The Ballmer Days Are Over • Hacker News Board

Re: The Ballmer Days Are Over

#151

Post by InclinedPlane » Fri, May 13, 2011, 7:04 AM UTC

kevin_morrill wrote: post #147

InclinedPlane wrote: post #32

Earlier quoted context omitted.

As the article mentions the job of a CEO is to increase shareholder value, dividends are part of that value. MSFT has issued quarterly and sometimes annual dividends which are currently at 16 cents a share. In total, MS has issued $6.35 in dividends since 2005, this is fully 25% of the current stock price.

In fact the company issued a special $30 billion dividend early in Ballmer's tenure. The Federal Reserve had to correct for this in their quarterly report, because it was an economic event felt across the entire country.

Even so, it wasn't enough. Shareholders of MS stock realized a 25% return due to dividends over the last 6 years, nearly half of it due to that one $3 per share dividend. In contrast, Google shareholders realized a 177% investment gain, Amazon shareholders a 370% gain, and Apple shareholders a 900% gain. This would be fine if Microsoft were in a different industry than these guys, but they're not. If anything Microsoft's business is most similar to Apple's (or at least had been). Microsoft's failure to capitalize on markets other than their core OS/platform and Office is very, very much reflected in their current stock price.

Re: The Ballmer Days Are Over

#152

Post by ikono » Fri, May 13, 2011, 7:20 AM UTC

amorphid wrote: post #132

ikono wrote: post #75

Earlier quoted context omitted.

Microsoft has also repurchased a lot of stock over this period which should inflate the stock price. In any case, it doesn't matter that much especially given a relatively small number of years and a stagnant price per share. The general premise of Microsoft stagnating is true regardless of how you tweak the numbers.

Buying back stock increases earnings per share, not the stock price.

Yes, and increasing earnings per share generally increases stock price.

In theory you only buy shares back when you believe that they are worth more than they are trading for. If this is true, it will increase the intrinsic value of the company and should increase its price per share. If it is not true, then management is incapable of evaluating their own business and shareholders should demand that all non-essential capital be returned to shareholders in the form of dividends.

In either case, my point still stands. These things don't matter enough to be bickering about them. From January 2000 to present the Nasdaq is down about 29%, for Microsoft to only be down that amount your adjusted price would need to be about $40. You need to be very generous to say that those dividends we're worth ~$15 and that's just to match the Nasdaq.

If you really want to argue with the data you should be arguing about the start/end dates. Comparing to the Nasdaq eliminates some of the problem as most tech stocks were equally inflated in 2000. I still think you're looking at near parity at best. Microsoft should have been better than average and the data shows that it probably wasn't.

Re: The Ballmer Days Are Over

#153

Post by Spyro7 » Fri, May 13, 2011, 7:24 AM UTC

wonnage wrote: post #149

Spyro7 wrote: post #144

Earlier quoted context omitted.

An insane valuation? At the start of January 2000, Microsoft's most recent earnings per share was $0.90. It's share price was about $58 dollars. This would have given it a P/E ratio of about 64x. This was relatively tame by dot com standards. MSFT's current P/E ratio is about 10x. Just looking at that number right there, most people would conclude that MSFT was a great value play. In my personal opinion it is indeed…

64x being tame by dot com standards still doesn't make it cheap! As for the earnings argument, look at it this way - Apple and Microsoft both made about 18B after taxes in 2010. Difference is, Microsoft's been printing money for almost a decade. Google doesn't even come close. It's a fantastically profitable company. You can speculate about the future however you want, the fact remains that this company that until a…

It is a fantastically profitable company. A fantastically profitable company with the P/E ratio and historical growth rates of a public utility.

Why invest in Microsoft when you could invest in Exxon Mobile, Johnson & Johnson, The Coca-Cola Company, Novartis - all companies with better long term growth rates and beefy dividends.

Look, I am not trying to be discouraging, but I find it grating how little progress Microsoft has been able to make despite its huge market advantages.

Maybe the question is one of perspective. I tend to constantly think in terms of long-term investments. If you are investing because you intend to cash in on an upcoming bounce in the price (rather than holding on for the long term) then that is actually a sound strategy - I wish you luck in timing the bounce.

It's the long-term perspective that I am mostly referring to. That is the reason for the speculating about the future.

Disclaimer: I own none of the shares mentioned above - as a matter of fact I currently own no shares of anything.

Re: The Ballmer Days Are Over

#154

Post by contextfree » Fri, May 13, 2011, 7:30 AM UTC

brg wrote: post #136

enjo wrote: post #133

Earlier quoted context omitted.

Is adcenter a failure? I have no idea what their data looks like, but I do know that bids have gotten quite competitive (much more Google like) since the Yahoo partnership.

As the revenue generating end of Microsoft's online services division, the popular bar chart showing quarterly losses exceeding 600M says that it is a failure. This may turn around if Bing hits its magic number in terms of market share. But one would think that the division will have to have start stemming its tide of losses if it is to be given a chance.

I remember reading somewhere that Microsoft is targeting 2014 as the year that Bing is supposed to stop losing money. I can't seem to find it again though.

Re: The Ballmer Days Are Over

#155

Post by ikono » Fri, May 13, 2011, 7:31 AM UTC

amorphid wrote: post #129

Spyro7 wrote: post #108

Earlier quoted context omitted.

Note: I do not hold shares in any of the below companies. Apple and Google were in their heydays during this time period. If anyone is interested in seeing a really interesting comparison then go to finance.google.com and do the following: 1. Look up MSFT 2. Click "All" for your zoom option, this should give you from 1986 to present 3. Add GOOG and AAPL using the compare box Now look at the chart. MSFT is up 25,019.0…

MSFT was the overpriced darling of the Dotcom era. Ballmer inherited an insane valuation. Meanwhile, in the last ten years, net income has gone from under 8 billion to over 18 billion. This is not a failure and will eventually be reflected in the stick price. Source -- http://www.microsoft.com/presspass/inside_ms.mspx

"Though ’s intrinsic value cannot be precisely calculated, two of its three key pillars can be measured... The first component of value is our investments: stocks, bonds and cash equivalents... 's second component of value is earnings that come from sources other than investments... There is a third, more subjective, element to an intrinsic value calculation that can be either positive or negative: the efficacy with which retained earnings will be deployed in the future. We, as well as many other businesses, are likely to retain earnings over the next decade that will equal, or even exceed, the capital we presently employ. Some companies will turn these retained dollars into fifty-cent pieces, others into two-dollar bills. This “what-will-they-do-with-the-money” factor must always be evaluated along with the “what-do-we-have-now” calculation in order for us, or anybody, to arrive at a sensible estimate of a company’s intrinsic value. That’s because an outside investor stands by helplessly as management reinvests his share of the company’s earnings. If a CEO can be expected to do this job well, the reinvestment prospects add to the company’s current value; if the CEO’s talents or motives are suspect, today’s value must be discounted. The difference in outcome can be huge. A dollar of then-value in the hands of Sears Roebuck’s or Montgomery Ward’s CEOs in the late 1960s had a far different destiny than did a dollar entrusted to Sam Walton."

- Warren Buffet, 2010 Letter to Shareholders

Over the last ~10 years Microsoft has been good at #1, good at #2, but #3 has been suspect.

Re: The Ballmer Days Are Over

#156

Post by chalst » Fri, May 13, 2011, 7:31 AM UTC

wonnage wrote: post #149

Spyro7 wrote: post #144

Earlier quoted context omitted.

An insane valuation? At the start of January 2000, Microsoft's most recent earnings per share was $0.90. It's share price was about $58 dollars. This would have given it a P/E ratio of about 64x. This was relatively tame by dot com standards. MSFT's current P/E ratio is about 10x. Just looking at that number right there, most people would conclude that MSFT was a great value play. In my personal opinion it is indeed…

64x being tame by dot com standards still doesn't make it cheap! As for the earnings argument, look at it this way - Apple and Microsoft both made about 18B after taxes in 2010. Difference is, Microsoft's been printing money for almost a decade. Google doesn't even come close. It's a fantastically profitable company. You can speculate about the future however you want, the fact remains that this company that until a…

It's a cash cow. The bulk of its income comes from Windows and Office, with most of the rest coming from servers and enterprise services.

The issue is that it is being managed like it is a change-driving company investing huge sums in new markets that generate slender revenues where they don't generate losses. Paying $8.5 billion, around 4% of its market capitalisation, for Skype is not likely to change the revenue it gets from its core businesses.

If it wasn't so big, I would expect it to be a private equity target. But the pargest PE deals have been around $40 billion, about 20% of Microsoft's cap.

Re: The Ballmer Days Are Over

#157

Post by greyman » Fri, May 13, 2011, 7:37 AM UTC

>> Beyond that is the fact that Microsoft has 89,000 employees — are you telling me that the company that put a computer in every home couldn’t create a Skype clone? Yes, that's right. They couldn't create a Skype clone, no chance. Of course, they could create a similar product in terms of functionality, but how many would switch to it from Skype?

Re: The Ballmer Days Are Over

#158

Post by nl » Fri, May 13, 2011, 7:49 AM UTC

greyman wrote: post #157

>> Beyond that is the fact that Microsoft has 89,000 employees — are you telling me that the company that put a computer in every home couldn’t create a Skype clone? Yes, that's right. They couldn't create a Skype clone, no chance. Of course, they could create a similar product in terms of functionality, but how many would switch to it from Skype?

Actually it's a lot worse than that. MS already has a very successful Skype competitor, that does better than Skype in most metrics

Windows Live Messenger boasts in excess of 330 million monthly active users with 40 million concurrent, compared to Skype's 170 million and 20 million-30 million concurrent

http://arstechnica.com/microsoft/news/2011/05/microsoft-conf...

Only 8 million Skype customers pay, so the income they'll get from it is pretty much nothing (compared to other sources of income MS has)

Read that whole article - it shows how dumb this purchase really is.

Re: The Ballmer Days Are Over

#159

Post by iamelgringo » Fri, May 13, 2011, 7:49 AM UTC

People often forget the Microsoft right before Balmer was slapped with one of the largest anti trust lawsuits in decades. People wonder why MSFT hasn't been competing aggressively for the following decade... It's because they've been afraid of anti trust litigation yet again.

I've had a couple of conversations with people in semi-upper levels of MSFT management. Long term Microsoft employees are still scarred from that litigation. So much that it still comes up in conversation 12 years after the fact.

Re: The Ballmer Days Are Over

#160

Post by wonnage » Fri, May 13, 2011, 7:49 AM UTC

alexqgb wrote: post #140

wonnage wrote: post #104

Earlier quoted context omitted.

The graph starts around the height of the internet bubble. It's a dishonest comparison. You can't blame Ballmer for not driving the stock back up to unrealistic levels. Meanwhile, Google is basically starting from zero - of course it's going to show faster growth than the lumbering behemoth that is MS. Keep in mind that few people outside of the bank underwriting the IPO and Google employees actually got the awesome…

There's a big difference between "driving the stock back up to unrealistic levels" and totally flatlining - which is what MS has actually done. Yes, the former is ridiculous. But so is the latter.

If you factor in dividends the return would be something around 20% over the past 7 years. Crappy, but definitely not "flatlining".

Microsoft makes twice as much as Oracle, pays a dividend, and yet has half the P/E multiplier. It's just not a sexy stock right now, but you can't deny the underlying profitability. Personally I think it's just that they've made some really embarrassing mistakes (Bing?). None of the failures have really dented the bottom line...they still had 8.5B lying around to buy Skype.