Shares of a company frequently rally after the CEO is fired. For example, shares of Groupon Inc (NASDAQ:GRPN) surged Thursday after Andrew Mason was let go, and shares of Chesapeake Energy Corporation (NYSE:CHK) traded higher after Aubrey McClendon’s resignation was announced in January.
In the same vein, it is likely that shares of Microsoft Corporation (NASDAQ:MSFT), J.C. Penney Company, Inc. (NYSE:JCP) and Cisco Systems, Inc. (NASDAQ:CSCO) would rally if their CEOs were sent packing.
Microsoft’s Steve Ballmer has presided over a decade of stagnation Hedge fund manager David Einhorn called for Ballmer’s resignation in 2011. At the Iran Sohn investment conference, Einhorn derided Ballmer for failing to take advantage of the shift to mobile computing while, at the same time, blowing billions on ill-fated acquisitions and pie-in-the-sky projects.
It’s hard to argue with Einhorn’s assessment. Ballmer became Microsoft Corporation (NASDAQ:MSFT)’s CEO in 2000. In the 13 years since, both the business and the share price have stagnated.
Microsoft missed the mobile computing revolution, losing out to rivals Apple Inc. (NASDAQ:AAPL) and Google Inc (NASDAQ:GOOG). Its attempt to catch up -- Windows 8 and the Surface tablet -- has thus far failed to have a meaningful effect on the market.
Microsoft’s search engine Bing, which Einhorn characterized as a “sinkhole,” remains a distant second to Google (about 15% of the market to Google’s 66%). Ballmer hasn’t been shy about making acquisitions, but they mostly haven’t panned out. The company posted a loss last year after taking a $6.3 billion write-down on aQuantive -- a company it had acquired just five years prior.
Ballmer’s failings have been enough to create speculation that Gates would consider coming out of retirement. Just last October, Gates had to insist that he remained devoted to philanthropy.
If Ballmer was fired, shares of Microsoft would surge on the hope that new blood could reinvigorate the company. Whether or not that would ultimately happen is another matter, but as long as Ballmer remains CEO, investors will continue to view Microsoft for what it is: a tech utility.
Ron Johnson’s turnaround strategy at J.C. Penney could bankrupt the retailer Ron Johnson was brought in from Apple in 2011 to turn J.C. Penney around. At the time, J.C. Penney was an old budget clothing retailer, coasting along with a core customer base of lower-middle income consumers.
Johnson wanted to change all that. He had built arguably the most successful retail operation ever at Apple, and at the time he was hired, it was believed that he could work his magic on J.C. Penney.
To put it mildly, he has failed. Shares of J.C. Penney plunged as much as 20% on Thursday after the company reported what was arguably the worst quarter for a retailer ever. Same-store sales fell over 31%, suggesting that the company’s shifting strategy has driven away its core customers. For the entire year of 2012, the company lost nearly $1 billion.