News

Microsoft's Board Reelected Amid Shareholder Grumbling

• By Kurt Mackie
• 11/16/2010

Microsoft concluded its 2010 annual shareholder meeting today, with few surprises.

The entire board of nine members was reelected by Microsoft's shareholders, including Bill Gates and Steve Ballmer. The company's auditor, Deloitte & Touche LLP, was confirmed. Finally, a proposal by a shareholder to include an environmental sustainability responsibility at the board level was defeated.

Steve Ballmer, Microsoft's CEO and board director, commented during the shareholder meeting that Microsoft reported "record revenue of more than $62 billion" in its 2010 fiscal year, with earnings per share "up 30 percent from the prior year." He cited Windows 7 as the fastest-selling operating system in Microsoft's history.

"We released Windows 7 to the market just over a year ago and since then, we've shipped over 240 million copies to consumers and businesses around the world," Ballmer told attendees, according to a Nov. 16 Microsoft transcript of the 2010 shareholder meeting.

Ballmer also cited adoption of Microsoft's Windows Azure cloud computing platform services, saying that "today, we have nearly 20,000 subscribed applications for Azure." He cited more than 10 million downloads of the Internet Explorer 9 beta, which was released in September of this year. He also said that Microsoft has sold more than one million Kinect gaming units in the first 10 days of the product's launch.

Ballmer, who owned more than 408 million Microsoft shares as of Sept. 3, 2010, plans to sell up to 75 million of those shares by year's end. The sale plans are attributed to a "personal financial decision" and not to Microsoft's prospects, according to a released statement on Nov. 5. Ballmer earned $1.3 million in total compensation for fiscal-year 2010 as CEO. He received no compensation as a Microsoft board director, except for expenses.

A shareholder question at the event was directed to Director William H. Gates III and his plans to sell his shares and devote the proceeds to the Bill & Melinda Gates Foundation charity. The shareholder asked Gates, "Why don't you just erase those shares from the corporate books, take a load off us?" Gates replied that he just decided that the wealth should go to the "Foundation."

A question from another shareholder complaining about Microsoft's dividend payouts was answered by Chief Financial Officer Peter Klein, who said that Microsoft had initiated a 23 percent dividend increase this year. He added that Microsoft has "returned about $170 billion in the form of buybacks and dividends over the last 10 years." A second shareholder question on that topic, calling Microsoft's dividends "a pittance," was answered by Ballmer. He said that "I'll merely point out that if you look at the dividends we pay out as a percentage of earnings or stock price, we're absolutely at the top of the rank for all tech companies."

A shareholder asked about whether it wasn't time to break Microsoft up and divest Microsoft's core businesses (something proposed by a Goldman Sachs analyst in the last month or so). Ballmer said that such a split would cause a "dyssynergy" for the company and would make it harder to compete since Microsoft builds its products on Windows. Ballmer also put in a good word for continuing Microsoft's Bing search engine efforts, which are part of Microsoft's loss-leading Online Services Division.

"Bing is a super important area for us, not just because of search itself, but a lot of the most interesting stuff that's going to happen relates to this notion of understanding users and understanding the world, and being able to connect," Ballmer said, according to the transcript. "Search is the first place you do that."

Gates agreed with Ballmer's position and plugged Microsoft Research, a frequent target of financial critics for its $9 billion yearly expense.

"Yeah, I agree with what Steve is saying there in that the Microsoft brand, the scale of Microsoft Research on a worldwide basis, the intellectual property we build up, the way we hire and train people, there's a lot of synergy across the company, and it's been a real strength," Gates said, according to the transcript.

Gates, who serves as a board director, received at total of $200,000 in cash and stock for the 2010 fiscal year, according to Microsoft's "2010 Proxy Statement."