Famed hedge-fund manager David Einhorn (Greenlight Capital), the man who shorted Lehman Brothers, has been clobbered along with other Wall Street stars over the past few months. In his “I’m sorry about our awful performance” letter for the third quarter, however, Einhorn did include one nugget that a lot of Microsoft investors can probably relate to:
We wanted to share some thoughts on Microsoft (MSFT), which we closed during the quarter. We believe that we purchased the shares at an attractive time, and for a good while the investment worked nicely. As has been our habit of late, we overstayed our welcome as the shares peaked after the company announced a very good September 2007 quarter.
Since then, management has acted in an overaggressive and almost panicky fashion regarding its online offering. First, it sought to acquire Yahoo! and then after that failed, it announced extremely high internal investment requirements to pursue this “huge” opportunity (read: “Google-envy”). We doubt the opportunity is what they say it is and wish MSFT focused on its core strength: software.
The CEO is a very smart and very wealthy man. Perhaps, he is so wealthy that he has bigger ideas and aspirations than making MSFT’s shareholders wealthier. We’ve given up on MSFT for now as we feel better investing in companies where management at least appears to be trying to work for shareholders.
We share the concern about Microsoft’s online investment, which we continue to believe is going nowhere. (We think Microsoft should just spin what’s left into Yahoo.) We do think that Steve made the right call about Yahoo, however. We continue to think that deal would have been a disaster.
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