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Ballmer’s Insanity and Microsoft Stock
posted in Apple (AAPL), Microsoft (MSFT) |Steve Ballmer, CEO of Microsoft (MSFT), may be digging himself a grave. If he isn’t replaced within the next year, I think it will seriously be time to reconsider Microsoft’s business strategy and reasonable reasons to invest in the stock.
When sizing up any stock, there are a number of factors to take into account. With a large, well-known company like Microsoft many of the fundamentals and reasons to invest in the stock are found quite easily. On the positive side, Microsoft is and has been releasing a wealth of new products, along with recognized increases in revenue. Office, Vista, and the Xbox 360 have all taken part in the recent increases in MSFT (Recent price: 27.33). The interesting part is taking into account the negatives. For starters, Microsoft stock is definitely overpriced at a 23 P/E ratio. The stock is flat over six months, with a high in the stock price in January 07. Unfortunately, at the root of some trouble in the stock may be Microsoft’s very own CEO.
Ballmer became the CEO for Microsoft in January 2000. Since then, Microsoft has been on a bumpy road, and consistently falling under the pressure of Wall Street and fellow competitors. For instance, in Apple Inc’s (AAPL) latest quarter, revenue showed a steady and commanding increase in product sales and market share. A confidence boosting number for Apple, but a warning sign for Microsoft. The reaction to this and many other issues is what’s so alarming. Instead of saying nothing at all, or admitting that a competitor has a great product, he passes it off like it’s nothing.
In some recent news and video with Ballmer, interviewers are seeing some of the most humorous and childish ways of answering questions. A recent interview caught Ballmer laughing hysterically at the idea of the iPhone. The idea that the phone starts a $400 and goes up to $500 was just to humorous for him to reasonably answer the question. The fact is that all new products have a high starting point, Ballmer should know this with Vista Ultimate, which sells for about $400. As the phone captures greater market share, prices should begin to go down, and flexibility with phone plans should soon follow. Look below for the Ballmer Video.
A recent news article, by Ina Fried, entitled “Ballmer calls Google’s growth plan ‘insane’,” captures Ballmer’s incredibly unintelligent business sense and public speaking abilities. Ballmer’s vocabulary never ceases to amaze, as his phrases like, “Google is a one-trick pony,” “They do a lot of cute things,” “They are trying to double in a year, that’s insane in my opinion,” and in acknowledging Google’s current success, “That was the ’90s for us…or I would say the ’80s and ’90s.” At first the quotes may seem to be true insults to Google as a company and its business model, but dig deeper, and a much scarier notion evolves. Microsoft is stuck in the past, continuing to create the same products that they always have, and refusing to make the necessary changes to broaden their technological innovations. Video of Ballmer from the Stanford Graduate School of Business can be found on CNET at: http://news.com.com/1606-2-6167775.html.
If Microsoft continues to harbor such a negative and inarticulate CEO, their stock and business will continue to suffer. Ballmer is bad news for Microsoft, and he needs to be taken down from his position as CEO. Understanding that upper management and executives play such a large role in the price of a stock is something that is overlooked far too often. The winners in the investing game know, before investing, always try to investigate and study up on the influential people in the company, and understand their possible effects on the stock price.
Disclosure: Long Apple Inc. (AAPL)
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