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Reports: ValueAct Capital Takes $2 Bln Stake In Microsoft

Activist hedge fund ValueAct Holdings LP has taken a $2 billion stake in software giant Microsoft Corp. (MSFT), according to media reports on Monday, citing the hedge fund's founder and CEO Jeffrey Ubben. Shares of Microsoft closed 3.6 percent higher following the news.

The stake was reportedly confirmed by Ubben at an investor conference in New York. Ubben reportedly said that Microsoft could emerge as the largest cloud-computing company in the world in three to five years.

The $2 billion stake would represent about 67.18 million Microsoft shares, based on Friday's closing stock price of $29.77. On Monday, shares of Microsoft recorded the highest closing price since September 21, 2012 and are up now more than 12 percent year to date.

ValueAct was initially formed in June 2000 to manage the capital of its three founders, along with the capital of a limited number of outside investors. The company, with offices in San Francisco and Boston, currently manages more than $10 billion on behalf of institutional and individual investors.

According to ValueAct, the hedge fund concentrates on "acquiring significant ownership stakes in a limited number of companies that it believes are fundamentally undervalued."

Last Thursday, Microsoft reported a 19 percent increase in profit for the third quarter from last year, helped by revenue growth in all its business divisions, particularly Windows and Entertainment & Devices.

Microsoft's net income for the third quarter was $6.06 billion or $0.72 per share, up from $5.11 billion or $0.60 per share in the year-ago quarter. Revenue for the quarter grew 18 percent to $20.49 billion from $17.41 billion in the same period last year, despite the continued softness in demand in the personal computer market.

"The bold bets we made on cloud services are paying off as people increasingly choose Microsoft services including Office 365, Windows Azure, Xbox LIVE, and Skype," said Steve Ballmer, chief executive officer at Microsoft. "While there is still work to do, we are optimistic that the bets we've made on Windows devices position us well for the long-term."

At that time, Microsoft also said that its chief financial officer Peter Klein will leave the company at the end of the current fiscal year, after nearly four years in the role and 11 years at the company. The company said it will name a new CFO from its finance leadership team in the next several weeks.

Microsoft's two major divisions make the Windows operating system and Office business software. About 90 percent of the personal computers around the world run on the company's windows operating system. The company has launched a Windows-based tablet "Surface" in a bid to take on Apple Inc.'s (AAPL) hugely successful iPad.

MSFT closed Monday's trading at $30.83, up $1.07 or 3.58 percent on a volume of 137.91 million shares.

by RTTNews Staff Writer

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