ValueAct Capital Has Taken Close to $2B Stake in Microsoft

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ValueAct Capital has taken close to a $2 billion stake in Microsoft Corp, according to news reports.

ValueAct may have almost 60 million shares, valued at about $1.9 billion, Bloomberg News reported. If so, ValueAct would be among the 20 largest investors in Microsoft.


ValueAct explains in an online statement that it, “concentrates on acquiring significant ownership stakes in a limited number of companies that it believes are fundamentally undervalued. The investment team seeks to identify companies that are out of favor, or may be undergoing significant transition. Such companies may be temporarily mispriced for a variety of reasons, including perceived unfavorable industry conditions, poor business performance, changes in management or ownership, reorganizations, or other external factors. These conditions can often result in fundamentally ‘good’ businesses that are available at depressed valuations. The goal in each investment is to work productively with management and/or the company's board to implement a strategy or strategies that maximize returns for all shareholders.”  

It’s not clear how much influence ValueAct will have over Microsoft. ValueAct likely holds less than 1 percent of Microsoft’s total stock, according to The Wall Street Journal.

Nomura Securities analyst Rick Sherlund told The Journal he didn’t think ValueAct’s percentage is large enough to be “influential,” and may not be able to influence company leadership on strategy.

“I’m not sure you can do that with 1% stock holdings,” Sherlund said.

Microsoft and CEO Steve Ballmer have been criticized for falling behind Apple and Google – as the sector moves more toward mobile, Reuters reported.

But ValueAct is positive about the company.

“It is a dominant software company…and in the long term it will win out,” Jeffrey W. Ubben, founder of ValueAct Capital Management, said at an investor conference on Monday.

He also predicted that after three to five years, Microsoft may be “the largest cloud company in the world.”

“In three to five years, which is our time horizon, we’ll stop talking about PC cycles and instead talk about Microsoft as the largest cloud-computing company in the world,” Ubben said.

In an apparent response to the ValueAct move, Microsoft’s board and management both “welcome the perspectives of shareholders,” a Microsoft spokeswoman said in a statement quoted by The Business Insider. “We are committed to enhancing value for all shareholders, and will continue to take actions that we believe will enable us to achieve this objective."




Edited by Stefania Viscusi
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