Are Microsoft shareholders mad as hell? One analyst thinks they’re ready to force change

Rick Sherlund, Nomura Securities’ software analyst, clearly thinks something’s up with Microsoft(s msft). He is a long-time, respected Microsoft watcher — first at Goldman Sachs(s g) and now at Nomura — so when he puts out a research note saying something’s new, even if he’s a little coy about what that might be, it’s worth noting. Sherlund also boosted his price target for Microsoft  to $38 from $32 per share, while retaining his neutral rating on the stock. Hmmm.

Here are some veiled semi-, sort-of predictions Sherlund put down in a research note released very early Tuesday morning:

1: Restive shareholders gain power: Sherlund thinks that shareholders are gaining steam in their  demand for a greater voice in the company’s strategic direction.  There “may be a more receptive group of frustrated shareholders to leverage in an effort to drive greater realization of shareholder value at Microsoft,” he wrote.

2: Microsoft could exit search. It could hand search off to Facebook(s fb) or Yahoo(s yhoo) in return for traffic acquisition costs, Sherlund wrote.  Microsoft Bing has gained some ground on Google but remains a distant second. The latest Comscore numbers  showed Bing with a record 17.1 percent of U.S. searches in April, up from 16.9 percent in March. Google share fell from 67.1 percent to 66.5  percent over the same period. Whether Microsoft’s gain is worth what the company spent on its BingitOn campaign, is subject to debate, however.

3: It could (gasp!) dump Xbox Sherlund acknowledges that we like to play Xbox but “it doesn’t seem like a good enough business for Microsoft to focus on.” He goes on to explain that at one point it was critical for Microsoft to “own the consumer connection to the internet” i.e. the console but as cool as it is, it’s not material to Microsoft’s broader business. More importantly, he thinks that someone, say Samsung, might pay a couple billion dollars for that business.

4: It could simply pay off disgruntled investors.  They want dividends, Microsoft could sweeten the pot, potentially doubling the dividend “to yield about 6 percent by providing tax on current foreign source income,” Sherlund wrote.

One thing is clear: Microsoft shareholders are one unhappy bunch. Looking at the post bubble-burst over the last 13 years, the stock price is basically flat — it’s peaked at around $37 and has bounced between that and $20 for much of that time.

That’s led to some very loud calls for CEO Steve Ballmer to head for the door — something Ballmer shows no intention of doing. Dow Jones Newswire’s  Al Smith helpfully published Ballmer’s Epitaph earlier this month, citing Windows 8 as a “bet the farm” gamble that didn’t pay off. The contention that Windows 8 is a failure has been repeated in several news outlets and is something Microsoft’s top corp comms guy couldn’t let pass. In a blog post, Frank Shaw responded that Windows 8, which has sold 100 million copies, is hardly a failure. And linked to two positive reviews.

But back to Sherlund. He senses something different in the air when it comes to Microsoft’s corporate governance:

“We think there is a shift in the wind upcoming for Microsoft,with shareholders likely demanding a greater say in the direction of the company and how it might be run to drive a better return to shareholders.”

Now we’ll just have to wait and see.

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This story was updated at 10:41 a.m. PDT May 28, 2013 to add comments around Microsoft’s Xbox business.