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Will Bill Gates Step Down?

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Reuters reported that three large shareholders, together holding more than 5% of Microsoft (MSFT - Free Report) shares, would like Bill Gates to step down as chairman.

These shareholders wield some authority, for sure, but the fact remains that Bill Gates and Steve Ballmer together hold more than they do. Further, despite the recent uproar created by ValueAct Capital Management, the company's founder remains popular with some shareholders. So getting rid of him may not be so easy.

There are usually at least two sides to every story, and this one is no different.

The active shareholders are afraid that Bill Gates being chairman of the Board will influence the decision regarding Ballmer’s successor. Since both Ballmer and Gates are old-school, they are afraid that their chosen candidate will not bring the radical change at Microsoft that they want to see.

Also, Gates sells 80 million shares every year and has been more interested in philanthropic activities of late. His declining shareholding in Microsoft could be read as a diminishing interest in the company’s future, which could be detrimental for investors.

The argument in his favor is related to the turbulent times at Microsoft, which is on its way to becoming a devices and services company. The founder may be the steadying force, maintaining balance in times of rapid change. In any case, the services side has done better than the devices side on the whole, with the Xbox 360 game console giving it a leadership position.

Xbox One is a different story, however, and the company is on track to lose significant market share here. But Microsoft continues regardless, launching better versions of its Surface tablets and spending $7 billion to acquire Nokia’s (NOK - Free Report) handset business for a three-pronged approach to mobile.

Microsoft has its work cut out for itself: the main attraction for its devices is its business productivity solutions, but both Apple (AAPL - Free Report) and Google are now offering theirs free.

Microsoft has a Zacks Rank #3 (Hold).

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