Microsoft — Putting Their Money Where Their Mouths Are

What effect does it have when you criticize the company of which you are a major shareholder?

January 10, 2000

What effect does it have when you criticize the company of which you are a major shareholder?

This episode reminded us of Microsoft's Steve Ballmer, who said in September 1999, "Reality is out of line.… There's such an overvaluation of tech stocks, it's absurd." Not to mince words, Mr. Ballmer said that he would even include Microsoft on a list of overvalued companies.

The market promptly responded to Mr. Ballmer — just as it would to Sony's president — by sending tech-sector stocks into a tailspin. Microsoft itself lost about 5% of its value. Owning some 250 million shares of Microsoft stock, Mr. Ballmer's assessment of the market ended up costing him almost $1.2 billion of his personal fortune.

So, while the musings of Mr. Ballmer and Mr. Idei might have produced similar results, there was at least one critical difference. Mr. Ballmer had his own personal wealth to lose. And this probably only heightened the amazement of investors left wondering why Mr. Ballmer would torpedo the value of his company — and kiss goodbye to so much of his own money.

Then again, the blame may indeed lay with those same investors who, taking Mr. Ballmer's words as gospel, promptly dumped their tech stocks on the market. It reminds us that there is some real wisdom in Tevye's observations from the musical Fiddler on the Roof:

If I were a rich man
Daidle deedle daidle deedle daidle dum
All day long I'd biddy biddy bum
If I were a wealthy man

The most important men in town will come to fawn on me
They will ask me to advise them
Like a Solomon the wise
And it won't make one bit of difference
If I answer right or wrong
When you're rich, they think you really know