Thursday, 10 April 2014

Activist investor who wants Office on iPad joins Microsoft board

Computerworld - Microsoft yesterday added G. Mason Morfit, president of ValueAct Capital, to its board of directors, making good on its part of the deal it struck with the activist shareholder last year.

"We've had the opportunity to work with Mason over the past six months, and we look forward to working with him more closely as a member of the board," said John Thompson, Microsoft's chairman, in a statement Tuesday. "Mason brings valuable insights given his financial background, his extensive experience as a public company director and his perspective as a significant Microsoft shareholder."

What Thompson did not say was that Microsoft's hand was forced. To keep San Francisco-based ValueAct from launching a proxy fight last year, Microsoft offered a board seat to the investment firm and said that Morfit could regularly meet with "selected Microsoft directors and management to discuss a range of significant business issues" before he took his place at the table.

In return, ValueAct promised not to acquire more than 4.9% of Microsoft's outstanding shares, not to launch a proxy battle, and not to "make any statement or announcement that constitutes an ad hominem attack on, or otherwise disparages or causes to be disparaged the Company or its affiliates or any of its current or former officers or directors," according to a late August filing with the U.S. Securities and Exchange Commission (SEC).

Morfit was the first Microsoft director appointed under duress, not by the Redmond, Wash., company's choice. As of February, ValueAct owned less than 1% of Microsoft. At today's current share price, ValueAct's holdings were worth about $2.5 billion, far less than any of the top 10 institutional investors, such as Vanguard ($14.2 billion) and State Street ($13.1 billion).

ValueAct got onto the Microsoft board by being the proverbial squeaky wheel. ValueAct's CEO, Jeffrey Ubben, who was linked to calls for former CEO Steve Ballmer's ouster, had agitated for a seat on the board. Like many shareholders, ValueAct had expressed concern over several major mistakes by Microsoft, including falling behind in smartphones and tablets. At an investor conference last year, Ubben also called on Microsoft to make its lucrative Office software franchise more widely available on non-Windows platforms, including Apple's iPad and Google's Android mobile operating system.

Some observers expect Microsoft to launch an iPad Office suite this year, perhaps as early as the first half of 2014. For its part, Microsoft has said next to nothing publicly, although last month, Tami Reller, the company's marketing chief -- who is now on her way out the door -- seemed to hedge on a previous promise to bring Office to the iPad.

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