Microsoft on Tuesday said Mason Morfit, president of San Francisco-based activist investment firm ValueAct Capital, has joined its board of directors and audit committee.
What's especially notable about Morfit's appointment is that ValueAct Capital, which has $14 billion in assets under management, is said to be against Microsoft's push into hardware devices, Reuters reported last July. ValueAct wants Microsoft to focus more on its enterprise business and less on Windows given the trend of declining PC sales to consumers.
Surface tablets would presumably be near the top of ValueAct's list of concerns. Microsoft took a $900 million write-down on unsold Surface RT inventory last July, and while Surface 2 sales have been better, they’re still not generating a profit. Neither Microsoft nor ValueAct could be reached for comment.
Microsoft has so far limited Surface sales to a small subset of resellers, but last year began putting out feelers to other partners it deemed capable of selling the devices. Microsoft's pending $7.2 billion acquisition of Nokia will give the software giant a major stake in the smartphone market.
Despite the presence of an activist investor on the board, one Microsoft partner told CRN he doesn't expect ValueAct to have much impact on Microsoft's hardware plans.
"Devices and services might not look like the right idea from a purely financial point of view, but as an end-to-end value capture play, it makes sense," said the source, who spoke on condition of anonymity because he's not authorized to speak about company matters.
As the operating system becomes a smaller proportion of the cost of devices, being a device supplier could help Microsoft maintain its top line revenue even if margins shrink, said the source. "Twenty percent of a decent share is better than 80 percent of nothing," said the source.
Microsoft and ValueAct inked a "cooperation agreement" last August under which Morfit was given the option of taking a seat on Microsoft's board. Some industry analysts interpreted the deal -- which came a week after Steve Ballmer announced he'd be stepping down as CEO -- as Microsoft's bid to ward off a proxy battle with ValueAct Capital and other investors intent on getting a seat on Microsoft's board.
Ballmer later told The Seattle Times that his decision was unrelated to the discussions with ValueAct. "My retirement has nothing to do with that," Ballmer told The Seattle Times at the time. "My retirement has everything to do with what I think is the right long-term timing for Microsoft."
Morfit becomes the eleventh member of Microsoft's board, joining Ballmer, Bill Gates, current CEO Satya Nadella and John Thompson, CEO of Virtual Instruments and chairman of the Microsoft board.
Other Microsoft board members include: Dina Dublon, former CFO of JPMorgan Chase; Maria Klawe, president of Harvey Mudd College; Stephen Luczo, chairman, president and CEO of Seagate Technology; David Marquardt, general partner at August Capital; Charles Noski, former vice chairman of Bank of America Corp.; and Dr. Helmut Panke, former chairman of the board of management at BMW Bayerische Motoren Werke AG.