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Sherlund Says It's Less Likely Alan Mulally Get Tapped for Microsoft (MSFT) CEO Spot

December 18, 2013 7:59 AM EST Send to a Friend
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Nomura Securities analyst Rick Sherlund (considered the axe), weighed in on Microsoft (NASDAQ: MSFT) following an update from the Board of Directors on the CEO search, saying a decision is not likely until early 2014. Sherlund said this news raises a number of issues, namely that it now appears less likely that Ford's (NYSE: F) Alan Mulally gets the nod to replace Steve Ballmer as some board members dig in their heels for a candidate with more of a technical background.

Sherlund highlights:
  • We have been of the view that Ford CEO Alan Mulally has been interested in the Microsoft CEO position (supported by his nondenial denials) and likely to take the position. It does not appear he has been offered the job based on press reports that the board has approached several "dark horse" candidates over the past few weeks, raising the question whether there may be some change in consensus thinking at the board level.

  • An ideal candidate would have demonstrated the ability to run a large organization, execute a turnaround, and have a technical background. This skill set may not exist in a single candidate, so we believe the board has considered a good general manager (such as Mr. Mulally) who might be able to complement his skills with technology strengths of others, either already within the company or outside (we met with Paul Maritz last week, who confirmed he is not interested in returning
    to Microsoft).

  • The blog post makes reference to Bill Gates' comments previously that the position is a “complex role to fill, involving a complex business model and the ability to lead a highly technical organization and work with top technical talent.” We question whether this implies that the board is rethinking the role and looking more exhaustively at candidates from the technology field as the recent "dark horse" candidates noted in the press have suggested, including Pat Gelsinger from VMware (great candidate, in our view) and Steve Mollenkopf from Qualcomm (who is very highly regarded).

  • If the board of Ford is pressing Mr. Mulally for a definitive answer, as we have seen reported in the press last week, we have to question whether he might need to pull his hat out of the ring at some point soon and say with certainty that he is not interested.

  • This would be negative for the stock, in our view, at least over some interim period until we have more clarity on who else might be on the potential list of "dark horse" candidates.

  • We are less confident that Mr. Mulally will be heading to Microsoft, given our reading between the lines of Mr. Thompson's choice of words, appearing to us to imply that some on the board may be digging in their heals on a candidate with more of a technical background. So far, this appears to have failed in turning up a willing
    candidate.

    The analyst maintained his Buy rating and price target of $45 on MSFT.

    For an analyst ratings summary and ratings history on Microsoft click here. For more ratings news on Microsoft click here.

    Shares of Microsoft closed at $36.52 yesterday.




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