Microsoft's annual shareholder's meeting occurred yesterday and given that the stock traded today at $17.50, its lowest point since 1998, you can imagine the tone among those that attended. Fed up might describe it, if this TechFlash blog post by a long-term shareholder is representative of the crowd. Michael McDonald bought 100,000 shares of MSFT in November, 2000, at a split-adjusted, average price of $36/share. (You read that right ... this cost him $3.6 million). This week he wrote:
"It is not unreasonable to expect Microsoft, the world’s software leader, enjoying a high-margin monopoly on more than 90 percent of the world’s computers, to have annual stock appreciation of 9 percent over this span of eight years. At this compounded rate, MSFT should now be selling at twice the price I originally paid. Instead, it is selling at half the price I paid. (The current economic meltdown hasn't materially altered the underlying, long-term price trend of MSFT shares). In this same time frame, my Berkshire-Hathaway shares have tripled. ...Apple, meanwhile has experienced a nine-fold growth in share value during this period."
Now maybe a compound 9 percent return post Internet bubble is a lot to ask for. In November, 2000, Apple had been pretty much written off by investors and was trading at about $8/share after being at $31 in April of that year. (And it has been a continuous roller coaster ride ever since. In 2008 prices ranged from about $200 to around $80 today.) But unlike Apple's stock price ride, the bitter disappointment that McDonald writes about can't be laid at the feet of the current economic crises. On June 11 -- during the Microsoft/Yahoo merger mania era -- the blog MSFTextrememakeover lamented:
"It's sobering to realize that during Ballmer's term as CEO, MSFT has under performed almost all of its top tech peers (including AAPL, IBM, HPQ, SAP, INTC, CSCO, SYMC, NOK, ORCL, ADBE, RIMM, QCOM, Ebay, and AMZN), and badly lagged the major averages. We may even see our third plunge to test the 2000 lows during his watch. Unbelievable. ... That performance record would be embarrassing enough on its own, but it comes in spite of going through an unprecedented amount of our cash on buybacks (nearly $43 billion worth in just the past three fiscal years) and other schemes that were supposed to drive the stock. ... Meanwhile MSFT's senior leadership have collectively been paid billions over this period, while leading the industry in insider selling every year (net of purchases, almost 350 million shares sold over just the past 5 years). You are expected to be patient and wait for returns over the 'long term' (still undefined, but has already exceeded 10 years - think Jim Carrey in Ace Ventura and 'If I am not back in 5 minutes…just wait longer.'), but they want their return up front."
Microsoft certainly isn't the only multi-billion IT monopoly to be struggling to rise above the stock prices of a decade ago -- a situation made worse by the fact that Wall Street is currently in a panic. Cisco (CSCO) is in a similar boat. But just because Microsoft has company, doesn't make it right. Ultimately, CEOs report to investors. With the kind of competitive pressure that Microsoft is seeing in cash-cow operations such as desktop operating systems and office applications, the software giant is giving strong indications that things at the top might be about to get ugly.
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