“A top hedge fund manager said Tuesday that Microsoft has a business model that makes it a better company than Apple for the long-term,” Maureen Farrell reports for CNET.
“Jeffrey Ubben of ValueAct made the comments at the Value Investing Conference in New York. Ubben’s firm announced a $2 billion position in Microsoft earlier this year and is thought to be a driving force behind CEO Steve Ballmer’s decision to retire as well as Microsoft’s new stock buyback and dividend increase announced earlier Tuesday,” Farrell reports. “Ubben said he likes that Microsoft charges a lot of money, makes a lot of money, and has enterprise contracts that will last for years. He noted that Microsoft is ‘in the plumbing’ of big corporations.”
Farrell reports, “By contrast, companies like Apple and Samsung, which cater more to average consumers, have to keep churning out new products every few months even if changes are incremental. Ubben refused to discuss his stake in Microsoft in greater detail, saying his hedge fund and Microsoft ‘are in the middle of stuff.’ ValueAct should play in even more active role in deciding what’s next for the company. Microsoft offered a board seat to ValueAct president Mason Morfit in late August.”
Read more in the full article here.
MacDailyNews Take: iCal’ed.
[Thanks to MacDailyNews Readers “Fred Mertz” and “David E.” for the heads up.]
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Awwww, God bless his pointy little head. 😉
Pointy as in no room for a brain….. but..
Actually if you allow for his lying thru his teeth, he did..”is thought to be a driving force behind CEO Steve Ballmer’s decision to retire as well as Microsoft’s new stock buyback and dividend increase announced earlier Tuesday, ”
So he is happy to buy into Microsoft as long as they buy 40 BILLION in shares back so the stock rises and he can cash out.
Pure and simple cash, money, greed talking. Specuating… er….. investing in Microsoft… ….. Right!!!!
Just a thought.
Actually I agree with him. Microsoft IS in the “plumbing of major corporations”. Can someone please call the plumber? We have a serious blockage here. Roto-rooter please? And how about a little air freshener while we are at it…
Yes, everyone I know stuck at work with Winduhs, that have a Mac at home all say the slow slug that is Winduhs of any form is the biggest block to working faster and more efficiently than anything else. I typically hear: “I could have done [insert task description] 2 or 3 times faster on my Mac at home. Businesses are cutting staff and chaining the leftover people to the giant productivity sucking slug that is Winduhz.
TL/DR: Shithead trying not to lose his investment money.
No, smart guy who is taking an active step in making sure his investment pays off big, even if it really has nothing to do with either company’s long term prospects.
One thing he’s right. As long as 90% of the business world keeps using that POS Windows and hires CIO/IT Windows Pawns, MS will continue to bank billions and billions every quarter. No matter how many POS products they churn out that causes them to lose billions and billions, MS will keep on profiting. That one BS moves and lies that fooled IBM set them for life!
And once upon a time the “tried and true” statement was, “No one gets fired for buying IBM.”
MS will eventually die out in the enterprise too unless it *radically* changes its path. There is a slow, unstoppable move to a post PC era. It won’t happen soon, but eventually the average business will be as interested in Microsoft as they are in IBM today.
I’ve got news for a LOT OF US on this blog.. Apple getting ahead of Microsoft in market share in enterprise is NOT going to happen in OUR LIFETIMES… I mean, how long are we going to wait? I’ve been waiting 20 years now.. I only have about 10 more of my “Career”…so I’ll never WORK and see Apple Dominate. If you’re in your 40’s or older, Apple gaining any enterprise majority market share wont happen in your career.. Maybe in Niche businesses. I’m good with that, I do video work, and have always used Macs, but as an investor, I’m not holding my breath.. For starters, as long as Apple has no pro “Killer” apps, (name one that is industry standard, even ADOBE sells way more to windows users,) and as long as they refuse to put out machines that are customizable, (no mac pro in years, even to this minute), and competitively priced, ( I can get equivalent i7 processor in a PC for less than 1K anywhere) and refuse to even try to penetrate enterprise, (certainly the percentage of user base has not changed much beyond 10 to 13%… even with the great “ecosystem”) This Hedge fund manager is correct. Sorry….and If you ask me, it doesn’t even look like Apple is trying. So big deal, windows needs a great mobile phone. We know Samsung made that happen overnight.. At the dentist last week, I had a CEREK crown made, with CAD design and Milled in 45 minutes, ALL created with a program running on a windows BOX.. Staring me in the face. my Local bar/restaurant runs their entire ordering, cash register and inventory on a windows custom program…all medical equipment, everything, SADLY runs on windows and is everywhere, Where is Apple with any of the custom made applications. NOWHERE. And Apple stock will suffer until this changes. I hate it, but in the words of Metallica’s James Hetfield, “SAD BUT TRUE”… I write this hoping Apple gets off its ASS. Is someone reading this? OR they simply make the products they make, could not care about actual market cap or growth, and are “GOOD”… like a “BMW”… I think COOK lays around home with his BUDDY, and drinks expensive wine, coasting it out, not being able to spend his cash fast enough… I am an Apple Fan, but My god.. we’re waiting for a watch?? Head-in-the-sand hate mail in 3…2…1…
Sorry you didn’t get the memo. Apple does not WANT to be in enterprise on enterprise’s terms. Enterprise dictates what Microsoft develops on the software side, and on the hardware side demands razor thin margins on equipment they buy. Ask Dell how that scenario plays out. Enterprise is responsible for all of that legacy spaghetti code in Windows because the world would screech to a halt if they had to change any business procedures due to a software change.
Customization? Are you joking? As a professional systems admin for the last 12 years of my career I NEVER opened the case of a company computer. Non-standard configurations are not tolerated, and when different specs are needed a new machine is bought.
I think you should switch your investments from Apple to Microsoft. They seem to be doing all the things you wish Apple would do.
This is correct. It doesn’t mean Apple never ever wants to be in the Enterprise Market. It’s simply a lost cause and they stopped wasting their effort convincing the MS PINHEADS running those companies.
Instead, what Apple is doing is creating products that will work well enough integrating with existing Enterprise bitched slapped with MS. The same products and more, if one so chooses, can start an enterprise business with all Apple or escape MS stranglehold and be perfectly fine. Apple is simply not yelling at you to do it, Apple is simply smiling and saying yes we have the stuff you need, so if you want, you can go Apple all the way. Just come and ask us when your ready.
First, I find it extremely difficult to believe you are an Apple fan.
Second, no where did I say that *Apple* would be, or will be, replacing Microsoft in the Enterprise.
Third, at no time in the past 20 years did Apple make a distinct, direct effort to take over the Enterprise. If you’ve been waiting for 20 years for that to happen, you just have not been paying attention.
Fourth, you say you can buy an i7 processor in a PC for less than 1K *anywhere*. That is 100% BS. Go to Dell or HP and get an exact equivalent to a Mac Pro — even a three year old Mac Pro and you are going to pay more than 1K. Period.
Fifth, Enterprise does not care about Adobe (except PDFs — and that’s been built into Mac OS for many years). Adobe is a niche product supplier in the Enterprise.
Sixth, as someone who works with, and has developed for, medical equipment and medical equipment suppliers I can say with 100% certainty that NOT “all medical equipment” run on Windows! If you need a truly life critical system you do NOT run Windows. To say otherwise it either knowingly lying or just plane delusional.
Seventh, is Microsoft firmly entrenched right now? Yes. Was IBM (and to a lesser extent DEC, Data General, Wang, and a whole slew of others) were firmly entrenched 30+ years ago. How many real main frames or mini computers have you laid your hands on (that were working!) in the past five years? It *IS* the post mainframe/minicomputer era. People DON’T user terminals anymore!
What I said was that the world is inexorably moving to the post PC world. It won’t happen over night, but it WILL happen. If you think Microsoft is leading that change you are certifiably insane. If you think that Apple is not leading that change at this particular point in time you just are not paying attention.
Who will be the leader when the post PC era is fully upon us? No one knows. Not me. Not you. No one. However, right now, with the trends of the past few years, it most certainly does NOT look like it will be Microsoft.
With “Bring Your Own Device” happening more and more (even some U.S. Defense Contractors are embracing BYOD under proper circumstances!) the post PC world is evolving everywhere. The device in BYOD is NOT a PC!
Yes, the move to the post PC era will NOT happen overnight. It will take several more years. Possibly as much as a decade more. But it will happen in our lifetimes (barring some untimely end of any of us).
However, as I said above and in other posts to this site, unless Microsoft *RADICALLY* changes its current path (and I cannot put that more strongly) Microsoft will be as relevant to the average business of the next decade as IBM, DEC, Wang, Data General and the rest are to the average business today.
Great post!!!
MS is facing a number of problems.
Consumer revenue is calculated as revenue per unit times number sold. In this area both numbers are headed south. The PC market is shrinking and as prices for PCs become very low the price MS can charge for Windows is dropping. With the introduction of free Office suites from Apple and Google the price and demand for MS Office is falling as well.
They have had some success with Xbox but that will never be a big moneymaker for them. It may have peaked already.
Their only out is to retreat up market to the Enterprise. The problem with that is that Dell, HP, Oracle, IBM and others also have the same idea.
MS won’t disappear but I see them struggling and getting much smaller. Maybe the new CEO will spin off Windows and Office while they can still get good money for it.
Agreed. Completely.
Unless Microsoft, with its desperate acquisition of Nokia assets and technology (not the entire company) can find a way to be disruptive, the hubris of Steve Ballmer may relegate Microsoft to the unusual position of being an also-ran with mobile computing. And presently, that is where the puck is going. The traditional WinTel PC is where the puck was in the past.
That was then, and this is now.
Microsoft still generates a lot of cash. As long as businesses continue to license Windows seats, Office and enterprise tools, the company can continue to succeed. But in terms of the growth that Microsoft once enjoyed, even as it attempts to enter or dominate markets such as home entertainment, gaming and search, Microsoft has found itself either to not be competitive enough, or products such as the XBox, while successful, are not necessarily profitable.
A good metaphor is Dell. Once the undisputed king of PCs, Dell has suffered a significant reversal of fortune. While it was an early entrant in producing tablets and even an attempt at an iPod competitor, Dell failed to impress consumers. Today, Dell has retreated from consumer products, and now focuses on selling low-margin PCs and increasingly is focused on servers and higher margin enterprise services (IT outsourcing via its acquisition of Perot Systems). Essentially, Dell has thrown in the towel on trying to compete with Apple, Samsung and Google/Motorola on consumer products.
The decline in PC sales growth means a decline in the number of Windows licenses sold. It won’t necessarily make Microsoft crater, but unless the company can truly innovate under a new CEO, it will be a slow-growing company.
I dispute Jeffrey Ubben’s assertions about Microsoft, even though the company will trudge along in future years. While even Apple has slowed down, I still firmly believe in the company’s ability to grow its market share competitively in mobile devices. And I believe that more surprises are in store for products and product categories yet to come to market. That is something for which Apple excels.
Apple is challenged by having to create new “blockbusters” much like pharmaceutical companies have to with their drug pipeline, or movie studios (and game software companies) have to with movies and major new game releases. But the company is more than equal to the challenge. What frustrates the investor is that Wall $treet prices and values Apple’s stock not on its earnings and cash flow growth, but on the company’s ability to roll out a new “blockbuster” every few years.
But the patient Apple investor who diligently reinvests their dividends, takes advantage of Apple’s massive stock buy-back program and waits out Wall $treet will in the end be greatly rewarded. In fact, research has shown that the patient investor is rewarded by dividend paying stocks like Apple, especially companies that grow their dividend every quarter. Companies like Apple (which only recently started to pay dividends), and stalwart companies like Pfizer, Johnson & Johnson, General Mills, Proctor and Gamble, Phillip Morris and other “Dividend Aristocrats” as they are known, have, over long periods, generated a much higher total return (stock price growth + number of shares resulting from dividends reinvested) than the S&P 500. That’s no small feat.
So yes, Microsoft will be a decent investment for a dividend-loving investor. But it’s likely that the business model that Microsoft has today will not mean that it will blow past Apple. Microsoft’s hegemony with Windows licenses is threatened by declining PC sales, and its enterprise sales may in fact be threatened by the growth of iPads in the enterprise, and the emergence of cloud-based apps from Google (Apps) and even Apple.
I think Jeffrey Ubben is not a little disingenuous when he asserts what he did, and is using the media to hype things. He knows well that his crown jewels are stuck in a figurative vice as long as Microsoft’s stock price continues to flatline. It makes me angry to see that the media will run with anything a hedge fund manager or analyst cares to toot, without first examining the facts.
I urge you to read John Gruber’s recent posts about Jeffries analyst Peter Misek (www.daringfireball.net) and those of Philip Elmer-Dewitt at Fortune. Misek moved Apple’s stock price downward after concluding (wrongly) that a reduction in production of Apple A-series CPUs at the Samsung Texas plant hinted at decreased demand. What Misek failed to research and understand was that this had nothing to do with a decreased demand for iPhones, and everything to do with Apple moving production of the A7 CPU to another vendor (to be named).
Likewise, analysts who poked Apple with a stick for not disclosing pre-order sales figures of the iPhone 5c are equally disingenuous and prejudiced. Apple simply chose not to disclose this information, much like Amazon has steadfastly never released sales figures for their Kindle devices, or Google with its Nexus series phones. Yet, analysts expect only Apple to be transparent and forthcoming.
Apple is being held to a double-standard by analysts and greedy hedge fund managers, who use CNBC and other financial media as a bully pulpit for outright lies and inaccurate (and woefully incomplete or wrongheaded) assertions like Ubben’s. If I were a large pension fund, I would steer clear of his company. By deeply investing in Microsoft, ValueAct is painted into a corner. It will take much more than a Ubben’s manipulation of the media, replacement of Steve Ballmer, Microsoft’s overpayment of Nokia technology, patents and assets and other acts to make them realize the full return on their investment.
Stuff like this makes my head hurt. But I am a patient investor. And in the end, I firmly believe that the true value of Apple stock will reach its appropriate level after all the noise, manufactured rancor and BS fades away.
John, Just take a breath….. breath…
“Apple getting ahead of Microsoft in market share in enterprise is NOT going to happen in OUR LIFETIMES… ” — Er just what do you mean about getting ahead??? Do you mean Apple stock going up so you can sell and make money or Apple ending up ruling every tech business that ….. makes money???
PS, “I think COOK lays around home with his BUDDY, and drinks expensive wine, coasting it out, not being able to spend his cash fast enough ” —– This indicates to me that you really do not research anything, just read blog headlines.
Cook speaks very little about his life but he is very food and health aware and is up super early exercising and then getting into work very early. Read John, read and think.
Just saying.
Sorry John, you don’t know what you are blithering about. I manage a dental office for one of the top dental implantologists in the world. Everything in my office, from the patient database, to chairside data entry, to patient check in, to digital radiography—including state-of-the-art 3D Cone Beam Computed Tomagraphy—is initiated and handled by, wait for it, Apple equipment, including 7 iMacs, one Mac mini as office server, one Mac Pro for the 3D CBCT/panelipse, 3 MacBook airs, 4 iPads, and 8 iPhones, plus the doctors’ personal home Macs and iPads. All inter-connected and working with our vertical solution software MacPractice Dental which offers the same degree of integration in MacPractice Medical, Chiropractic, and Optometry. Many physicians carry MacBook Airs or iPads from patient to patient as they do their rounds. They are not carrying PC products.
We do have two of our iMacs in the front office running parallels with Windows 7 in a sandbox purely to run ONE Windows application, which if the vendor were smart could be easily run as a website. It, however, is totally created with Microsoft products and will not run with anything except a Windows Operating system using Windows Explorer to connect to their database of employers and dental benefit plans. . . a necessity to assure coverage for patients who need work done. It won’t even work with Firefox. The vendor’s Software writer is Microsoft centric all the way. . . and is on record calling Mac’s “toy computers” and refuses to program for anything but Windows. So, we have to have that one MS invasion into our office.
When we first got the CBCT, the maker provided a “free” Windows 7 computer as the workstation to control it. . . even though they sold $136,000 device as Mac compatible. This Windows POS computer had to networked into our office system. . . but MS, in its misguided non-wisdom, for some reason, allows multiple applications and services to willy-nilly shut down the computer’ network cards—some of which that leave you scratching your head why on earth THAT app would ever NEED the ability to shut down the network card—which had the unintended consequence of often (Try Daily!) crashing our network in the middle of transmitting large 3D files! Not a desired outcome!
That problem went away when we repurposed an old Mac Pro and trashed the almost brand new Windows PC (after tracking down over forty apps and services that had the power to SHUT DOWN THE STUPID network card and either removing them as totally unnecessary for the purpose of that computer, or disabling that function!) SHEESH! Did I mention the very few of these settings were in centralized logical places. . . Some required $tring commands to be edited. BAH!!! We gave the PC away to a gamer.
MS is in the plumbing…..the sewer pipe.
Swirling…
“He noted that Microsoft is ‘in the plumbing’ of big corporations.” ”
Well, we all know what else is ‘in the plumbing’, don’t we children?
Can we say “shitcan”?, I think we can…
In Alaska we call it the ‘honey bucket’. Still in use in some remote villages.
Hi Cinerama — and out here in the islands it’s too warm. Tourists might call a poi bucket, but I like poi!
Not many companies succeed with that business model of writing off huge losses for products nobody wants and even few buy after prices are slashed.
Oh boy. Have to feel bad for his investors.
He was right 5 years ago. Maybe he just has delayed speech?
He must have lost thousands in M$ stock, so he just needs to bump it up a little & then he can sell it at a small loss.
the share price has gone nowhere for over a decade, and he thinks maintaining the current model and adding a new CEO will change that?
Ok, we’ll see. Maybe he’s doing an intermediate term play and looks to exit at the next bounce when the new CEO is named.
The best of it is not that he offers such a hopelessly optimistic analysis of Microsoft’s prospects, but that his company’s president is planning to influence Microsoft’s board in the future and advocate carrying on in much the same way as before.
I think we can all see how that one is going to pan out.
“Jeffrey Ubben is Steve Ballmer’s long lost right nut..”
What???!!! Your long-lost twin????!!!!
Fraternal twins
Wanker
Do people still trade in ‘pork belly’?
He announced his resignation.
reminds me of this morning on msnbc’s morning joe, i caught some conversation about apple between joe scarb. and a fellow named brian. don’t know his last name, i’d seen his face before, nobody was sure if he was from the house of lords. haha. but seriously, they were both going on how apple has done nothing in the past couple of yrs, nothing ..so disappointed they were. it was really unbelievable how these mouthy mouth people on talky talk shows go on and on and on like they’ve got the inside know when in reality, it’s their job to just sit and bullshit and viewers listen to them as though they’re informed. it was like a big curtain was pulled open and i saw their little brains. and still, people listen and believe. it’s sad. so, so sad.
And the winner of the most blatant attempt to manipulate a stock price goes to………
Wait until he goes to track his investment balances and can’t figure out if he needs to touch the screen or click his mouse. It will all end in the blue screen of death anyway…
Steve Jobs said the problem with MS is that they have not taste. I would add to that they treat their customers more as a foe than a friend. You see it is so many way: creating an operating system and then dumbing in down into multiple versions; leaving back doors open; selling music (when they did) with points that had to be purchased ahead of time at prices that were not evenly divisible into the points; on and on.
Interestingly, they have all the pieces and the resources to be a mighty competitor. If someone with taste and empathy for the customer became CEO, the fortunes of Microsoft could change very quickly.
Yes, by making the former Apple’s Scott Forstall their next CEO! That would be a real “steal” and we would see a new Apple II in making. haha.
Yea, he could put some digital curtains on their Windows. 😉
What a great news for MS, they should hire this guy! Because this guy can forecast something that even Bill Gates couldn’t and talking bubble before seeing the actual result!
I like his strategy (dreaming, he must be using mind-altering substances like Drain-o)
I like it a lot.
I hope he doubles down on his ingenious “investment” to have one less xxxxxx (whatever he is) when the strategy works just like it has for the past 10 years.
I know another formally large company that was heavy in the backend of companies, their name was Sun Computers. Every website seemed to be running off of their plumbing… I haven’t heard much about them lately, oh yeah they were bought out for a fraction of their former worth by Oracle and their (at the time) industry leading Java is still huge, but no Sun anymore.
The only thing missing is the uncomfortable laughter by Balmer in agreement.
There are two signs of a sinking ship – when the rats start leaving and the Hedge Fund Managers start coming aboard.
you forgot their cries of despair
Glad that monkey’s not handling MY money.
“Microsoft is ‘in the plumbing’ of big corporations.”
Didn’t he mean sewage?
ValueAct reminds me of ValueJet and probably end with the same results…
This guy wants to sell MS and buy Apple, that’s why he wrote this article.
So he owns $2.0 Billion worth of Microsoft and he doesn’t want to admit it has turned to crap. This passes for news?
One word for this pap: BULLSHIT