The reaction on Wall Street Friday to news of Bill Gates’ plans to transition out of his daily duties at Microsoft Corp. was a bit ho-hum.
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After Thursday’s closing bell, Gates announced he would immediately leave the chief software architect’s position, handing over those duties to Chief Technology Officer Ray Ozzie, and unveiled a two-year timetable to leave his day-to-day role at the world’s largest software company.
Shares of Microsoft gained 3 cents, to $22.10, on the Nasdaq stock market Friday after trading in a tight range the entire session.
JPMorgan Chase & Co. maintained an overweight rating on the Dow component following the news, saying it recognizes the stock’s prospects have turned into a longer-term story now, but that it believes there will only be a modest impact, if any, on operations in the near term.
“Gates’ withdrawal from Microsoft’s operations was widely anticipated and we believe the transition plans which led to the announcement first started back in September 2005 when Microsoft reorganized the company into three divisions,” Morgan told its clients.
As for where the stock will go from here, Morgan said it believes the next important catalysts are the fourth-quarter financial report, scheduled to be released July 20, and an analyst day July 27.
Citigroup Inc. had a similar reaction, keeping a “hold” rating on the stock and a $27 price target.
“Given the two-year transition period and our belief that Gates has been preparing the organization for this through the previous reorganization and hiring of Ray Ozzie, we are only slightly concerned about the impact of this announcement,” analyst Brent Thill said.
Thill said the beginning of the end of the Gates era at Microsoft might temper morale in the short term, but noted that any vacuum created would “give a new generation of leaders a chance to step out of Bill’s shadow, evolve new business models, and develop the software and services vision of Windows Live.”
Friedman Billings Ramsey left an “outperform” rating on Microsoft and kept a $32 price target on the shares, but it struck a more bullish note while forecasting just a slightly negative impact on the stock in the near term.
The firm said it sees “business as usual” at Microsoft in the wake of the announcement and looks ahead to the balance of the year, when it expects Microsoft to bring clarity to issues that have held the stock back of late. It specifically mentioned the lack of a detailed strategy and uncertainty regarding the release of its Vista operating system.
RBC Capital Markets also left intact its “outperform” rating on the Redmond, Wash.-based company.
The firm’s analysts, who have a price target of $32 on the stock, said they continue to like the risk-reward ratio for Microsoft while the stock is sitting near a four-year low.
“With the stock stuck in neutral for some time, a change such as this may help paint a picture of new beginnings for investors,” RBC told clients.