Microsoft's newest board member is an activist investor, known to try and shake things up at companies in which his firm invests -- and he's already said Microsoft needs to de-emphasize Windows and release iOS and Android versions of Office. Will he be able to force changes at Microsoft, or will it remain business as usual?
The new board member is G. Mason Morfit, president of ValueAct Capital, and he essentially pushed his way into Microsoft's board room. ValueAct, an investment firm with over $14 billion in assets, had been accumulating Microsoft stock, and had gathered 0.8 percent. That's a lot more sizable number than it seems, given that it is held by a single company -- especially an activist one like ValueAct.
Forbes says that ValueAct had been talking to other big holders of Microsoft stock about a proxy contest to try and force changes at the company. Notably, ValueAct wanted Microsoft to focus more on the enterprise and businesses, and less on consumers.
There's a chance that ValueAct had some influence in forcing Ballmer to leave Microsoft, Forbes notes. Only a week after Ballmer announced he would retire from Microsoft, Microsoft signed a "cooperation agreement" with ValueAct in which ValueAct got to put someone on the Microsoft' board early this year, and in which there would be "regular meetings between Mason Morfit, president of ValueAct Capital, and selected Microsoft directors and management to discuss a range of significant business issues." Unstated, though obvious, is that ValueAct wouldn't pursue a proxy fight.
That's why Morfit is now on the board. He's no shrinking violet, and is more than happy to tell Microsoft where he believes the company has gone wrong, and what it needs to do to set things right. Just last week, Bloomberg reported that Morfit and ValueAct:
...want the world's largest software maker to reduce its focus on Windows...[and] accelerate efforts to unchain products and services from Windows so that they can be more widely adopted on smartphones and tablets.
In addition, Bloomberg reports:
Morfit also wants to emphasize enterprise and cloud businesses and push Microsoft to look at jettisoning or scaling back hardware and consumer products such as the Xbox game console, which carry expensive marketing and manufacturing costs.
He's already planning to work behind the scenes to get Microsoft to adopt his agenda, says Bloomberg.
Given that he's only one board member, and that ValueAct holds only 0.8 percent of Microsoft stock, does he have a chance of succeeding?
I think he does. There are plenty of people who believe Microsoft is being hurt by clinging to Windows at the expense of hurting other parts of its business, notably Office, which would certainly bring in plenty of revenue if it gets released for iOS or Android. In fact, Microsoft has already taken a number of steps related to Windows that once would have been unthinkable. The company is at work on what could be a free version of Windows 8.1, and it's also considering a free version of Windows Phone. And it has been embracing Android as well, by taking steps such as allowing Nokia to introduce a low-cost line of Android phones, and by signing a deal to allow an Indian manufacturer to make dual-boot Windows Phone-Android phones.
De-emphasizing Windows makes plenty of sense, especially in a world where PC sales had their steepest decline ever in 2013 and will continue to decline for as far as the eye can see.
As to walking away from the consumer market, by getting rid of the Xbox business, I don't see that happening, although it's a possibility. After all, Microsoft CEO Satya Nadella was in charge of a variety of enterprise products, notably its cloud business, before he became CEO. So Morfit may well find a kindred soul in Nadella.
Still, I don't expect Microsoft to back away from the consumer, although I do expect Morfit to help accelerate Microsoft's de-emphasis on Windows.