Shares of Microsoft (MSFT) advanced as much as 2.5 percent Thursday after David Einhorn, head of Greenlight Capital — best known for capitalizing from bets against Lehman Brothers (LEHMQ) several months before the firm collapsed in 2008 — said the tech giant should fire CEO Steve Ballmer. According to Einhorn, the longtime company executive (Ballmer has been the head of Microsoft since January 2000) is wasting millions in R&D without having a real focus on the future.[Bloomberg]: “Ballmer is weighing on the company’s share price,” Einhorn told investors in Microsoft at the annual Ira Sohn Investment Research Conference in New York. “It’s time for Microsoft’s board to tell Steve Ballmer, ‘All right, we see what you can do, let’s give so-and-so a chance,” Einhorn said.
Einhorn’s remarks echo what some investors have suggested for some years in private.
“Ballmer’s continued presence is the biggest overhang on Microsoft’s stock,” Einhorn told fellow fund managers.
As of March 31, Einhorn’s Greenlight Capital stake in Microsoft — a co. which is no longer seen as a dominating force in technology after failing to capitalize on Internet and mobile markets — was worth over $230 million. Shares of MSFT, which currently have a forward PE ratio of 8.9, an indication that shares trade at a clear discount to the market’s multiple, have underperformed the S&P 500 index in four of the past five quarters. The stock is down 11% in 2011, 3.2% in the past 52 weeks, and 30% over a decade.
MSFT currently trades at a 3.04x on a price to sales basis. The equity has a trailing P/E of 9.84 and a P/E to Growth ratio of 0.91. The median Wall Street price target on the stock is $34.00 with a high target of $38.00.
“Microsoft trades at a remarkable discount,” Einhorn said. “Microsoft is not getting credit for its achievements and prospects.”
At last check MSFT shares were up 64 cents, to $24.83, a gain of 2.73% on 49 million volume.