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Gates Works To Save Legacy, Adds Activist Investor

Douglas A. McIntyre

Microsoft (MSFT) did something it did not have to do (something that no public company would want to do), so why did it do it? The huge software company said it would add a director from a tiny activist law firm--not one anyone has ever heard of. The announcement come just after the one which said CEO Steve Ballmer would resign. Why would Microsoft panic? (Or, perhaps founder CEO has something secret on his mind)

The company issued a release:

Microsoft Corp. today announced that it has signed a cooperation agreement with ValueAct Capital, a San Francisco-based investment firm with $12 billion in assets under management that beneficially owns approximately 0.8 percent of the outstanding shares of Microsoft common stock and is one of the company’s largest shareholders.

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The cooperation agreement provides for regular meetings between Mason Morfit, president of ValueAct Capital, and selected Microsoft directors and management to discuss a range of significant business issues. The agreement also gives ValueAct Capital the option of having Morfit join the Microsoft board of directors beginning at the first quarterly board meeting after the 2013 annual shareholders meeting.

“Our board and management team are committed to enhancing growth and value for Microsoft shareholders, and we look forward to ValueAct Capital’s input,” said Steve Ballmer, Microsoft chief executive officer.

That is not 8%, it is .8%. Gates owns 5.47%. Ballmer owned 3.95%. And, Gates is as close to a controlling shareholder as a company (without owning a majority of the stock, or voting control) could have because of his role as founder. Gates, in other words, must have signed  off on the deal.

And, it must me Gates' deal completely. Probably, he has decided that an outside director with an aggressive temperament will roil a board which has acted as minions to Gates and Ballmer. In essence, Gates has the equivalent of a new board to go with a new CEO--which he will undoubtedly pick as well.

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Gates, not willing to come back as CEO himself, is doing what he can to shake Microsoft from its slumber--and revive his own legacy in the process.


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