Something rather unprecedented is happening to Microsoft.
After sitting in limbo for about a decade, shares of Microsoft are reaching highs the company hasn’t seen in more than ten years. A run this week has sent shares above $40 — a price Microsoft hasn’t been in shooting distance of since 2007.
In general, a rising share price is a sign that shareholders think that it will be more valuable in the future, and they will make more money from buybacks of stock and dividend payouts. A stagnant share price is usually an indicator that investors are not confident that the company can do something innovative and be competitive with market leaders — in this case, Apple and Google.
Microsoft promoted Satya Nadella to the CEO position in February, and in the past year Microsoft has already risen about 40%. Former CEO Steve Ballmer said he would retire in August last year. That news alone sent shares of Microsoft up 8%.
Ballmer had been criticized for failing to see a number of approaching industry trends — including the emergence of smartphones and tablets — and more importantly failing to create a value proposition that would inspire a run up in Microsoft’s stock price. This led to an enormous amount of pressure on the company, which has also so far failed to produce a revolutionary operating system in Windows 8 to put Microsoft back on the competitive landscape.
This pressure led to a major re-organization and to the announcement that Ballmer would retire within the year. During that time, Microsoft also bought Nokia’s devices and services division, and after an enormous amount of speculation, Nadella was finally appointed CEO. The most recent run in Microsoft appears partly tied to reports that the company will introduce Microsoft Office for the iPad at an event next week.
Much of the intrinsic problems and questions around Microsoft still remain, though under new leadership. But the company has already accomplished something that Ballmer was not able to do for the better half of a decade — get its shareholders excited.
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