Investors Get $16 Billion Payday On Ballmer News

Microsoft's market value soared from $269.81 billion to $288.05 billion in the wake of the news that Microsoft's CEO Ballmer will "retire."

"Steve Ballmer saying adios resulted in a $16 billion increase in the market value of the company," said Jeff Matthews, general partner at Ram Partners LP, Naples, Fla., hedge fund. "It's almost better than a hot new product release. It has been speculated about for so long that I don't think anyone was surprised. There is only so long you can take of this guy missing innovation after innovation after innovation. Microsoft's business problem has always been that everything they do has to promote Windows. Everything is a compromise."

[Related: Microsoft Partners: The Search For Ballmer's Successor Is A Channel Turning Point ]

Ballmer's plans to step down within 12 months sent shares up as much as 8.7 percent, the highest intraday price since 2009, before settling back down at 7 percent.

Pitchfork wielding investors applauded the move banking that the retirement of 57-year-old Ballmer will hasten the company's shift away from personal computers and toward mobile devices.

"It's time for Microsoft to stop doing business as usual," Jim Bethmann, head of the technology practice at recruiters Caldwell Partners International in Dallas. He said Microsoft needs a bold new leader that will help the company lead the technology world instead of follow it.

"Microsoft needs to shake things up," Michael Obuchowski, a portfolio manager at North Shore Asset Management. "I'm not sure he could bring much more to the company. It was time to for him to step aside and Microsoft to get some new blood."

Obuchowski said Ballmer excelled at running a tight ship, helping transform the company from a "bumbling behemoth" to a streamlined company that could ship software on time. But what he excelled in when it came to business acumens, he lacked in vision that would have allowed the company to stay ahead of the trends, he said.

Ballmer saw the writing on the wall in the wake of the iPad, but he reacted too late, Obuchowski said. "The joke is every fourth time Microsoft got it right," Obuchowski said. "Wall Street doesn't like those odds."

Reacting to the market as opposed to leading was Ballmer's downfall. Azure and the move to the cloud with Office 365, Obuchowski said, were all reactive market moves.

Ballmer was the right guy at the right time, said Matthews. "Any business person in their right mind would love to have Ballmer's legacy. You might make fun of him now because Microsoft has missed a lot of boats. But, Steve [Ballmer] helped Bill Gates build a hell of a business."

A new CEO should finish guiding Microsoft down a similar path starting with Windows 8, analysts said. But, Matthews warns that Redmond needs to take a more Apple-like approach to moving forward.

"Microsoft never wanted to cannibalize itself. Everything was a compromise on how do we promote Windows," Matthews said, and Microsoft focused instead on a "half-baked tablet and half-baked phone."

"Steve Jobs was the real genius. When Apple came out with the iPhone, he knew it would cannibalize the iPod. But, Jobs knew that was the future and moved in that the direction," Matthews said.

Analysts CRN talked with said Microsoft should bring in fresh talent from outside the company saying it will show a will to change. Analysts short list of Ballmer replacements include Google's Nikesh Arora, Apple's Eddy Cue, Oracle's Mark Hurd and former Compaq CEO Michael Capellas.

All said, Friday wasn't such a bad day for lame-duck Ballmer. Using back-of-the-envelope math, with Ballmer holding about 4 percent of Microsoft's shares, his stake in the company is up by almost $1 billion.

PUBLISHED AUG. 23, 2013