There’s been plenty of talk about who Microsoft Corporation (NASDAQ:MSFT)’s next CEO will be. Paul Maritz, whose name has been floated in a sort of offhand way several times, is actually Nomura analyst Rick Sherlund’s top pick for the position. Keep in mind that Sherlund knows Microsoft almost as good as anyone at the company because he’s been following the company for many years.
In his latest note, Sherlund also provided brief analysis of Microsoft’s latest proxy filing and provided a little bit of business advice for the software giant. He remains Buy-rated on Microsoft with a $38 per share price target.
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Microsoft’s CEO position might be a two-man job
He suggests that the CEO job at Microsoft Corporation (NASDAQ:MSFT) might actually be a job that would best be done by two different people. He said the company needs someone with a product background, as well as someone with management skills. He believes there are few people who have both the product background and also a track record of turning a company around. Like others have mentioned, he notes that Ford Motor Company (NYSE:F) CEO Alan Mulally would be a good choice for the management side of the job.
Sherlund suggests that Maritz’s product background may be just what the doctor ordered for Microsoft. He worked at Microsoft previously, but he’s currently at Pivotal, a subsidiary of EMC. Sherlund believes Bill Gates approached Maritz a year ago to possibly be Steve Ballmer’s successor but that he declined. He sees Maritz as a visionary who may be more focused on building “the next big thing in cloud computing” rather than turning Microsoft Corporation (NASDAQ:MSFT) around. However, he suggests that this ambition could best be fulfilled at Microsoft and that Mulally could help mind the store while Maritz focuses on honing the company’s products, specifically by making it a leader in cloud computing.
Would Microsoft buy Pivotal to make it happen?
According to Sherlund, Microsoft even might consider buying Pivotal to avoid non-compete problems with Maritz and also leverage the work that’s already been done by the company. He says taking Microsoft in the open source direction to support the company’s infrastructure stack and open systems “could be an exciting new direction” for Microsoft and perhaps even “define the next-generation computing platform.”
He also offered some additional advice to Microsoft Corporation (NASDAQ:MSFT), suggesting that the company should buy Evernote and Box as well as Pivotal. He said the company could then position itself on the iOS and Android tablet platforms rather than just trying to force Office onto them. He said this would give the company opportunities to innovate on these two platforms in a way that goes behind Office.
“It’s not about turning a tablet into a PC,” Sherlund wrote. “It’s about innovation on new platforms that are not Windows and have use cases that are different than a PC. Mr. Maritz is likely to get this and have the courage to move beyond Windows and risk the cannibalization of the consumer Windows business to address the next-generation apps platform across iOS, Android and Windows.”
Microsoft’s proxy filing was “pretty boring”
Sherlund also examined Microsoft Corporation (NASDAQ:MSFT)’s proxy filing, and there aren’t many changes offered in the filing ahead of the Nov. 18 shareholders’ meeting. He said the number of directors and the composition of the board will remain the same.
All nine of the company’s current directors are up for reelection. The proxy filing does authorize up to 11 board seats, with ValueAct Capital having the option to take one of the two new seats at the first board meeting after the shareholders’ meeting. This would suggest that the activist investment firm might not have a seat on the company’s board until early next year.
Sherlund notes that media reports have suggested that Microsoft is interviewing potential board members, so he’s surprised that the company hasn’t increased the number of directors or changed the composition of its board through the proxy filing. He says there’s quite a bit of focus on corporate governance and why certain directors add value. There is also discussion of executive compensation.