What’s Important in the Financial World (10/10/2012)

Ballmer and Microsoft’s Future

Much of the recent discussion about Microsoft Corp. (NASDAQ: MSFT) has centered around the cut in CEO Steve Ballmer’s bonus, which to some extent was due to ongoing losses in the company’s online operations. A bit less prominent in the news are Ballmer’s comments in the annual report of the world’s largest software company:

There’s a remarkable amount of opportunity ahead for Microsoft in both the next year and the next decade. As we enter this new era, there are several distinct areas of technology that we are focused on driving forward — all of which start to show up in the devices and services launching this year. Leading the industry in these areas over the long term will translate to sustained growth well into the future. These focus areas include:

• Developing new form factors that have increasingly natural ways to use them including touch, gestures and speech.
• Making technology more intuitive and able to act on our behalf instead of at our command with machine learning.
• Building and running cloud services in ways that unleash incredible new experiences and opportunities for businesses and individuals.
• Firmly establishing one platform, Windows, across the PC, tablet, phone, server and cloud to drive a thriving ecosystem of developers, unify the cross-device user experience, and increase agility when bringing new advancements to market.
• Delivering new scenarios with life-changing improvements in how people learn, work, play and interact with one another.

We are uniquely positioned to lead in these areas given the breadth of our devices and services portfolio, as well as our large, global partner and customer base and the growing Windows ecosystem.

Ballmer continues to argue that Microsoft will be among the most important software companies in the world, That is true because of its size. But he also argues it will be the most relevant, because within this breadth the company plans to be extraordinarily innovative. Whether that is so will be analyzed by the public or most investors not based on enterprise software, products for businesses or server enhancements. Windows 8 will be the critical measure. Its release is less than a month away. By the end of the year, the pace of downloads and the tenor of reviews will say a great deal about whether Ballmer’s sentiment is true.

Wall St. Compensation

The office of New York State Comptroller Thomas P. DiNapoli released its annual report on the state of Wall St. The focus of the report, at least according to the press, was this information:

The average salary (including bonuses) paid to securities industry employees in New York City fell sharply in 2009, but rose by 16 percent in 2010 and by another 0.5 percent in 2011 to reach $362,950. This was a higher average than before the financial crisis and was the highest average among New York City’s major industries. The disparity between the average salary in the securities industry and the rest of New York City’s private sector narrowed slightly but it remains wide at 5.3 times greater than the rest of the private sector ($67,900).

The data will reopen the argument about why investment professionals should be compensated more than teachers, firemen, the police or, for that matter, any other productive American who works in a job that adds to the tax base and gross domestic product. The argument is about why an industry that was bailed out by taxpayers at the risk of hundreds of billions of dollars should be allowed to pay its employees so well. But those same issues have surfaced frequently for years, and, except for the two years of the financial crisis, nothing has changed.

Rescuing the BAE-EADS Merger

It has only been a few weeks since BAE Systems and EADS proposed to merge. But objections by large investors, as well as some of the nations that have many employees from one or the other firm, have voiced concerns about shareholder value and the future of jobs.

Reuters reports:

EADS and BAE Systems are engaged in a final push to rescue their $45 billion aerospace merger from the political jockeying that threatens to sink it, as doubts grow over German backing for the deal.

The European companies have until 12 noon EDT on Wednesday to declare their intentions and either scrap their merger or ask UK regulators for more time or finalize their plans to create the world’s largest aerospace and arms group.

Douglas A. McIntyre