My spidey sense is tingling; I am going to bet that Ballmer steps down  within a year.

Here is the official statement:

Ballmer Statement on Stock Sales
First stock sale in seven years, for diversification and tax planning.

Microsoft Chief Executive Officer Steve Ballmer confirmed Friday that he is selling some of his holdings of Microsoft stock to gain financial diversification and to assist in tax planning before the end of the calendar year. He plans to sell up to 75 million shares by year-end. Before taking into account recent sales, according to the latest Microsoft proxy report, Ballmer held approximately 408 million shares.

“Even though this is a personal financial matter, I want to be clear about this to avoid any confusion,” Ballmer said. “I am excited about our new products and the potential for our technology to change people’s lives, and I remain fully committed to Microsoft and its success.”

Does anyone really buy this nonsense? The dude just dumped $1 billion in stock — and its for tax planning!

He sold 49.3 million shares in the company — that is $1.3 billion in cash. The shares Ballmer sold amount to 12% of his personal holdings; he still has a 4.2% stake in Mister Softee, according to Reuters.

The sale seemed to be timed,to high-profile releases of the Kinect and Windows Phone 7 — now on sale in the U.S. On Microsoft’s website, Ballmer cites tax planning and financial diversification as reasons for his first stock sale in seven years, and says he plans to sell up to 75 million shares by the end of the year.

Video after the jump

Bing Bing Bing!

Category: Corporate Management

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

42 Responses to “Ballmer Dumps $1.3B MSFT stock for “Tax Planning””

  1. rip says:

    Well duh. He’s bailing. He’s no Steven Jobs or what’s his name that hopes to turn Africa into the new Microsoft market.

    Besides, he has outlived his usefulness there. The situation has shifted dramatically, and throwing chairs though a window won’t work anymore, unless it’s Mumbai

  2. jaymaster says:

    I can believe there is some “tax planning” going on. Lots of folks (including me) at my company are selling before year end, on expectation that the cap gains and dividend taxes will go up (i.e., no extension to Bush tax cuts). I suspect that’s one reason insider selling is so strong across the board right now.

    Let’s say Balmer takes a $1 billion profit on $1.3B sale this year. That’s an extra $50 million in his pocket versus next year. Might only be 5%, but that’s enough to fund one hell of an endowment somewhere. And God only knows what rates will be a few years down the road.

  3. Thomaspin says:

    Nah. If he was stepping down he would sell after the event, when the stock will pop 20%.

    Hang on, though, this is Ballmer ww2e are talking about.

    Strike that thought.

  4. hammerandtong2001 says:

    Outside of Windows, Microsoft struggles.

    And if the world goes mobile, it will get ugly for them.

    Time to go.

  5. Rescission says:

    Microsoft is kicking butt in the video game market. If you guys had teenage sons you would know this.

    ~~~

    BR: They poured several billion into X-Box to fight Sony; I wonder if the entire stnad alone games business is a break even yet.

  6. ironman says:

    Given that both capital gains and dividend taxes are slated to rise in 2011, perhaps substantially should the lame duck U.S. Congress fail to act to avoid the expiration of the relevant tax rates set in 2003, tax planning is a reasonable explanation for Ballmer’s behavior. We are, after all, already seeing an unusual amount of dividend payments scheduled to take place during the last two weeks of the year, specifically to avoid the risk of higher tax exposure.

    But that doesn’t mean he isn’t departing soon – the tax planning explanation is most reasonable if Ballmer expects to depart his position before 2013.

  7. ElbowSpeak says:

    Also, the income tax initiative 1082 just lost here in Washington. It would have levied income tax over 250k of income per person (we currently have not state income tax). He gave hundreds of K to defeat the measure. Now he’s cashing out.

  8. RC says:

    I think Ballmer will stay. Dont discount Windows phone 7. It will take place of a lower price point SmartPhone market. This market is just starting to pick up now.

  9. rktbrkr says:

    The tax situation is enough to justify his sales but insiders generally have been selling hand over fist to take advantage of the Bernanke boom. Eventually BB won’t have the Fed votes to continue his reckless program, a couple of vocal opponents and maybe some others who are quiet but uncomfortable with BB so obviously gaming the market.

  10. What has Microsoft missed ?

    Hmm, how about:

    Search
    Cloud Computing
    Social networks
    Smart Phones
    Tablets
    MP3 players
    User Generated Content
    Blogging
    Twitter and Micro Blogging
    Location Aware Apps

    I am sure there are more, but that’s a pretty good start — and remember, Ballmer is the CEO who wouldn’t let his best market research people — his own kids — have an iPod or an iPhone.

    Now that’s some bad tech firm management

  11. ExpectingDeflation says:

    I have to agree with ironman. If I had a billion in capital gains, I would be worried about capital gains taxes going up. I would not be surprised to see no tax extension, even though it seems like the market has priced in the tax cut extension.

  12. Bob A says:

    msft is like a hybrid of the post office and the military…
    a hopeless and bloated bureaucracy
    why would any truly creative young person choose to work there?

  13. victor says:

    I always doubted that not extending the tax cuts for the rich would “save” the Treasury $700b over the next 10 years, just look at what thunderous Balmer is doing, or saying anyway. Not that I pretend that this or that marginal tax rate for the “rich” is the right rate, I have no idea. Let’s not forget that Mr. Balmer is not rich, he’s super, ultra rich and soaking the likes of him via rigid IRS marginal rates manipulation may be more difficult than we, mere mortals think. As far as MSFT goes, may be Janet Reno’s and Co idea to break them up wasn’t that bad after-all, who knows several mini MSFT’s might have done better?

  14. Bill in SF says:

    jaymaster Says:

    “I can believe there is some “tax planning” going on. Lots of folks (including me) at my company are selling before year end, on expectation that the cap gains and dividend taxes will go up.

    Let’s say Balmer takes a $1 billion profit on $1.3B sale this year. That’s an extra $50 million in his pocket versus next year.”

    Oh, Please! When you have that kind on money, you can’t really be concerned about tax planning. He’s probably salivating about how many Happy Meals this will fetch.

  15. Mike in Nola says:

    MSFT is really on the ropes. Bigger net than AAPL. But, then again, MSFT doesn’t make stuff for wealthy dilettantes who have orgasms at the sight of black turtlenecks.

    MS makes stuff that businesses use. Jobs decided to kill the Apple server with no warning. Lack of stability and roadmaps is why Apple is no threat in the business market. http://go.theregister.com/feed/www.theregister.co.uk/2010/11/08/apple_xserve_server_dead/

    Also, Apple could have had the kinnect. The reason they don’t is is the Apple is/was a pain in the ass to deal with.
    http://www.cultofmac.com/how-apple-almost-got-microsofts-kinect-game-controller/67951

    It could be that Ballmer is smart enough to sell near the top. Or maybe he wants to buy some gold. Or, maybe he’s tired of the grind and getting no respect after presiding over a doubling of earnings with a quarter billion Windows 7 sold in a year and Mac worldwide sales (where the future is) declining and still a barely a blip.

  16. changja says:

    Interesting graphic on where Google / Microsoft/ Apple compete vs each other…

    Key question is who do you think will win. My personal opinion? Microsoft has no chance unless they completely restructure themselves.

    http://www.nowmedia.it/wp-content/uploads/2010/08/apple_microsoft_google.jpg

  17. rktbrkr says:

    drums along the Mohawk, sounds like a simmering rebellion against QE ad nauseam

    http://www.cnbc.com//id/40073916

  18. Super-Anon says:

    Sell high. Buy low.

  19. AG Sage says:

    victor,
    I’ve always assumed (a la ATT) that MSFT would have done far better cut into rational units. For example, we would have Office for Linux, and Exchange could have been the current hot calendar/shared docs Internet app instead of having been hobbled by needing to promote the OS.

  20. Mike in Nola says:

    AG Sage: I think you’re right that the units would have done much better separated. They could have been much more agile. Word is that the fiefdoms battle each other and stymie innovation.

  21. greg says:

    Mike in Nola….I don’t think it was very nice of you to infer BR is a wealthy dilettante.

  22. Robespierre says:

    @Barry Ritholtz Says:

    “What has Microsoft missed ?

    Hmm, how about:

    Cloud Computing”

    You are way off on this one. Cloud computing is its infancy and there is no dominant player. So too soon to say they missed it.

  23. powerpenguin says:

    I agree with a lot that’s said here BUT I think everyone’s missing out on a critical factor in these tech wars, and that is profitability of the users.

    Let me oversimplify and describe all tech users in two groups. The first is the one that me and my techie friends are in. We are diehard open-source freeware users, hate microsoft like the plague, and will always use google/firefox/linux at every opportunity. Microsoft, with it’s complete disregard for user-generated content, compatibility with other products, and general market image will never win us over, no matter how hard it tries.

    Now, consider people like my dad. He knows how to turn computers on, but that took him a while. He uses internet explorer and whatever default search engine it pops up with. He buys microsoft software at list prices. In short, he knows very little about what goes on with computers, and he has no interest in learning about freeware and what it all means.

    Compare the two groups. Who uses microsft/bing? The second group. Not because they like them, but they just don’t know enough/care enough to use anything else.

    But now, who do you think you should target to make money? The first group is very hard to wring a profit out of; we use our knowledge to cut middlemen out of our purchases. We never pay more than a product is worth. When we google things, we know what we’re googling and we don’t click on the adds. The second group, though, is like fish in a barrel. They click on pop-up adds. They spend more money than they should for software. They’re complete suckers for media.

    The point is, yes the first group is abandoning microsoft at every chance they can, but microsoft doesn’t care, that group is not a proportional representative of the money floating around on the internet. The bulk of the profitability online comes from the second group, which microsoft has almost complete control over.

    If google comes out with a complete, freeware, operating system + office setup that rivals microsoft’s, then things will get interesting. But until then, microsoft is in an excellent position and there’s not a thing anyone can do about it.

    What do you guys think?

  24. bman says:

    Developers, developers, developers developers.
    I like that little viddy
    Microsoft may be missing some of the mobile app software, but those customers are taking themselves out and everyone around them driving down the freeway while they text.
    Sustainability is not an idle topic.
    I agree the standalone game fad has been around since the commodore64, but kids don’t rake leaves anymore these days, they still only got chump change…
    As a hobbyist programmer, I don’t give a fig about ipads or iphones, on the long term horizon they’re in the recycle bin already. .Net is pretty substantial if you like to code. If you want sustainability the coders are your friends.

  25. yuan says:

    Smart Phones
    Tablets
    MP3 players
    Location Aware Apps

    your apple addiction is showing, rithholz.

    linux runs my mp3 player, my laptop, and netbook. my netbook wakes in less than a second and reboots in 7 seconds. try that on a mac or pc.

  26. hammerandtong2001 says:

    Google is to “search” (95% + rev) as Microsoft is to desktop.

    Mobile is the future. Mary Meeker says so.

    Neither will play a dominant role in the next wave.

    .

  27. Mike in Nola says:

    Barry:

    On the Xbox, they are making lots. They grossed $1.2B this past QUARTER and the business is growing. It was one of the those long term investments fanbois can’t quite understand :) Sorry, couldn’t resist.

    You also seem to have some misapprehensions about what MS missed.

    Bill Gates was an advocate for tablet computing back in the early 2000′s and never gave up on it. The state of hardware was not good enough for it and there really wasn’t a big market for it. There really still isn’t. It’s a niche product. While it’s generated a lot of hype, 10-20 million ipads is really a drop in the bucket compared to the overall market. Many have questioned why MS wants to even bother with that market: let google do the dirty work on the ipad margins with Android tablets.

    MS had smart phones early this decade. I had a windows mobile device back in 2005 and that wasn’t even and early one. The problem with Win Mobile was that MS tried to apply the PC business model to phones: supply the software and let the manufacturers innovate the hardware. It didn’t figure out til last year that the mobile phone market is dominated by VZW and ATT whose main interest was in selling phones that were as low end as they could get away with, with a lack of memory and processor speed. The consequence was often poor performance and user experience. Even so, Windows Mobile is still widely used in business. MS hopes to remedy the performance problems with the minimum specs in Windows Phone 7 and has succeeded at that. We shall see if it is successful.

    I would also disagree that MS missed cloud computing whatever that is. MS has had various offerings on that front in their enterprise software. Consumers don’t see it, so they think it doesn’t exist.

  28. John says:

    To get back on topic of Barry’s post:

    Bill in SF Says: “When you have that kind on money, you can’t really be concerned about tax planning.”

    Steve Ballmer may not be concerned, but this is an opportunity for his advisors to take actions that generate fees that are significant for them.

  29. some student says:

    The B2C market is hard-fought but i dont think that MS has lost there already. And many of the key features are being introduced atm.

    MS creates for the masses (unlike apple who try to be ‘rare’), MS creates for vendors, industries, businesses, not for consumers directly. And they have learned their lesson regarding usability & user satisfaction.

    MS market is the industry. In all those thousands of skyscrapers filling the worlds metropoles are working millions of people with Excel, Powerpoint, Exchange and Windows Server. And as long as there is no alternative to those, MS will have no hard competition there. Sure Blackberrys, iPhones and iPads are all around but they are mainly products designed for (media) consumption & communication. They dont add too much value when it comes to productivity & creation. MS did a LOT of really interesting research in the tablet market but its

    And Barry: all those “misses” you name up there; MS didnt regard them as their core business or as a mature mature productline.
    MS doesnt drive the development of the web, i believe they dont even want to. They provide the facebook search and ill bet the contracts include the exclusion of access for google.
    They care about cloud computing as it helps corporations to increase efficiency, but as long as bandwidth AND confidentiality problems arent solved, that market wont grow mature.

  30. Mike in Nola says:

    John: probably the best explanation of all :)

  31. constantnormal says:

    Strange that Balmer would spend over $426K from his own pocket to defeat Initiative 1082, and THEN unload his stock. I mean, why bother to lobby against the “billionaires tax” if he was planning on cashing out before it would have taken effect?

    But then we are talking about Steve Balmer, the man most responsible for the stagnation of Microsoft.

    Also — Ray Ozzie and a bunch of senior Yahoo execs have recently jumped ship … if your senior executive talent is leaving the party, might the board perhaps, just maybe, when confronted with all the hoopla about MSFT share stagnation in the face of AAPL’s leaving them in the dust, decide that Balmer was past his sell-by date?

    I don’t agree with Barry about Balmer leaving within a year, I think his “retirement” will be announced in January.

    When a company has an operating profit margin of over 41% and is paying over a 2% dividend, with earnings growing at 50% YoY, and the stock can’t grow, if the company cannot produce new products but can only come into a market after the early money has been made, to collect the table scraps, there’s something seriously wrong with how the company is run and how it is perceived, and that speaks to a lack of leadership.

    A significant part of Ballmer’s job is watching after the interests of the stockholders, and it certainly appears that he is interested in only one stockholder, himself.

    Ballmer’s got to go. But who are they going to get to clean up his mess?

  32. constantnormal says:

    All y’all AAPL-bashers out there need to take a look in the mirror and ask yourselves why you are investors … when a company can take a 4% slice of the cellphone marketplace and acquire 47% of the profits from the entire cellphone market, and you sneer at that, you gotta ask yourselves why you are in the stock market, if you don’t like AAPL. Are you there to indulge your platform preferences, or to make money?

    Microsoft thought it had invented the smartphone market, fer chrissakes, with the Windows Mobile software a long time ago. And then it did nothing with that franchise. It had every opportunity to do what Apple did with the iPhone, and failed to even try.

    And from the mindshare of the pundits on the Windows 7 smartphone, arriving finally after several years of iPhone domination, it appears that the verdict is “too little, too late”. We’ll see how their sales look in another 6 months, but I think it’s quite likely that the Windows Phone is going to go the way of the Zune.

    I really don’t care if Apple’s market share of the cellphone market never grows beyond 4%, so long as they can keep taking almost half the profits from the entire sector, they are doing GREAT.

    Apple is a company that has a mission in life: to make money selling hardware. When they have a product line that isn’t being received well by the public, they either change it or they drop it, and focus their efforts on making an effort that succeeds. That’s what the Xserve rack-mounted server business ended — they weren’t selling enough of them, and I suspect that the margins were too low in what is pretty much a commodity business.

    Microsoft has had a tremendous tablet technology for almost a decade, and has gone nowhere with it. If Google’s Android tablets successfully constrain Apple’s iPad revenue, they will drop the iPad, but not before they mount a spirited defense by lowering prices (but not profits) and innovating out the wazoo. If all that the Android tablets do is to expand that market segment, so much the better, so long as Apple can continue to capture most of the revenue in an expanding market. Why not let Google expand the market for Apple products?

    But mostly I’m just happy to have somebody on the other end of an AAPL trade. Don’t change a thing, y’all. If everybody was an AAPL fanboy, the stock would have nowhere to go but down.

  33. [...] Steve Ballmer dumps $1,3 billion in Microsoft stock, he's been taking the Cowboys all season.  Totally kidding.  (TBP) [...]

  34. BennyProfane says:

    Dear lord that man is wealthy. Tax purposes??!! What’s his salary, anyway? Is it eight or nine figures?? If I were him, I’d just walk out on the streets of Seattle and hand out hundred dollar bills to little kids for kicks when I got bored. Maybe walk down to a local school or two and fill them up with all sorts of cool equipment and people. Furcryingoutloud, how much money do you need before you go meet your maker? It’s not as though he’s ever done any good in this world. He and his nerdy buddy Gates just created a monopoly and went with it. They’ve pretty much failed at anything else they’ve attempted since then, except for the silly XBox, but, momentum is your friend, I guess.

  35. constantnormal says:

    @Mike in Nola 12:34 am

    “Barry:

    On the Xbox, they are making lots. They grossed $1.2B this past QUARTER and the business is growing. It was one of the those long term investments fanbois can’t quite understand :) Sorry, couldn’t resist.”

    hmmm … making lots … that didn’t square with my recollection of the topic … let’s go to the Microsoft quartlerly earnings report …

    yup … Revenue — Entertainment and Devices Division — $1.795B

    … oops, waitaminnit …

    Operating income (loss) — Entertainment and Devices Division — $0.382B

    That strikes me as an operating margin of about … let’s see, carry the 2, dot the i, cross the t … 21.3%

    Not a lotta profit for all that revenue. but it’s better than it used to be, when they were struggling (and frequently failing) to turn any kind of profit at all in the games business.

    But I think that Barry’s point was, that at this rate of profitability, it’s gonna take a long time for them to recover their investment in this business, let alone show substantial net gains for their involvement in that business.

    However, their Kinect technology looks very nice indeed, and may hurt Nintendo and Sony, and actually generate some serious profits for Microsoft’s games business unit. But that’s in the future, the track record for their games business unit remains sadly lacking at this point in time. I think that if you total up all the losses vs all the profits that the Entertainment business unit has produced to date, the answer will come out negative, or certainly not a very large positive number.

    profit is … one of the those long term investments fanbois can’t quite understand :) Sorry, couldn’t resist.

  36. constantnormal says:

    What’s the long term capital gains rate for billionaires? Isn’t it about 20%? 20% seems like a pretty small price to pay for a business-friendly legislative and tax climate — can anyone find me a better one?

    I suppose that Ballmer could incorporate himself, and shuffle money through Ireland, to the Netherlands, and on into the Caribbean, but really — what’s the problem with supporting the environment that allowed you to make all that money in the first place?

  37. Kort says:

    Missed the cloud, what?

    Just announced Office365 a couple of weeks ago, you can get Office inthe Cloud for a couple of bucks per month.

    http://office365.microsoft.com/en-US/online-services.aspx

    SharePoint is growing by leaps and bounds.

    Nice, long article, from last month on the “Mystery of Microsoft”

    http://www.institutionalinvestor.com/investment_strategies/Articles/2683546/The-Mystery-of-Microsoft.html

    “On Ballmer’s watch, Microsoft’s revenue has grown by 172 percent; earnings per share have tripled.”

    “Over the past five years, despite the recent recession, operating margins never strayed outside a band of 34 to 37 percent; over the past ten years, they’ve averaged 35 percent — two points above the 33 percent average achieved from 1986 to 1995, Microsoft’s first decade as a public company. “

  38. MBD1120 says:

    The guy has approximately $8 billion (amounting to over 60% of his total net worth according to last Forbes list) concentrated in a single company stock and we are excoriating him for selling 12% of it to diversify? Please.

    I am not defending Ballmer’s abhorrent record at MSFT this past decade, but the guy certainly has a right to long-term estate planning.

    Barry I would be curious to know if you have 60% of your assets concentrated in a single position.

  39. dsawy says:

    Uh, your prior post was a nice piece of info-porn showing how Google (and other tech giants) circumvented taxation (by increasingly complicated means, I might add), and you’re dubious that Ballmer sold his stock for tax reasons? I’d believe that he would, simply because the actions of his type of corporate entity shows that they’re willing to go to great and bizarre lengths to avoid taxation.

    Secondly, I’d NB that the article said “diversification and tax planning,” not just “tax planning.” Any competent financial advisor would be telling Joe and Jane Bumfuzzle to “diversify” if they had Ballmer’s level of asset concentration.

  40. dr_w says:

    According to the quote below the real reason is to avoid a proposed new state tax on the wealthiest (to help education).

    “Microsoft CEO Steve Ballmer, one of several Washington state business executives who worked tirelessly (and donated substantially) toward defeating Proposition 1098 is apparently celebrating all the way to the bank. Prop 1098, which was designed to tax the wealthiest in the state to provide additional education funding, was soundly defeated.
    Only days after the election, Ballmer just announced he is selling 75 million Microsoft shares, which are expected to net the CEO about $2 billion state-tax-free dollars.”
    (source: http://business.gather.com/viewArticle.action?articleId=281474978672400)

  41. [...] Steve Ballmer dumps a load of Microsoft (MSFT) stock for ‘tax planning purposes.’  (Big Picture) [...]