Bonum Certa Men Certa

Microsoft is Collapsing Based on Staff Exodus

"One strategy that Microsoft has employed in the past is paying for the silence of people and companies. Charles Pancerzewski, formerly Microsoft’s chief auditor, became aware of Microsoft’s practice of carrying earnings from one accounting period into another, known as “managing earnings”. This practice smoothes reported revenue streams, increases share value, and misleads employees and shareholders. In addition to being unethical, it’s also illegal under U.S. Securities Law and violates Generally Accepted Accounting Practices (Fink).

--2002 story about Charles Pancerzewski, Microsoft



Summary: The pace of high-level departures at Microsoft speaks volumes and helps confirm that something is very rotten inside

THE SYMPTOMS are sometimes more indicative of a disease than an optimist's diagnosis/prognosis can ever be. Bias is simply built into the system and nobody dares to deviate towards the controversial. Microsoft is close to many financial firms, so the continued illusion of Microsoft as an unprecedented cash generator falls under too little outside scrutiny. For example, we are asked to accept that Microsoft is rich while its numbers turn out to be fake and it actually has some debt to repay. People in the news pessimistically wondered what's next for Microsoft around the time it was downgraded by FBR and another analysts firm [1, 2, 3]. It was also around the same time that BlackRock cut its stakes in Microsoft, as we noted at the time.



Earlier this months we ran through some Microsoft news to see if there is something that we missed. Well, while there is a degree of overlap (wrt older posts), there is a lot that needs to be added in order for our record to be complete.

Let us start with the claim that "Microsoft's Ballmer falls far down list of CEO 'wealth creators'". He sank from eighth to almost 100th in just one year! To quote a Microsoft booster:

Microsoft CEO Steve Ballmer fell 65 spots down a list of the top 338 chief-executive wealth creators and destroyers, ranking 73rd in 2010 after boasting the No. 8 spot in 2009.


Another Microsoft booster says:

But the big drop came at Microsoft. Steve Ballmer's ranking plummeted a whopping 65 spots as the CEO of the software giant finished in 73rd place. That was enough for the company and Ballmer to earn an "F" in terms of economic margin change. [Update: As a reader pointed out, Microsoft did receive an "A" rating in three of the categories, including management quality score]. Only Campbell Soup, and its CEO Douglas Conant, saw a bigger drop among the top 100 companies.


These reports are as Microsoft-sympathetic as they can get because the writers are both serving Microsoft's agenda in unofficial-yet-dedicated Microsoft blogs. Here is a corporate 'news' article whose headline says that "Ballmer's CEO ranking plummets, Steve Jobs' climbs" (storyline added there for increase in page hits).

More importantly, however, there were heaps of articles that month about Ballmer dropping billions in Microsoft shares. There were also embellishments from this or this blog (again Microsoft boosters from Seattle), which don't put it as bluntly as the report titled "Microsoft CEO Dumps More Shares" put it:

We know that Microsoft is struggling in the consumer and Smartphone markets and that their share of the browser market is on the skids, but does CEO Steve Ballmer know something that we don't know?


Exactly.

The behaviour among Microsoft presidents has been rather consistent because many of them left and as we've shown over the past year or so, many of them also sold their Microsoft shares. Only 2 months ago it was the company's COO, Kevin Turner (GNU/Linux-hostile guy [1, 2, 3]), who dumped Microsoft shares:

COO of Microsoft Corp. (MSFT) Brian Kevin Turner sells 48,956 shares of MSFT on 11/01/2010 at an average price of $27 a share.


It is worth mentioning that this same GNU/Linux-hostile chum was travelling to Nigeria to ensure its continued dependence on Microsoft back in November (see background in [1, 2, 3]). He was also diversifying by joining the board of Nordstrom at the end of last year, so watch out for what Nordstrom does next. The appointment was additionally covered in [1, 2, 3] just months after Nordstrom had collaborated with Microsoft, or vice versa. Here is the press release about this appointment. Might Turner be the next bigwig to leave Microsoft and pursue other opportunities? These ex-Softies often help Microsoft more from the outside than from the inside. Entryism is becoming a real problem and to quote a Red Hat employee from yesterday, "Will Muglia join/create another patent troll? Maybe Nokia needs more ex-softies? We will see ..."

This reference was made in relation to Muglia's exit [1, 2] and in his departure note (published by Mary Jo Foley) Muglia named his competitive threats and "Linux" was the first. "Microsoft Exec Exodus Continues" is a noteworthy report about it. It's looking pretty grim.

Microsoft Corp. announced on Monday that Bob Muglia, who led the company’s server and tools division, will leave the company this summer at the behest of Chief Executive Officer Steve Ballmer.

Muglia, who has worked for the Redmond, Washington-based company for 23 years, will continue to actively run the $15 billion Server and Tools business (STB) while Microsoft searches for his replacement, said Ballmer in an e-mail sent to employees on Monday.


My co-host Tim opines that Ballmer will have been fired (or left) by July this year. Microsoft is spiraling down the tube at this stage. As more products get axed, in more areas will Microsoft technically qualify as a patent troll.

"I’d be glad to help tilt lotus into into the death spiral. I could do it Friday afternoon but not Saturday. I could do it pretty much any time the following week."

--Brad Silverberg, Microsoft



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