Steve Ballmer just announced his retirement, and the CEO of Microsoft has decided to call it a day within the next 12 months. The head of Redmond had been under fire from several circles, former employees, media and investors.

Back in April ValueAct spent $2 billion in order to take over 1 percent stake in Microsoft. And now gossip is flowing that the investment firm may be pushing for some big changes within the Redmond campus.

A top Microsoft analyst reveals that ValueAct is still pursuing a seat in the company’s board of directors.

This new report over at BizJournals has Nomura analyst Rick Sherlund claiming that as far as Microsoft is concerned, important changes are likely to take place in the company very soon.

Sherlund recently upgraded Microsoft’s stock to a “buy” rating wrote in a note that ValueAct is very likely to receive the support of other shareholders in its quest to get a seat in the board. The reason being that the investment group wants to get rid of Steve Ballmer — and it is not the only one:

“A decision by the board at Microsoft to offer a nomination for a board seat could keep the activist agenda behind closed doors and take longer for shareholders to see potential benefits.”

ValueAct is said to be looking to replace the company’s CEO because his strategy inspires little confidence. However, no other name that could take over the reins at Microsoft has been provided.

Along with pushing for Steve Ballmer’s exit, ValueAct is also said to be trying to get rid of the Xbox division. The new shareholder actually believes that Microsoft would do better without it, and selling it to another technology company would allow Redmond to focus on its key products like Windows:

“Xbox is cool, but by our estimates Microsoft has not made money at this.”

It appears that as of right now, Microsoft administration has no other choice than to give ValueAct a board seat — the investment firm might otherwise launch a public war on Steve Ballmer.

That, for Microsoft, would have much more serious consequences, even as it searches for a new leader.

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  1. Sounds like they need to buy that 1% back.

  2. xbox may not make much money for microsoft (the same goes for playstation with sony), but I think it’s much needed for microsoft to have their presence in the living room. Xbox is a necessary connection and without it, I fear microsoft may lose more than what it will temporarily gain by a simple sell-off of their xbox division. In the long run, xbox is a sound investment for microsoft. It may not make much, but it’s definitely worth it.

  3. Rodney Longoria / August 24, 2013 at 9:56 am /Reply

    These guys (ValueAct) are complete idiots and self-serving at that, IMHO. They obviously have no clue of the whole picture. For example, they probably would have gotten rid of Bing too, eventually. And yet, Bing was an investment and that is showing up now in Windows 8.1, as the back-end for many apps (and developers as well), and has become very integral in the process. Sure, it lost has lost money up to this point, but its potential can turn out to be a real money-maker. Let’s see in another five years. After all, Microsoft doesn’t invest for instant satisfaction, but for the long-term.

    And who knows what ultimate plans are on the burner for Microsoft regarding Xbox down the road. No one has yet to conquer the vast opportunities of the Living Room. Not Apple, not Google nor anyone else. That, is the wild west. What product is out there that is MUST-HAVE in the home that can do it all, or nearly close enough. None! So, to sell Xbox off is short-sighted and unimaginative. If for no other reason, it keeps Microsoft’s name out there — and that is worth something in itself, is it not?

    ValueAct has no vision, except to make money for shareholders. While that is golden, it is NOT the only thing to consider here. Besides, Microsoft has its pots on fire in so many different kitchens of which ValueAct has no idea of what to do with them all, so who are they to believe they are experts in anything (especially technology-wise)?

    Too much ego is at play here, me thinks.

  4. It would be a 100% mistake to sell off xbox division. Short sighted and no long term strategy. Only focus on profit. Selling off anything that don’t make profit is for company who wants to get out of chapter 11. I think MS is not in that stage yet.

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