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Microsoft stock sheds 4% after Windows boss departs

Former Windows chief Steven Sinofsky holds a Surface tablet with skateboard wheels attached to show the strength of the device during the launch event for Microsoft Windows 8 in New York, in this Oct. 25, 2012 file photo.


These days at Microsoft Corp., you can't take anything at Surface value.

The launch of Windows 8 and the Surface tablet in October was supposed to be a revolution for the company, with investors hoping to finally see some capital gains after a lost decade of stagnant share value. But signs of shaky foundations at the software company emerged Monday when Windows chief Steven Sinofsky announced his departure.

The news sent Microsoft's shares down 4 per cent Tuesday, exacerbating the stock's poor performance since Surface's Oct. 26 release. While the stock rose more than 8 per cent in the week and a half following the release, it has since lost that premium and more – it's now worth 2.8 per cent less than it was at Surface's launch.

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With Mr. Sinofsky gone, some analysts are growing concerned.

"While the departure of Sinofsky is just one additional data point, it is a negative and further calls into question the early momentum of the Windows 8 ecosystem," Barclays Capital analyst Raimo Lenschow said in a research note late Monday.

Analyst Rick Sherlund of Nomura Equity Research said in a note that he believes Mr. Sinofsky's departure would continue to weigh on Microsoft's stock in the near term. "We hold Sinofsky in high regard as a technical visionary and his ability to deliver complex products on a timely basis," Mr. Sherlund wrote.

Mr. Sinofsky's success in the Windows division led many to speculate he would eventually take the CEO reins from Steve Ballmer. After finding success with the highly profitable Office software suite, Microsoft appointed Mr. Sinofsky head of its Windows division as the company sought to recover from the flop of Windows Vista. He led its successor, Windows 7, to success, and Microsoft hoped to one-up that victory by using Windows 8 to gain traction in the mobile computing sector, where the company has long fallen behind competitors, such as Apple Inc. and Google Inc.

By leaving, Mr. Sinofsky has drawn negative speculation – not only of tension within Microsoft's upper ranks, but also of the positioning of Windows's future within the brand.

"[Mr.] Ballmer's been a controversial CEO at best, and people were hoping there would be a succession plan," Michael Turits, an analyst with Raymond James & Associates. said in an interview. With the success of Office and Windows 7, "[Mr.] Sinofsky was a rock star," he said.

With the visionary gone, Mr. Turits said, there's a concern whether Microsoft has a succession plan in place "that will keep investors happy."

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Other analysts are more positive, as Mr. Sinofsky's exit may point to more integration between Microsoft's product lines.

"While the departure of an exec with [Mr.] Sinofsky's track record is negative for sentiment, the directional impact on the organization could be more constructive," Crédit Agricole Securities analyst Ed Maguire wrote in a note.

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