April 20, 2024

Reuters Breakingviews: Some Faint Praise for Mr. Ballmer

Mr. Ballmer started as chief executive in January 2000. Over the last decade, Microsoft’s shares have tumbled 30 percent, and they’re up only a hair from their low in 2006. The potted narrative is that Mr. Ballmer has shepherded the “old” operating system and productivity software powerhouse reasonably well but misjudged new developments, wasting billions of dollars chasing Silicon Valley innovators like Apple and Google.

It would be a lot to expect a single company to dominate more than one truly world-changing technology. But with that caveat, the critique of Mr. Ballmer is on target even if he’s far from the only chief executive who has struggled to make the most of a franchise. And he at least saw the need to pay dividends a few years earlier than, say, John Chambers at Cisco Systems.

On a total return basis including those payouts, Microsoft shareholders are down just over 10 percent over 10 years, and better off by some 14 percent over five, according to Thomson Reuters Datastream. That’s far from gratifying, but easily beats Cisco. Looking further across corporate America, Mr. Ballmer stomps Mr. Immelt’s decade-long reign at G.E. and outdoes Rupert Murdoch’s latest five-year stretch at the News Corporation. Richard Fairbank at Capital One Financial and Steven Burd at the grocery chain Safeway, two other corner-office fixtures, also have fallen short of Mr. Ballmer’s performance.

This report card, of course, damns Mr. Ballmer with faint praise. His problem isn’t so much shrinking profits as a loss of investor faith in Microsoft, whose price-to-earnings ratio is one of the lowest among big companies in the United States. But Mr. Einhorn probably won’t quickly get his wish for a replacement. Mr. Ballmer and Microsoft’s chairman, Bill Gates, go way back and together own more than 10 percent of the company. That means the current chief executive probably will get more time to try to reinvent Microsoft.

Virtual Inflation

In the currency wars, the nerds are winning. The value of a Bitcoin, a digital currency trading over peer-to-peer networks, has rocketed more than ninefold in two months to more than $8.60 as of Friday afternoon. The preordained supply and decentralization of Bitcoins have intrigued geeks and paranoid inflationistas alike. But this abstract gold may not survive what looks like a bubble.

Bitcoins are actually strings of unique digits, tracked and traded via an online network. People earn new coins by solving network security problems. These coins can then be traded for real currencies on exchanges, or for goods from certain businesses that accept them.

The Bitcoins in a user’s virtual wallet are tracked by the secure system and can be transferred only by that user. Moreover — and here’s the hook for the inflation worriers — the currency can’t be printed willy-nilly. The supply of Bitcoins is on a predefined path and will be capped at 21 million. And because there’s no central point in the system, there’s no equivalent of the Federal Reserve to rewrite that policy.

The concept of the Bitcoin is no less real than regular paper money or coins. All such currencies have only the value their users accept. Bitcoins do, though, have a couple of disadvantages: they don’t generate income, and since they exist in the digital cloud they’d be less use than paper money in any scenario involving power cuts or lost connectivity.

Still, it’s easy, quick and essentially free to transfer Bitcoins. Moreover, transactions are anonymous and the system knows no national borders. That’s helpful for some legitimate users, but also makes the currency a potential worry for law enforcers.

The finite supply means the value of Bitcoins should rise as demand increases. But the latest run-up looks decidedly frothy. A flush user can buy Web design help or alpaca socks. But there aren’t many businesses that accept Bitcoins. So it seems likely that enthusiasts and speculators are hoarding them without regard to the value they really represent. A bubble that bursts when the abstract intellectual appeal fades would probably doom the otherwise creative idea.


Article source: http://feeds.nytimes.com/click.phdo?i=7ecc65ba7beb926d58b977fd73a3c9ed

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