Why Do Investors Want Alan Mulally? (Hint: He Sold Off Major Ford Assets)

Ford CEO Alan Mulally’s name continues to pop up as a possible replacement for retiring Microsoft CEO Steve Ballmer.  I like Mulally and there is certainly no arguing that Ford would have gone bankrupt without him.  However, I do not think he is the right person to replace Ballmer, but could be an asset to Microsoft in another capacity.  Making planes at Boeing and cars at Ford is quite different from running a premiere technology company.

We recently covered a report, in which investors have been pressuring Microsoft to name Mulally as CEO.  Why would investors want Mulally as CEO? He isn’t from Google, Apple, Amazon, Twitter or some other hot silicon valley startup.  He isn’t fawned upon by the Technorati (excluding the times he does large ad buys on their “respective” websites).  Mulally isn’t young or hip.  He isn’t a rich socialite or fashionista akin to Marissa Mayer.  He isn’t a bully like Steve Jobs.  He doesn’t flaunt his money with yachts and young girlfriends like Larry Elison.  Instead Mulally is approaching the age of 69 and is the retiring CEO of a blue chip company.  So why do investors want him running Microsoft?

One of the important lessons I learned from Lester Freamon in the critically acclaimed show “The Wire,” was to “…follow the money […].”  Let’s take a look at what Mulally did when came to Ford in 2006.  First he mortgaged the entire company’s assets, almost ~24 billion.  He then proceeded to focus Ford’s brand and sold off major assets including:

  • Jaguar
  • Aston Martin
  • Volvo
  • Land Rover
  • Mercury

Mulally was able to make billions in each of these sales.  He also significantly reduced Ford’s stake in Mazda.  Mulally sold off much else including Ford’s corporate Jets, closed factories, and outsourced what he could.  He also fought hard with the auto workers unions, reducing their pay from $76 to $55 per hour.  In terms of logistics he significantly reduced Ford’s inventory of automobiles and streamlined car models, brands, and production.  This all in the backdrop of a financial crisis in 2008 with General Motors and Chrysler nearly going bankrupt and forced to take government bailouts.  It’s easy to look good when your major competitors are failing around you.

During his time at Ford, Mulally has taken the company’s stock price from $1.80 to $17.31.  I think it’s clear as to why investors want Mulally as Microsoft’s next CEO.  They want him to come in and have a fire sale on Microsoft’s non-enterprise assets (Bing, MSN, Skype, Xbox, etc) and return those billions to shareholders in a special stock dividend.  This will drive up the share price, so they can sell that off and make even more profit.  I think investors also believe Ballmer would be open to naming Mulally as CEO, since Ballmer’s father was also an executive at the Ford Motor Company.  Ballmer and Mulally are friends and have met many times in Michigan.

However, Ford has not been a leading technology.  They have not been a leader in electric cars.  Their ‘MyTouchFord’ software is a disaster, even if it is slightly better than their competitors. *If* you were hypothetically were considering a car company CEO, wouldn’t Elon Musk make a significantly better choice.  His company has been forward thinking into the future to say the least.

As a side note, Mike Lawrie was also named in the report with Alan Mulally.  Unsurprisingly, he was previously a general partner at ValueAct.  The activist investor hedge fund who has recently gained a seat on Microsoft’s board, encouraging them to get rid of Ballmer and sell off Xbox, Bing etc.

Among Microsoft observers, I’ve seen little support for Mulally aside from Kara Swisher and Paul Thurrott.  Thurrott has long advocated that Microsoft should split the company up. (any question as to why Thurrott is being cannibalized by Tom Warren, wmpoweruser, etc?)

Follow the money.  Follow the money.

  • Avatar Roku

    A 69 year old transportation engineer is a terrible choice. He would be there for a stint and only to do asset stripping, ripping MSFT into disparate pieces. Is this really the best the world’s biggest software maker can do? How will Mulally build a MS that can compete in mobile and tablets and smartphones? By removing entertainment services and native search he will make a weaker OS ecosystem. MS is a company making over $20B in profit every year, they are not a bankrupt automaker like Ford. MS doesn’t need to be sold for parts to stay profitable.

    • falconrap

      I was with your comment until the “bankrupt automaker” part. Ford is anything but bankrupt. They are doing quite well and making fine cars. Otherwise, the rest of your statement is 100% accurate.

      • Bugbog

        They Were almost bankrupt 5-7yrs ago! Mulally came in and “restored” the Ford name.

        • falconrap

          Yes, I know. But the comment is written like the company is still bankrupt, which it clearly isn’t. A simple “was” at the end of that sentence would make a big difference in the way that sentence can be perceived.

          Quite frankly, I want Mulally to stay at Ford, where he’s doing a great job.

          • Avatar Roku

            That’s not what I said. I was comparing the state of Ford when he took over to the state of Microsoft today. Ford was in very bad shape and some of its lines and brands had to be sold off for the company to survive. There is no relation to where Microsoft is at this point.

      • Joe_HTH

        Mulally didn’t turn Ford around by innovating or building better cars. He turned them around by gutting them.

        • falconrap

          Umm…no. He sold off poor performing units, consolidated lines, and had Ford focus (no pun intended) on core products and make them high quality and appealing. The result has been great. Gutting Ford is simply not what he did. My lowly 2013 Ford Focus blows away the features and build quality of my wife’s much more expensive 2012 Jeep. Mulally has been great for Ford, and should stay put.

    • http://twitter.com/surilamin surilamin

      Exactly. Mulally would only be there short term. Probably 5 years at max. Do you have a good email address I can contact you at @MatthewStone:disqus ?

  • arorak

    IMO, if they want an outside guy, it has to be ELON MUSK. He is something and is really changing the world. Not to mention, he is young, quite energetic and has established many world changing companies. Wonder what he would accomplish with all the money that Microsoft just throws away buying useless companies and billion dollar write downs (Hello Kin/RT). I really believe in that guy and think he will take Microsoft to the new heights which Apple & Google will admire to.

    • Tips_y

      Yes, Elon Musk is young and innovative so I also think he will be a nice fit for MS CEO.

    • jack

      People decry Mulally for being an “old transportation engineer” when Elon Musk is essentially a mechanical engineer/physicist/investor. Neither are software engineers. First, old age should never be seen as a negative. Mulally brings experience, perspective, and a pedigree of success to the table. Not only did he turn Ford around into a major automotive player again, but he’s also made huge gains in the stock price. That’s a win-win. If he could do the same for Microsoft, why the hell not? I’m not necessarily pulling for Mulally as Microsoft CEO, but the man was key to Ford’s turn around and you can’t deny that. The bottomline for me is future growth and success. If selling MSN, Bing, Skype, or Xbox will drive both future growth AND stock prices, then I’m all in. I can’t say because I’m not an expert (although I did sleep at a Holiday Inn Express last night), but Mulally has shown prowess in turning troubled companies around. That’s the whole point isn’t it? If selling Xbox or Bing will hurt Microsoft’s long term success/strategy, I would hope Mulally would be smart enough to recognize that. He’s no fool.

      • Guest

        Finally, the voice of reason. Well done.

      • Avatar Roku

        A 70 yr old isn’t going to be running the company for the next decade. And it doesn’t exactly help the image of the company either. Successful or not he would be gone soon.

      • NGM123

        There’s one point you made the negates your argument….
        “Mulally has shown prowess in turning troubled companies around”

        MS is NOT a troubled company. He’s an expert at using the scalpel to trim dead flesh and keep a company afloat. MS is in the complete opposite position to his strengths, so why him?
        Bring in a fresh face to grow and expand the company, not rip, cut and savage.

  • Guest

    Supposedly Mulally has the backing of several large MS shareholders, so not just idiot Swisher or Paul. But there’s obviously two broad strategies that can be pursued and the CEO skill set is different depending on which you chose. The first is admit one of your three main franchises is in decline, the second is likely on its way, the third isn’t big enough to make up for the loss of growth in the other two, and all the rest are basically dog shit. So you sell off everything non-core, minimize costs, and maximize return to shareholders as the company winds down to zero. The other option is you try to bring it MS back to market leadership. In that scenario you might still sell off non-core businesses, or maybe you do what Gerstner did with IBM and mostly resist that, instead deciding you’re stronger together. Mulally is a more obvious fit for the first scenario than the second. OTOH, is you think MS’s main problem over the past decade has been execution, not so much lack of vision, then maybe he’s capable of removing the roadblocks and allowing MS’s bright people to shine. I’m not entirely sold on that though. I think a younger more savvy tech person would be a better choice. So the key question really comes down to who is calling the shots now, the board or investors? I’m starting to think the latter. MS’s board really pooched themselves by not doing more to address the stock’s sorry performance earlier.

    • Tips_y

      The Reuters article that first broke out the news on Mulally and Lawrie as CEO for MSFT mentions exactly 3 unnamed investors out of 20 big investors – your use of “several” implies more than 3. Also, the mere fact that Lawrie is one of the names suggested point to ValueAct as one of the three. Because of that, I did not bother to read the rest of your comment.

      • Guest

        My use of several meant several, as commonly defined, and was in response to the article’s statement about seeing little support outside of Kara and Paul. Explicitly so, in fact. If you didn’t read further because you don’t understand the meaning of the word or decided to infer something beyond what was written, that’s really your issue.

        • Tips_y

          However you may deny it, your use of the word “several” and then mentioning two names in one sentence was obviously meant to create the impression that more than three investors supported the move to include Mulally and Lawrie in the list of CEO.

          But no matter how much we argue semantics of the English language here, it will not matter one iota to the decision of who becomes the next CEO because that will be decided by Chairman Bill Gates, CEO Steve Ballmer, and the board. They will see to it that the right person who gets appointed will move MSFT in it’s present path forward – even if that were Mulally himself.

  • Bryan

    Wow wow wow. Great fucking analysis. Editorials like these are why I keep coming to this site.

  • Yuan Taizong

    ”They want him to come in and have a fire sale on Microsoft’s non-enterprise assets (Bing, MSN, Skype, Xbox, etc) and return those billions to shareholders in a special stock dividend. ” This is something that really irritates me about Microsoft’s investors, they simply want to make Windows a weak featureless O.S. without any of the awesome services it already has to offer, without Bing Microsoft would be 100% reliant on either Yahoo! or Google for their innovations in Windows 8 and Windows 8.1 (Blue) or they could’ve never implemented these, a similar story with the Xbox 360 and most notably the Xbox One and Windows Phone with their built-in voice commands. M.S.N. is an important portal, and it has been since 1995, Skype would only be losing money if sold off, Microsoft already integrated Windows Live Messenger into it, without Skype, they would have no native Messaging service to run on Windows… well maybe the Beta version of Nokia Messenger, but that won’t get them far.

    He’ll probably lose Microsoft SkyDrive and Outlook.com too, which are vital to the interconnection between Windows, Windows Phone and Xbox, as well as a web-stronghold for Microsoft Office and Microsoft Office 365. Without the Bing AppEx-team Windows 8 would be half of what it is, without the Xbox LIVE Games Microsoft would be able to offer less games on Windows and without Zune (Xbox Music & Xbox Video) Microsoft wouldn’t have anything other than an ageing Windows Media Player.

    All investors want to see is short-term cash, Microsoft has a long-term strategy that benefits consumers over shareholders and this is something they should continue, Microsoft needs a strong (wo)man who’ll continue Ballmer’s vision of ”One Microsoft” and will integrate all ecosystems, exosystems, O.S.’es and services into each other.

    • Ingiomar Martina

      Ageing Windows Media Player? You mean as in there are still people who use it? I thought its pretty much dead.

      • Bugbog

        Nope. There are people that actually trash Windows 8 because WMP is not immediately available to use!

      • falconrap

        I use it all the time. I upgraded Windows 7 to Win 8 Pro, so I got to keep it. What else am I suppose to use for playing and ripping my media? A third party solution? When media player works just fine?

        I only use third party solutions like VLC for content that I can’t play through Media Player, or through which content playback is of better quality (MP4’s through VLC is an example).

    • kalval

      Yes, so true. The long term investors are the ones that have received smaller dividends while Microsoft established Xbox, bing, outlook, etc. It was necessary for them to do this to develop a coherent set of products as part of a single ecosystem. Without all of these components and teams Microsoft’s current and future product line-ups would be a mish-mash of semi-compatible products like they were 5 years ago. We are just starting to see the benefits of this now. Then short term, short sighted investors come in, buy some shares and demand to see massive returns immediately through asset sales. These sales are only possible because of the foresight and long term investment that happened over the last few years. This is everything that is wrong with wall street. Massive short term gains are all that is important to them, not long term stability.
      The thing about good investment is that it is stable over the long term because of sensible choices being made by the board. The board have a duty to serious investors in the company, not to those who want to walk away with half the company after a few months of investment.

  • pdouglas

    Great analysis. This whole change of CEO thing is about stock performance. I believe either the new CEO addresses stock performance as a priority, and continues with the Microsoft One initiative, or MS could do like Dell and try to go private. As far as I’m concerned, Ballmer ran MS as best as any CEO could, but the tech media harbor such ill will against MS, this has weighed down on MS’ stock – starting before Ballmer became CEO. I believe MS should create its own media group to counter the one that prevails against it in the tech sector to solve MS’ stock performance problem.
    If investors insist on butchering MS to make money from it, maybe Bill Gates and the board need to consider the taking the company private, to keep investors off their backs.

    • Guest

      Going private isn’t a realistic option unless the stock drops another $100 billion at least. The loans required are just too big, and even that assumes Gates would stop his large and frequent selling to contribute, which isn’t likely. Also, what makes you think a MS free of any external pressure would make different and better decisions than they have over the past decade, when shareholders have been unbelievably patient?

      • pdouglas

        What do you mean the if the stock drops another $100 billion? You talk as if MS’ stock has been going down, when it has been going up. At one point there was a stock split which halved the price of stocks, but the overall value of the company was not affected since the volume was also doubled.
        I’m sorry but I don’t see how investors who care nothing about the overall well being of a company, and who seek only to rape and plunder it, is any good for the company.
        Every company has weaknesses. Maybe MS needs to find ways to keep aggressive investors in check.

        • Guest

          Exactly what I said. You realize it peaked in 2000 and is down almost 50% since, split adjusted, right? So “another” $100 billion certainly applies despite it being “up” so far this year.
          Why is investor synonymous with someone “who cares nothing about the overall well being of the company”? MS stopped being a momentum stock in the 90’s and has mostly appealed to long term investors interested in dividends since. It’s counterintuitive to think they don’t care about the long term success of the company. Without that, the dividends end. Maybe you mean ValueAct specifically? From what I’ve read their focus is to increase their capital by 20% over five years. So shorter term focused than some, but again not really short term. And they have a reputation for working with management, not against them. So the board could do worse.

          You realize ValueAct, or any other investor, would have little control over MS if not for the fact that management has systematically destroyed the company’s former dominance over the past thirteen years, which is now showing up in reduced growth and the recent massive earnings miss? It seems to want to absolve the board of all blame while accusing investors, who incidentally haven’t made money in more than a decade, of being greedy.

    • NegLewis

      Follow the money.
      THERE IS a reason why in the wake of economic crisis Bill Gates sold it’s stocks and remained in the MS board as THE man.
      There is a reason why all Silicon Valey CEO’s trash MS (see MS last 15 years investors).
      There is a reason why BG keeps ots money-gun loaded, aimed and ready to fire.
      Those who bought stocks will be crushed by the man itself if they will try to sell MS.

  • semx34

    he would be the wrong type of CEO for a growing tech company… Microsoft is not in need of drastic economic change, its their image that needs to change.

  • Manu

    Ford had a cash problem, Microsoft does not. He also focused on core products, core brands, and customer experience. Ford also moved to a very deeply personal and emotional advertising campaign.

  • Gromanon

    It’s all that stupid ValueAct pitching these stupid ideas! They are trying to break apart Microsoft and sell it off in pieces! I could have sworn Google or Apple pays them to get on Microsoft’s board to destroy Microsoft!

    Someone kill ValueAct asap!

    • Mark

      Yeah, it’s ValueAct’s fault that MS’s stock has been dead since 2000. Or that Apple is now larger and more valuable. Or that MS lost the two markets it pioneered, smartphones and tablets. Or that MS hasn’t been able to make any money at Search. Or Longhorn. Or Vista. Or Zune. Or Kin. Or Surface. Or W8’s failure on tablets and poor adoption on the desktop.

      These guys are the best thing to happen to MS. Sure, in some cases they may err too much on the short term. But overall they’re the ones who are driving the long overdue changes that MS’s own board refused to make when it could have averted the current problems.

      • Gromanon

        Do you care for Microsoft stock? I sure don’t!

        But I do care for Microsoft products which have been all great for the most part.

        But under ValueAct’s ideal proposition is to sell off all consumer products MS has: like Outlook, Bing, Windows OS, Windows Phone, Xbox and etc. Leaving it with its Enterprise business and completely out of consumer market. This would make Google and Apple as only choices for consumer market, both products of which I dont like.
        are you saying this is good thing for Microsoft!??

        Think again

        • Mark

          Do you understand what a stock is? Ownership. They own the company. So yes, I care whether the owners of the company are having their needs met. Because if they aren’t, that’s going to effect what products and services I can expect to see.

          I don’t believe ValueAct has said anything publically about what they expect. But it has been reported they’d prefer more focus on enterprise and less on consumer. Is that good for MS? You act like there’s a choice. Like MS hasn’t been spending billions in consumer for years and not winning, but can just continue what it’s doing and suddenly Apple and Google won’t have the massive share lead they do. I don’t know whether it’s better for MS at this point to concede consumer and focus on the enterprise. But clearly just continuing to do what hasn’t worked well isn’t a viable strategy.

          • falconrap

            If MS gives up in the consumer arena, they will lose a lot of their core enterprise business as users migrate away from Windows. The more Android and iOS become part of peoples’ daily lives the more that bond weakens. MS needs to be on consumer’s tablets and phones to keep consumers from wanting to ditch Windows at work. PC sales aren’t really down because of Windows 8, nor anything that MS is doing. They’re down because of 1) the economy, 2) most PC’s bought a few years ago are still good enough, and 3) tablets eating up consumer capital. If the economy turns around someday, there will be a big rush for new PC’s (both laptops and desktops) to replace aging equipment. Same thing is happening in the business space, where corporate clients get to install their OS of choice. Less PC’s being bought due to lack of need to upgrade.

          • Mark

            Yes, the downside of focusing exclusively on the enterprise is that consumer winners will bleed into enterprise. That’s already happening and trends like BYOD are further contributing to it. I imagine the “enterprise” proponents assume Windows and Office will go into decline, as Windows already has. But by focusing exclusively on enterprise MS will expand in other areas, like Azure, and over time that will be the driver of future growth. On your PC comments, I’m not sure we’re ever going to see PC sales return to the highs we saw a few years ago. Tablets are here to stay. Even MS appears to be slowly admitting that too. Which shouldn’t be a surprise. Back in 2000, Gates predicted they’d be the most common form factor within five years. He was too early, and of course assumed most would be running Windows, but looks like he’s going to be right at least directionally.

          • donzebe

            The winner of the consumer market will eventualy win the enterprise market. if i use windows at home, i will likely demand it at work. Why are people resisting to move from windows XP and win 7 to windows 8? The main reason is because of the UI. The change is just too different from what they are use to.
            People tend to stict with what they are familiar with.
            Microsoft also need the consumer market in other to expand well in the enterprise. Microsoft may not be the leader in both enterprise and consumer markets, but they can not afford to drop one and concentrate on the other or else they loose both.
            At the end microsoft will need bing/skype/wp/Azure/window/office/Xbox and some other device sectors.
            All your five fingers may not be performing at peak but the ones that perform better need the less performing ones to perform effectively.

          • donzebe

            All you said is just right.
            Still running my five 6 years old desktops
            Still running my three 3 years old labtops
            Not upgrading to new hardware anytime soon. Windows 8 has just put new life into them and are sure to go for some more years.

          • Gromanon

            All you say is true if only we lived in world of only good people. Unfortunately investors are just that… investors aka gretty bastards who only care about money. They’d tare a chicken apart looking for golden eggs if they need to. And that chicken will be Microsoft if that man Alan Mulally get to become Microsoft CEO.

            ValueAct would support Alan Mulally, who is notorious for selling off major Ford assets. Just take look at this

      • pdouglas

        What’s the point in listing the failures of MS when the same can be done for just about every company? Why don’t you take Apple to task for losing market share in the smartphone and tablet markets to Android? Why don’t you point out that Apple has clearly lost the technological and mindshare edges in these markets? Why don’t you point out that Google+, Google apps, and countless other projects by Google, have been significant failures. Why don’t you point out that Google makes no real money from Android smartphones. I could go on and on about the shortcomings of Apple and Google, but the MS haters (including the tech media and trolls like yourself) don’t care about that. Haters just like projecting a distorted image of MS, and love it when the company and its CEO get into trouble over it, and the company’s stock suffer because of it.

        • Mark

          I agree with all those Apple and Google points. But there’s simply no comparison between their performance over the past decade versus MS, either in the marketplace or as stock investments. If you can’t acknowledge that, you’re simply in denial. It’s not trolling to point out the truth, as unpleasant as you may find it.

          • Viktor

            Thas is just because your comparison has weak coverage of modern technologies. You only conclude on smartphones and tablets performance (client devices), but there are WAY more things happening in IT.

  • vince

    FYI – you date yourself with ‘follow the money’ reference to ‘the wire.’ Try Woodward and Bernstein and rule 1 of investigative reporting.

    • Bugbog

      “Shiiiieeeeeet” The Wire is timeless ‘fool!’ :)

      • http://twitter.com/surilamin surilamin

        Glad someone got the reference :) I went with The Wire since it’s more recent. Do you have an email address I can contact you at @Bugbog?

  • NegLewis

    MS must leap forward – not to survive, but to take the industry to/tru the next step.
    Next step it’s a FULL solution.
    People want everything with anything, including an OS with services, devices, games, cloud, and so on..
    I’ll choose Sinofsky…

  • arrow2010

    Sell off useless MSN, but keep Bing/Skype/XBox. Those are all being tightly integrated into Microsoft OSes. Bing is now hard-baked into Windows 8.1 with Search Heroes. Who in their right mind would sell off Bing and let Google have 100% market share?

    • symbolset

      Integrating Bing into Windows doesn’t make Windows better, and doesn’t make Bing profitable.

      • Guest

        OMG, two career MS trolls for the price of one? How did we get so lucky? The symbolset moron is half right for once: integrating Bing into Windows doesn’t make it profitable. But losses were already slowly tracking to breakeven. So perhaps with the Windows integration and the greater Apple placement they’ll at least accomplish that. I’m not sure it doesn’t make it better though. The initial results look pretty nice. We’ll have to see where things are at after release. One thing you can bet on though, even if it’s the greatest thing ever, symbolset will still be popping up all over the internet critiquing it, like the knee-jerk hater that he is.

  • Spelling Bee


    Not precede.