Holman Jenkins, writing in today’s WSJ, criticizes Steve Ballmer’s management failures that have left its investors with a decade of “dead money.”
At bottom, this is a corporate governance problem. Manifestly, the solution is not to let management keep stepping up to the plate with shareholder money and promising home runs that never materialize. Nor is the solution another big, one-time dividend like the massive, $3-a-share payout in 2004. That $32 billion attempt to placate investors, in retrospect, may have been the seminal blunder of the Ballmer era. It didn’t go far enough. What the company should have done, and should do now, is sharply lift its regular dividend and then promise to keep lifting it, so management will have to strain and push to reinvest in its core business while still meeting its dividend commitment to shareholders. Mr. Ballmer or whoever succeeds him needs to be placed under relentless daily pressure to distinguish between necessary spending on the business and pursuit of me-too products that don’t serve shareholder interests.
Even better, Microsoft should become an LLC. Like a traditional highly leveraged private equity target, it should become a cash cow regularly producing milk rather than trying to stay a virile bull siring calves. Only it shouldn’t wait for a private equity buyout that probably won’t come in the current environment. Instead, it should adopt an uncorporate governance structure that enables it to commit to regular distributions to its owners. Think Sears Brands, LLC and Chrysler Group LLC. For details, see my Rise of the Uncorporation, Chapter 8.
This raises the question of where the innovations will be coming from if not from Microsoft.