Einhorn's Criticism of Ballmer Gets Support

Story corrected to note Microsoft's revenue, not net income, grew to $62 billion in fiscal 2010

BOSTON (TheStreet) -- Hedge fund manager David Einhorn isn't alone in his criticism of Microsoft(MSFT) Chief Executive Officer Steve Ballmer, as mutual fund shareholders of the technology giant are joining in the chorus of boos.

During a conference in New York Wednesday, Einhorn said Microsoft should fire Ballmer, blaming the longtime company executive for wasting millions in research and development without having a focus on the future. "Ballmer's continued presence is ruining your stock," Einhorn told investors in Microsoft.

Microsoft CEO Steve Ballmer

By his own admission, Einhorn isn't a home-run hitter. His success at shorting Allied Capital and Lehman Brothers ahead of the financial collapse has been well-documented, as has his bearish view on real-estate company St. Joe(JOE).

But Einhorn hasn't fared nearly as well with his bet on Microsoft, a stock that is down 11% in 2011, 1% in the past year, and 30% over a decade. As of March 31, Einhorn's Greenlight Capital hedge fund owned 9 million shares of Microsoft, having added more than 1 million shares to the position during the first quarter. The fund owned more than 3 million shares of Microsoft as the stock rebounded in late 2009, but as Einhorn has steadily added to the position, the stock has pulled back further below $30.

Einhorn's laundry list of complaints may make him sound more like a scorned lover than an astute investor, but other large shareholders of Microsoft back Einhorn's view of the company's boss.

"He brings up a lot of good points. I can't say I disagree with him," Greg Estes, portfolio manager with Intrepid Capital, says of Einhorn's criticism of Ballmer. "Ballmer has done an OK job shepherding that core product suite, like the operating system and Microsoft Office. But there have been a lot of misses along the way."

Intrepid Capital owns nearly 1 million shares of Microsoft across several of its mutual funds. Estes says Microsoft has long been a favorite of the fund because of the company's massive free cash flow and low valuation. The company currently has a forward price-to-earnings multiple of less than 9, an indication that shares trade at a sharp discount to the market's multiple.