Microsoft Corp.s stagnant stock price raising eyebrows in the tech industry, notably among people who dont own shares of the software giant.
Don Dodge, now a developer advocate at Google, where he landed after being laid off by Microsoft late last year, questioned in a recent blog whether Microsoft is looking at itself all wrong to investors disadvantage. (Dodge no longer owns Microsoft stock, FYI.) Microsofts share prices have barely fluctuated in the past five years, despite impressive increases in both revenue and cash-holdings all told, shareholders have seen almost no stock boost and theyve certainly not received any dividends. That seems to be because Microsoft considers itself a growth company, while Wall Street views the tech fixture as a Blue Chip, Dodge said.
Maybe Microsoft should accept Wall Streets conclusion that it is really a Blue Chip stock and stop acting like it is a growth stock,” Dodge wrote. Maybe they should listen to Mini-Microsoft and cut expenses significantly, focus their product development efforts, and increase their dividend.”
The failed Microsoft Kin smartphone experiment cost the company $500 million, Dodge pointed out. And the Bing search engine, meant to rival Google, has turned into a billions-of-dollars undertaking that doesnt contribute to growth or profits, Dodge said. In addition, Microsoft has done some M&A over the past few years that has done little, if anything, to increase the companys competitiveness.
Microsoft doesnt need to do anything fancy,” Dodge wrote. Imagine what the financial results would be if they stripped away all the needless spending in pursuit of elusive growth. Imagine how much cash they would have available to pay dividends to investors if they didnt keep spending billions on questionable acquisitions. Microsoft spends billions every year on pure research in labs all over the world. It is hard to trace any of that spending to commensurate revenue increases.”
Like any other company, Dodge said, Microsoft must keep investing. But it could stand to pare back its R&D expenses, which amounted to $8.7 billion last year alone.
That is more than every startup in the world combined, and most software companies of any kind too,” Dodge said.
So, the question is whether Wall Street needs to push back on Microsoft and make it justify that kind of outlay or force it to trim R&D spending altogether. Either way, Microsoft has to make a change, because Wall Street wont be the one changing, said Dodge.
The speculation comes as rumors spread that Microsoft CEO Steve Ballmer is the target of a not-so-secret coup. A group of executives reportedly wants to oust Ballmer, who they think is responsible for the companys immobile share prices.
Shares of Microsoft were trading .93 percent higher at 1:20 p.m. Eastern on Monday, reaching $26.05. The companys 52-week high is $31.58.