Steve Ballmer, Microsoft’s CEO, has had a torrid time in the office last week; helpless as the computer giant’s stocks were driven down by a hefty 11 per cent this past Friday. This was triggered by its dismal earnings report, causing investors to question the demand for Windows 8 and also the Surface Pro and Surface RT. Friday ended with stock prices plummeting to $31.40, falling $4.04 in a single day. A whopping 245 million shares changed hands, 5 times the average trading value (past 3 months) of 50 million. Overall, this resulted in Microsoft losing a total of $32 billion in terms of stock value, making it the biggest dive in Microsoft’s history since 2000.
Microsoft announced its quarterly earnings report a day before, i.e. Thursday. The figures themselves were fairly competitive with $4.96 billion worth of net income. Total revenue saw a 10 per cent boost as well. However, Microsoft’s earnings ultimately fell 9 per cent lower than expected by Wall Street. This once again, raises questions on the big picture CEO Steve Ballmer is looking to paint. Ballmer’s ability in steering the company safely in these troubling times is definitely in doubt. Furthermore, Microsoft had to take a $900 million write off regarding the unsold Surface RT devices. This will certainly put off many investors from continuing to venture further in this field.
Wall Street analysts were largely disappointed with Microsoft’s performance in the market. Rick Sherlund, analyst at Nomura, believes that activist investors will strive to redefine Ballmer’s existing strategies. He further added that Microsoft was “missing guidance” at a lot of different levels, and the intervention of activist investors was imminent. David Hilail, analyst at FRB Capital Markets, announced that Microsoft’s earnings from the Windows OS fell 9 per cent short of his expectations. He also added that Windows 8 and Surface, Microsoft’s potential trump cards for growth, appeared to be fading away.
The Surface tablet was released last year as a competitor to Apple’s iPad. However, it failed to pack any real punch, resulting in a poor market performance against rival tablets. A waning PC market could mean that earnings from Windows 8 could also continue to plummet. The Xbox, however, is one product that has gained popularity all over the world. With the new Xbox One slated for release later this year, Microsoft will certainly look to turn the tide back in its favour.
