engine into Windows in the early 2000s.  But one has to think Gates would have been a bit quicker on his feet the last decade, and that now would be a good time for him to return.  I certainly can't think of anyone better. 

Or does anyone have any other suggestions for a Ballmer-replacement (since Gates give zero indication that he has any interest in returning)?