NEW YORK (TheStreet) -- Three of the 20 biggest shareholders of Microsoft (MSFT - Get Report) reportedly want Bill Gates to step down as chairman, according to Reuters. The parties are concerned with Gates' reluctance to embrace a much-needed strategy overhaul and his undue sway in the company's management despite his dwindling stake.
Gates holds a 4.5% stake in the software giant, but if he continues to sell at a consistent rate his stake will be depleted by 2018. An industry stalwart, Gates has been an influential figurehead for the company since its founding in 1975.
The rumored power play comes at a time of executive uncertainty, as current CEO Steve Ballmer prepares for retirement within 12 months. Alan Mulally, current CEO of Ford (F - Get Report), is considered a frontrunner for the CEO post at Microsoft. Mulally has downplayed reports he would be a likely successor. Speaking with USA Today, he said he had no plans other than to continue serving Ford as CEO.
A Microsoft spokesperson said the company does not comment on rumors or speculation.Microsoft shares are 0.69% higher to $33.81, as of 12:07 p.m. EST. Speaking with Real Money, fund manager Donald Yacktman said, "Microsoft is a better alternative [to Apple (AAPL - Get Report)] because its margins are protected, due to generally lower competition in the operating system business." TheStreet Ratings team rates Microsoft as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation: "We rate Microsoft a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, attractive valuation levels and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- MSFT's revenue growth has slightly outpaced the industry average of 5.9%. Since the same quarter one year prior, revenues rose by 10.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- MSFT's debt-to-equity ratio is very low at 0.20 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 2.53, which clearly demonstrates the ability to cover short-term cash needs.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Software industry and the overall market, Microsoft's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Microsoft reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, Microsoft increased its bottom line by earning $2.60 vs. $2 in the prior year. This year, the market expects an improvement in earnings ($2.71 vs. $2.60).
- You can view the full analysis from the report here: MSFT Ratings Report
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