Microsoft board backs Ballmer over Einhorn
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Microsoft Chief Executive Officer (CEO) Steve Ballmer gestures as he speaks during the CII Cloud Summit - Enabling Inclusive Innovation, in New Delhi May 26, 2011. Microsoft Corp's board stood behind CEO Ballmer on Thursday, defending its longtime leader after influential hedge fund manager David Einhorn touched off a debate by calling for his dismissal. REUTERS/B Mathur
On Thursday May 26, 2011, 1:59 pm EDT
By Bill Rigby
SEATTLE (Reuters) - Microsoft Corp's board stood behind Chief Executive Officer Steve Ballmer on Thursday, defending its longtime leader after influential hedge fund manager David Einhorn touched off a debate by calling for his dismissal.
The fund manager, who made his name warning about Lehman Brothers Holdings Inc's financial health before the investment bank's collapse, accused Ballmer on Wednesday evening of being stuck in the past, launching the sharpest attack yet by a high-profile investor against the company's leadership.
Einhorn's comments, which echo what some investors have said for some years in private, caused a stir on Wall Street and helped Microsoft shares climb 2.4 percent on Thursday to $24.76.
"His continued presence is the biggest overhang on Microsoft's stock," Einhorn told fellow fund managers at the annual Ira Sohn Investment Research Conference in New York.
Microsoft's nine-person board, including Chairman and co-founder Bill Gates, supports Ballmer, a source close to the board told Reuters on Thursday.
Microsoft -- the largest U.S. company by market value in the late 1990s -- has been overtaken by Apple Inc and International Business Machines Corp in market value, and is no longer seen as a dominating force in technology after a failure to capitalize on Internet and mobile markets.
Before Thursday's gain, the stock had been down 6 percent in the past two weeks after Microsoft agreed to pay $8.5 billion for Internet phone service Skype, a move that mystified many investors.
Einhorn said it was time for Microsoft to consider strategic alternatives for its money-losing online business, which has so far failed to win share from Google Inc.
"Clearly, some people are calling for a change," said Sid Parakh, analyst with McAdams Wright Ragen. "If you look at the financial performance, that's been fine. But I think the issue is broader than that.
"If you look at search, mobile, tablet, these are areas they should have been investing in, and they have -- but they weren't able to get it right," he added. But: "If there was any reason to believe the board was not with Steve, it would be a different situation. But the board seems to be behind Steve."
IT'S ON
The online services unit, which runs the Bing search engine and MSN Web portal, had a loss of $726 million last quarter and has now lost $7 billion in four years.
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