MS CFO Maffei leaves for fibre-filled role
Second time lucky for Greg's breakout bid
Greg Maffei, CFO of Microsoft since he took over from Michael Brown in 1997, is leaving to join Worldwide Fiber of Vancouver, a BC-based builder of fibre optic networks. This is not the first time that Maffei has indicated he wanted to leave. In April he was offered the job of CEO of Road Runner (a cable modem Internet service owned by Time Warner), but Bill Gates objected to his departure on the grounds that as a 10 percent shareholder in the company, Microsoft has the right to veto who was appointed as CEO. Maffei was one of the inner circle at Microsoft, and as CFO looked after its $22 billion cash and $8 billion of investments. It's arguably the hot seat that he's vacating. At the end of June Microsoft admitted that it was being investigated by the US Securities and Exchange Commission, and in a conference call at the time, Maffei said that the SEC was investigating the way that Microsoft treats reserves. The SEC investigation was probably triggered in January following disclosures related to a wrongful dismissal claim brought by Microsoft's former general auditor, Charles Pancerzewski. He was offered a "resign or be fired" choice in 1996 after he questioned the legality of Microsoft's accounting practices. During the trial Microsoft witness Richard Schmalensee cast some doubt on the company's ability to determine Windows revenue, and to separate IE development costs. There was widespread incredulity about this, and it's not clear whether or not it's really true. But if it is, then it's Maffei's baby. His departure is evidently "amicable" since he remains as chairman of the spun-off Expedia, and has been allowed to convert 10 per cent of his unvested Microsoft options into unvested Expedia options. Maffei said that his departure will mean that he will be leaving "a lot of money on the table", meaning that he will be unable to take up lavish Microsoft stock options, which Microsoft uses as its way of retaining senior staff. These are probably additional to his holding of some $200 million of options. He did sell around $14 million of Microsoft shares last month, and filed for permission to sell a further $9 million, but to his credit he had not otherwise disposed of any during his term as CFO. On balance, the most likely possibility seems to be that Maffei wanted to leave to get away from Microsoft because of potential problems with the DoJ and the SEC, and to live a more normal life. It is probable that he will get substantial stock options from his new employer, potentially worth more than Microsoft has been prepared to offer in the past, although the move to create a separate tracking stock for Expedia was seen as a way of increasing compensation possibilities for an elite group. Maffei's replacement is John Connors, a one-time accountant who joined Microsoft in 1989 and who was previously VP of the worldwide enterprise group, which will now report to Jeff Raikes for the time being. Before that he was chief information officer, and also worked as financial controller under Brown. Wall Street did not like the news and marked Microsoft shares down $3 in after-hours trading on the news. Despite the euphoria of having sent Windows 2000 to manufacturing, morale at Microsoft is not high in view of the continuing legal cases and the SEC investigation. Pete Higgins, the former group VP who had been on leave of absence, recently made it known that he will not return to Microsoft, but will establish a venture capital company. It seems increasingly likely that Paul Maritz will also leave, and further executive departures are expected. ®
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