SEATTLE Microsoft's (MSFT.O) decision in 2005
to hire Chris Liddell, a New Zealander working in the paper
industry, to fill the company's open job of chief financial
officer seemed like an odd choice.
With no background in technology, Liddell joined Microsoft
from International Paper (IP.N) at a time when investors were
clamoring for the company to loosen the purse strings on its
substantial cash holdings and revitalize a stagnant stock.
"If you look at the odds of a New Zealand paper guy coming
into Microsoft and prospering, you wouldn't give it a
snowball's chance in hell," said Charlie Songhurst, a Microsoft
general manager for strategy and M&A who works closely with
Once the ultimate outsider, Liddell is taking a leading
role in changing Microsoft from within.
In about three years, he has helped transform Microsoft
from a miser that socked away money for a rainy day into a
spendthrift, and he has successfully challenged the philosophy
that Microsoft, given enough time and resources, should build
its own technology to take on all comers.
Liddell has completed nearly 50 deals since joining the
company in May 2005. His boldest move yet, Microsoft's $41.9
billion offer to buy Yahoo Inc (YHOO.O), would use up nearly
all of a legendary cash stockpile Liddell inherited.
Those reserves are sure to grow again, but now Liddell
wants to issue debt for the first time in Microsoft's 33-year
"I believe in being disciplined but aggressive," Liddell
described himself by e-mail. Colleagues see a quiet, intense
counterpoint to Chief Executive Steve Ballmer's animated
aggressiveness, a former rugby player who prepares obsessively
and routinely works 100 hours a week.
Avoiding the turf wars that have claimed other outside
executives who joined Microsoft, Liddell has won the confidence
and the ear of Ballmer and the company's board, and is known as
one of the few senior executives ready to meet the
rank-and-file for a drink after work.
Analysts praise Liddell for his clean and simple earnings
presentations, while Microsoft employees say he is militant in
his view that PowerPoint slides should be uncluttered.
In the weeks leading up to Microsoft's offer for Yahoo,
Songhurst's team would come to work on Sunday mornings for
"church with Liddell," planning sessions that would stretch
deep into the night.
At those sessions, Liddell probed Yahoo's financials,
checking and double-checking whether Microsoft's projection for
$1 billion in cost savings from a potential Yahoo merger is
realistic and achievable.
Liddell would grill Microsoft's own M&A team about its
logic for doing the Yahoo deal, a style of debate that stems
from his days studying for his masters degree in philosophy
from Oxford University.
"The questions never stop," said Songhurst. "His method is
very Socratic. It's about arguing things out. It's about
getting to the best possible intellectual answer."
Since Liddell's arrival at Microsoft in May 2005, the
company has tripled the rate of acquisitions, ranging from
small technology firms with a few employees to last year's $6
billion purchase of digital advertising firm aQuantive.
"I am happy to use our capital strength to drive growth as
much as possible," also wrote Liddell by e-mail.
A former investment banker with Credit Suisse First Boston,
Liddell keeps close tabs on the market's view of Microsoft and
has pushed Microsoft to be more responsive to ideas from
outside the company.
A former Microsoft employee who asked not to be identified
said Liddell pushed the company to solicit pitches from
investment bankers instead of relying mostly on its own ideas.
He is one of a handful of top-level executives brought in
by Microsoft in recent years to bring outside blood into the
company. The list includes Chief Operating Officer Kevin
Turner, a former Wal-Mart executive, and Ray Ozzie, who
replaced Bill Gates as the company's chief software architect.
Liddell, who still plays touch rugby with Microsoft
employees during lunch, has also pushed for the company's
aggressive campus expansion in the Seattle area.
Adding more offices, parking spots and other amenities is
part of a broader push by Liddell and other senior executives
to keep Microsoft workers happier. Those types of expenses
rarely make Wall Street happy, but Liddell views staff
retention as a priority, especially with Google Inc (GOOG.O)
and Yahoo opening new offices in the Seattle area.
Over the years, Microsoft investors have complained that
the company was too conservative, leaving billions of dollars
in cash sitting on its balance sheet.
In 2004, Liddell's predecessor, John Connors, issued a
one-time $32 billion dividend to investors after the company's
cash position reached a staggering $64 billion.
As of the most recent quarter, Liddell has cut the cash
pile to $21 billion -- roughly the cash portion of Microsoft's
offer for Yahoo. It has spent $54 billion in the last two
fiscal years on share buybacks and dividends.
"This is a company that had $70 billion in cash laying
around a couple years ago so it speaks volumes to how much the
company has moved the capital structure toward something more
efficient," said Bernstein Research analyst Charles Di Bona.
"It's a certain level of maturity within the management
team in changing how you need to behave sometimes."
(Editing by Phil Berlowitz)