Twitter pops on Ballmer buy? Unlikely story.
Twitter (TWTR) shares jumped almost 4% on Friday afternoon after former Microsoft (MSFT) CEO Steve Ballmer confirmed that he had invested some of his personal fortune to buy 4% of the social network. It probably should have fallen 4%.
Ballmer, who served as CEO of Microsoft from 2000 until 2014, had a terrible, horrible, no good track record in evaluating the prospects of other companies and predicting future technology trends. Not only did he repeatedly dismiss Apple's (AAPL) iPhone and miss out on the mobile phone revolution almost completely, but his major acquisitions lost billions.
That's not to say Twitter is doomed. New CEO Jack Dorsey is pledging to speed up the company's new product pipeline and offer new and less-savvy users a vastly improved experience. The shares have already rallied off an all-time low of $21.01 in late August to almost $30 at Thursday's close. But the Ballmer "buy" signal? That can't be a positive.
Just think back to 2007 when, fearing Google's (GOOGL) rising power from online advertising, Ballmer decided to acquire aQuantive, a hodgepodge collection of digital ad efforts, for $6.3 billion. "Microsoft is intensely committed to creating a thriving advertising business and to partnering closely with all key constituencies in this industry to help maximize the digital advertising opportunity for all," Ballmer said at the time.
Flash forward five years to July 2012 and Microsoft remained an also-ran in the ad business and was forced to write down almost its entire purchase of aQuantive to nothing. "This is an accounting decision that the company made based on how the business is performing relative to the projections we had made during the past five years," Ballmer explained.
Good job @twitter,@twittermoments innovation, @jack Ceo, leaner, more focused. Glad I bought 4% past few months. Like @alwaleedbinT move too
— Steve Ballmer (@Steven_Ballmer) October 16, 2015
After eventually realizing that there might be something to the whole smartphone trend, in September 2013, Ballmer made another huge mistake, investing $7.6 billion to buy the handset business of struggling Nokia. "Bringing these great teams together will accelerate Microsoft’s share and profits in phones," Ballmer crowed.
But no, not so much. Microsoft's share of the smartphone market dropped from a puny 3.4% before the Nokia deal to a miniscule 2.6% this year. Ballmer's successor, Satya Nadella, never seemed sold on the Nokia move. After numerous cutbacks and layoffs, Nadella announced in July that Microsoft would write off its entire investment in Nokia.
Ballmer's efforts to see the future evolution of big tech trends? 0 for 2.
And that's without even counting some of the deals Ballmer wanted to do -- but didn't -- like buying Yahoo (YHOO), parent company of Yahoo Finance, for almost $50 billion in 2008. "Sometimes, you're lucky," Ballmer admitted in an interview a few years later. Yahoo's share price quickly fell to less than half of Microsoft's rejected offer of $31 and didn't retain that level for more than five years. Yahoo's revenue has declined by 33% since the offer, although its then-small investment in Chinese ecommerce site Alibaba is now worth almost $28 billion.
There were also smaller mistakes along the way, like $500 million wasted on smartphone pioneer Danger.
His $8.5 billion purchase of Skype hasn't been a total disaster of aQuantive proportions, but it's hardly a shining success story, either. Two years in, the deal had made little noticeable impact on revenue and remains a long way away from justifying the purchase price.
Again, there may be reasons to get bullish about Twitter shares, which even after Friday's burst remain down 40% over the past six months. But Steve Ballmer's interest isn't one.
