Bloomberg News

Microsoft’s Ballmer Got Half Maximum Bonus on Windows Sales

October 03, 2011

(Updates with investor’s comment in fourth paragraph.)

Oct. 3 (Bloomberg) -- Microsoft Corp. said Chief Executive Officer Steve Ballmer wasn’t awarded his full bonus for fiscal 2011, citing lower-than-expected sales of phones based on the company’s software and a drop in revenue in its Windows unit.

Ballmer, 55, received $1.38 million in pay, according to a filing with the U.S. Securities and Exchange Commission. That included a bonus equal to 100 percent of his base salary, half of the maximum he could have been awarded. Still, the board noted in the filing that it regards Ballmer as “underpaid.”

While directors praised Ballmer for the company’s operating income, progress on the next version of Windows and partnerships with Facebook Inc. and Nokia Oyj, they voiced concerns about lower sales of Windows software and the need to be quicker to adapt the software to work on new devices. Ballmer has come under fire from some investors, including Greenlight Capital Inc. President David Einhorn, who used a May speech to call on Microsoft’s board to replace him.

“He deserves this bonus,” said Kim Caughey Forrest, an analyst at Fort Pitt Capital Group Inc. She said she’s encouraged by the newest version of Windows, unveiled last month. “I see the light at the end of the tunnel, and it’s a pretty big light. They came a huge way for me.”

At the same time, Ballmer didn’t deserve the maximum amount because he and the board aren’t returning enough cash to shareholders, said Caughey Forrest, whose firm manages about $1.1 billion, including Microsoft shares.

Windows Revenue

The popularity of tablets such as Apple Inc.’s iPad contributed to the decline in Windows revenue in fiscal 2011, which ended June 30. Some shareholders may balk at Ballmer’s 100 percent bonus because they think the new Windows isn’t coming fast enough, Caughey Forrest said.

“You could posit Windows 8 and the whole reaction to the phenomenon of tablets and mobile devices is a few years too late,” she said.

Microsoft’s board lauded Ballmer for making progress on the company’s Bing search engine and Azure cloud software; the successful release of the Kinect gaming device; the introduction of the Office 365 Internet-based versions of its productivity software; work toward the acquisition of Skype Technologies SA; and a “strong financial year.”

Ballmer, who owns almost 4 percent of the company’s outstanding shares, doesn’t get stock compensation at his own request, the filing said.

For fiscal 2010, Ballmer also received 100 percent of a maximum 200 percent bonus, with the board citing concerns about new devices and a loss of market share in phone software.

--Editors: Jillian Ward, Nick Turner

To contact the reporters on this story: Dina Bass in Seattle at

To contact the editor responsible for this story: Tom Giles at

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