Is Microsoft Corporation (MSFT) Really Corporate America’s Alex Rodriguez?

David Einhorn recently compared Microsoft Corporation (NASDAQ:MSFT) to Yankees third baseman Alex Rodriguez.

From the Greenlight Capital annual letter,

In 2006 we compared Microsoft to A-Rod, which was a compliment at the time. In 2013, the comparison is still apt, but it is no longer a compliment.

The famous stock picker implied that Microsoft Corporation (NASDAQ:MSFT)’s glory days were over and that the Redmond, Washington tech giant was in decline. Should investors follow Einhorn’s advice and sell?

The CEO

Steve Ballmer has been Microsoft Corporation (NASDAQ:MSFT)‘s CEO since 2000. Microsoft shares have languished since 2000, and it is not hard to see why.

Ballmer made several severe mistakes. First, he failed to acquire Google Inc (NASDAQ:GOOG) when they offered to sell themselves for five billion dollars. Second, Ballmer failed to acquire Facebook, which is now the world’s most popular social network. Third, he missed the entire post-PC era and famously laughed at the Apple Inc. (NASDAQ:AAPL) iPhone.

Instead of focusing on the mobile shift in the computing system market, Microsoft Corporation (NASDAQ:MSFT) spent too many resources on Apple iPod competitor Zune and Google Inc (NASDAQ:GOOG) search competitor Bing, which ended up being also-rans in their perspective sectors. Microsoft Corporation (NASDAQ:MSFT) also acquired AQuantative, which it had to write down 5 years later by over $6.2 billion, and acquired Skype for $8.5 billion, which is now under assault from mobile chatting apps such as Whatsapp.

Secular Decline

As a consequence of missing those trends, Microsoft Corporation (NASDAQ:MSFT) is in secular decline and has lost its monopoly on computing platforms to Android and Apple Inc. (NASDAQ:AAPL).

Source: Business Insider

According to market research firm IDC, worldwide PC shipments were down 13.9% in first quarter of 2013 Year Over Year. IDC attributed the decline to the increasing popularity of mobile tablets which the research firm predicted would surpass total worldwide PC shipments by 2015. Since a significant part of Microsoft’s profit comes from PC’s, Microsoft’s profit will eventually suffer.

The Benefiters

As a result of Microsoft’s numerous missteps, Google Inc (NASDAQ:GOOG) and Apple Inc. (NASDAQ:AAPL) have managed to eclipse Microsoft in market capitalization.