Is Bill Gates mulling a comeback to the iconic company he founded?
It wouldn't be the first time a legendary founder stepped back into the fray to right his faltering company. Perhaps Gates has noticed the success of his Seattle neighbor Howard Schultz, who returned to a badly bruised Starbucks (SBUX) only to help it surge. (Schultz was Fortune's 2011 Businessperson of the Year.) Michael Dell, Steve Jobs and Larry Page all pulled similar maneuvers.
It wouldn't be the first time investors had flirted with the notion, either. Early this year, activist investor David Einhorn of Greenlight Capital publicly called current CEO Steve Ballmer a weight dragging down the company's share price, prompting the rumor that Gates might return. But Gates has been cool to the idea publicly, rebuffing it in 2010 and again this year in June, when he told the Daily Mail his work at the Bill & Melinda Gates Foundation "is my job now." (Einhorn declined to comment for this story.)
One prominent chief executive told Fortune he'd heard from someone close to Gates that he might be considering such a move. Aside from an unexpected and bold final act for Gates, what could Microsoft (MSFT) gain from such a move?
The company's stock price has been a thorn in Ballmer's side for a decade. At the end of 1999, Microsoft's best year for market price, shares were at almost $60. When Ballmer took over as chief executive in January 2000, the stock was still over $50. With the burst of the tech bubble, Microsoft's stock dropped steeply and hovered around $25 area through much of the decade, excepting a short rally above $35 in late-2007 and a dip under $20 during the 2008 financial crisis. Ballmer dumped much of his stock during the decade and Bill Gates gradually left daily operations. (Gates' last full day was in June 2008.) During that time, the stock stayed flat as competitors such as Oracle (ORCL) and Apple (AAPL) saw huge gains in their share price.
Could Gates goose the moribund stock price? Possibly. Any CEO turnover tends to jumpstart improvement in a company's stock price, says Jarrad Harford, finance professor and chair at the University of Washington's Foster School of Business in Seattle. According to Harford, investors anticipate the company's value under new management even before the executive actually takes over. (New CEOs have about a year before his or her imprint needs to be visible to investors.) "There's a lot of frustration among investors with Steve Ballmer," adds Ed Maguire of CLSA Asia-Pacific Markets. "Some is merited, some may not be. But there's certainly a perception that Ballmer is responsible for the under-performance of the stock."
Then there's the effect a founder can have on the troops. Founders are generally free to execute their vision with added "gravitas," Harford argues. He points to Google (GOOG), where co-founder and again-CEO Larry Page is "cutting through the organizational muck" to restore the company's momentum. Ballmer might lack that incisive big-picture vision, says Maguire at CLSA. "You don't have the benevolent dictator," he notes, adding that while Ballmer handles the active management of myriad divisions and thousands of employees well, he's missing some of the messaging of a Jobs or Gates.
