Microsoft Investors Are Not Impressed With the CEO Waiting Game

Microsoft

Source: http://www.flickr.com/photos/wonderlane/

Only time will tell who the new chief executive of Microsoft (NASDAQ:MSFT) will be. Board member John Thompson wrote on Tuesday that the search committee expects to complete its work “in the early part of 2014,” and that until then, the markets will simply have to wait.

The news appears to have agitated investors who are eager to see what a post-Steve Ballmer Microsoft will look like. The stock has faced selling pressure ever since the announcement was made, with a temporary reprieve on Wednesday afternoon, after the U.S. Federal Reserve announced tapering and equities rallied to close the day near record highs.

News that Ford (NYSE:F) may not be doing so well has complicated the issue for Microsoft, as CEO Alan Mulally is a crowd favorite as a replacement for Ballmer. Analysts and pundits have argued that Mulally is exactly the type of executive that Microsoft needs to keep the company competitive with rivals like Google (NASDAQ:GOOG) and Apple (NASDAQ:AAPL), but he could be called on by Ford’s board to stay and right the ship there.

As much as investors appear to want Ballmer gone, he is leaving the company on pretty good terms. Shares have climbed more than 32 percent this year to date, outpacing the S&P 500 and the Nasdaq, and looking absolutely spry next to Apple’s fractional YTD return. If price gains were a race, though, Google wins the tech titan league hands down with YTD gains of about 50 percent.

But headwinds abound. Research firm International Data Corp. recently lowered its forecast for 2013 personal computer shipments from a loss of 9.7 percent to a loss of 10.1 percent. If the firm’s predictions for its Worldwide Quarterly PC Tracker are correct, 2013 will represent the biggest fall in PC sales ever. Declines are expected to moderate to 3.8 percent in 2014, but it’s still bad news.

Microsoft has been forced to focus on Windows Phone — for which it acquired Nokia’s (NYSE:NOK) device business — the Surface, and Windows 8 to stay competitive with Google and Apple. Fortunately for Microsoft, IDC reported that it expects sales of the Surface to grow to 39.3 million in 2017, up from less than 7.5 million this year. By 2016, Microsoft’s tablets are expected to make up 10 percent of the tablet market as a whole.

Decent Surface sales will only get the company so far, though, and investors know this. Investors want to know who will be steering the ship through Microsoft’s next chapter. Last week, it was speculated that Qualcomm (NASDAQ:QCOM) Chief Operating Officer Steve Mollenkopf was in the running, but apparently Qualcomm wanted him more, and gave him the top job there.

Satya Nadella is in the running, a tech executive through and through who would no doubt do justice to the system. Some observers have suggested that Microsoft appears to be leaning toward such a dark horse executive given the recent headline drama involving its CEO search.

According to a report from Bloomberg, losing Mollenkopf shows the many difficulties Microsoft’s board is facing in the search for a new leader. Some other executives have declined the position as well, including eBay (NASDAQ:EBAY) CEO John Donahoe and former VMware (NYSE:VMW) CEO Paul Maritz, people familiar with the matter said to the news service.

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