Ford stock up, Microsoft down on Mulally news

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Associated Press

Posted on January 8, 2014 at 9:00 AM

DETROIT (AP) — Ford Motor Co. shares rose while Microsoft Corp. stock fell Wednesday morning on news that Ford CEO Alan Mulally won't leave the automaker to take lead the software giant.

Mulally said in an interview with The Associated Press late Tuesday that he will stay at Ford at least through the end of this year. He said he wanted to end speculation about his possible departure to replace Microsoft CEO Steve Ballmer.

Ford shares rose 31 cents, or 2 percent, to $15.69 shortly after Wednesday's opening bell, while Microsoft stock fell 51 cents, or 1.4 percent, to $35.90.

Since late summer, there have been numerous reports that Mulally, 68, was in the running to succeed Ballmer at Redmond, Wash.-based Microsoft, and he never completely denied them until Tuesday.

"I would like to end the Microsoft speculation because I have no other plans to do anything other than serve Ford," Mulally told the AP. "Am I leaving Ford? No."

Nomura analyst Rick Sherlund, in a note to investors Wednesday, maintained his "Buy" rating on Microsoft. He wrote that Mulally appeared to be the front-runner for the Microsoft job, but as the process dragged on, it appeared the board wanted someone with tech industry experience.

Sherlund wrote that several tech executives have declined the position, "so we are hopeful that the board has others who might both redirect the company, but also be shareholder friendly." He suspects there are "dark horse" candidates with more technical experience, including internal candidates.

Mulally's withdrawal further shrinks the pool of company outsiders who have been touted as Ballmer's potential successor.

Steve Mollenkopf, the chief operating officer of smartphone chip maker Qualcomm Inc., was identified as a top candidate in a Bloomberg News report last month. But Qualcomm quickly squelched the speculation by announcing plans to promote Mollenkopf to CEO in March.

With Mulally out of the running, some of Ballmer's top lieutenants might have a better chance of replacing their boss. The list of internal candidates includes Satya Nadella, who oversees the Microsoft's lucrative business of selling computer servers and online services to other companies and government agencies, and Tony Bates, who joined Microsoft in 2011 when the company paid $8.5 billion for video calling service Skype.

Microsoft's pending acquisition of Nokia's smartphone business also has spurred talk that Nokia CEO Stephen Elop will replace Ballmer. Elop left Microsoft in 2010 to join Nokia, a mobile phone pioneer that continued to lose market share to Apple Inc.'s iPhone and Android devices under Elop's leadership.

Microsoft wouldn't comment on CEO candidates.

The news at Ford was much better because the man credited with saving the company from financial ruin will stick around. Mulally was hired away from Boeing Co. in 2006, a year the automaker lost more than $12 billion and appeared headed for bankruptcy court.

Just months into his tenure, he mortgaged all of Ford's assets — including its Blue Oval logo — for a $23.5 billion loan to fund a massive restructuring. It was a prescient move that helped Ford avoid the fate of General Motors and Chrysler, which both filed for bankruptcy protection in 2009.

During his tenure, Ford has earned $32.9 billion in pretax profit and its shares have more than doubled. The company expects to earn $8.5 billion before taxes in 2013. But it spooked some investors last month when it said pretax profits would be slightly lower in 2014 as it launches 23 vehicles worldwide.

Stifel analyst James Albertine told investors in a note Wednesday that Mulally's statements should eliminate an unnecessary headwind for Ford's stock in the coming year.

In November of 2012, Ford announced a number of executive changes in preparation for Mulally's retirement sometime after the end of 2014, including the promotion of Mark Fields to chief operating officer. That makes Fields the likely successor to Mulally.

"It seems the succession plan is, in fact, on track," Albertine wrote.

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