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Originally published November 16, 2010 at 9:01 PM | Page modified November 17, 2010 at 8:11 AM

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Stock in rut, Microsoft investors not happy

At Microsoft's annual shareholder meeting, people grumbled about the company's languishing stock price.

Seattle Times technology reporter

What used to be a love fest for Microsoft has turned into the nitpicking of a long-married couple.

At Tuesday's annual shareholders meeting in Bellevue, many grumbled about Microsoft's languishing stock price. Dividends, which increased 23 percent this year, weren't high enough, some said.

One asked Chief Executive Steve Ballmer to explain the disconnect between Wall Street and the company's financial performance — record sales and profits far exceeding analyst expectations.

Another asked Chairman Bill Gates why he was selling his shares and donating proceeds to the Bill & Melinda Gates Foundation instead of removing his shares from the corporate balance sheet to boost the stock price.

"We're all shareholders, all of us are shareholders, so I do understand the frustration," Ballmer said. "So let's talk about what we can do and what we can't do. I mean, ultimately, the stock market gets it right as long as we get it right. So we optimize every day on getting it right."

As for the Gates Foundation, Gates said, "I think the thrust of the question is, 'Are the current grantees of the foundation more deserving than turning the money over to Microsoft shareholders?' I guess I've made the decision that that wealth is going to go to the foundation rather than being some reduction in shares outstanding for Microsoft."

One shareholder did congratulate and thank the executives during the meeting for the company's financial performance.

Last year, the meeting was glum about the economy. The most pointed questions were directed at how Microsoft would compete against the cool factor of Apple products.

Many of the questions this year were about the company's stock, which has been trading between $25 and $30 for much of the past decade.

Ballmer spoke for the first 15 minutes, talking up Windows, Office and cloud computing. The company gave a brief demonstration of its new Windows Phone 7 smartphone system.

"The opportunity to transform people's lives all around the world has never been greater. The opportunities for growth and success have never been more exciting," Ballmer said. "We're going to work very hard every day to have a positive impact."

One shareholder asked whether Microsoft should break up the company, which had been suggested in a recent report by Goldman Sachs. The investment bank said the company as a whole was likely worth less than the sum of its parts.

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"I obviously don't think it is time," Ballmer said. "I don't think it would be useful. I think it creates economic dissynergies in fact."

Gates also said it was a bad idea. "I don't think there's a line where you'd create net simplicity by trying to create a new company," he said.

Tepid applause followed the speeches and the phone demo. The most enthusiastic clapping came when Ballmer said Gates was advising Microsoft on projects.

"We're lucky Bill keeps giving us generously his time not only as chairman of the board, but also as adviser on some of our key projects, and we're really fortunate to have that," he said.

Bob Selby, who came from Blaine for the meeting, called the meeting "highly controlled." "You would expect a lot of hoopla" for a tech company, Selby said.

The meeting was a monklike affair with coffee and a few technology demos at the Meydenbauer Center, compared with the lavish shareholder events put on by companies such as Starbucks.

Reka Swinford, of Maple Valley, bought Microsoft and Ford stock two years ago. She said her Ford stock has tripled while Microsoft has made small gains.

She does not expect the stock to go up that much, but "I'm in for the long haul," she said. "I think Microsoft is a good, solid company. We're the faithful locals."

She also was surprised by the austerity of the event. "I thought I would at least get a free pen," she said.

Here are the three matters voted on at the meeting:

• All nine directors nominated were re-elected: Ballmer, Gates, Dina Dublon, Raymond Gilmartin, Reed Hastings, Maria Klawe, David Marquardt, Charles Noski and Helmut Panke.

• Deloitte & Touché was approved as the independent auditor.

• A shareholder proposal to set up a board committee for environmental sustainability failed. Harrington Investments, a small firm in California's Napa Valley, supported the plan.

"It's extremely important that the directors recognize that sustainability, environmental sustainability, is a criteria for just about any publicly traded company on the globe," the firm's president, John Harrington, said at the meeting. He said Intel had adopted a similar committee.

The Microsoft board recommended rejecting the proposal, saying the company already has incorporated environmental values.

Sharon Pian Chan: 206-464-2958 or schan@seattletimes.com

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