There's a theory that had Microsoft been forced to split into two or more separate companies—as was originally planned during its epic US antitrust battle—those companies would have been better positioned to compete with the latest generation of threats from Google, Apple, and others. Instead, Microsoft blundered along through the past decade, failing again and again to win the hearts and minds of consumers, unable to move quickly enough to respond to emerging technology trends.
More damaging, perhaps, is that Microsoft's stock price as suffered mightily, as well. Indeed, Microsoft stock has held steady for roughly a decade while those of Google and Apple have skyrocketed, providing Microsoft's competitors with the necessary financial muscle to take on what was—in the previous decade—an unassailable technology behemoth. No more: Microsoft's entry into new markets today is more likely to generate condescending chuckles rather than fear, uncertainty, and doubt. And while the software giant still rakes in considerable revenues, there is a growing belief that its days of innovation, growth, and leadership are well behind it.
Shareholders are growing restless.
At Microsoft annual stockholder's meeting yesterday, one investor finally asked the obvious question: "Is it time to consider breaking this company up?" After all, certain parts of Microsoft—Windows client, Windows Server, Office, and Xbox—would be powerhouse corporations in their own right. And freed of the financial shackles of Microsoft's money-losing businesses, and of having to serve disparate consumer and business masters, these new mini-Microsofts could really shine, and grow anew. At least in theory.
Microsoft CEO Steve Ballmer says, however, that such a dramatic move isn't in the cards. But the company's performance over the next few years will prove whether he has a point, or whether he will be the man responsible for pulling the blinders shut in the face of Microsoft's death spiral.
"I obviously don't think it is time," Ballmer said. "I don't think it would be useful. I think it creates economic dis-synergies, in fact. It's not ... in my natural genetic makeup to think that way, but when you get enough people telling you to think that way, you at least go through the proper discipline kind of look. And in almost all cases, the market goes the other way. All of the people we compete with in devices will be in phone, PC, and TV, which in our case means Xbox, Windows, and Windows Phones. It's Apple, it's Google, it's us. I mean, divesting something only means creating a harder time competing for all relevant parties."
Microsoft cofounder Bill Gates explicitly said he agreed with Ballmer. "There's a lot of synergy across the company, and it's been a real strength," he added. "I don't think you'd find net simplicity by trying to create a new company."
Another investor questioned the "disconnect" between Microsoft's financial performance, which is exceptional, and its stock price, which is horrific. Noting that Microsoft has been very successful creating several "billion-dollar businesses," CFO Peter Klein said that these businesses were responsible for more than doubling the company's revenues and tripling its profits over the past decade. "Those businesses are going to be the key to \\[growing\\] our earnings and our stock price," he said. Note, however, that this hasn't happened over a period of 10 years or more. In fact, Microsoft stock has fallen 15 percent since the release last year of Windows 7, its most successful product in years.
Any discussion about successful businesses within Microsoft leads naturally back to the breakup concept, and whether Microsoft's shareholders wouldn't, in fact, be better off if the company was split up. Oddly, many shareholders seem to be blindly accepting of the current regime, and hold Bill Gates, in particular, in very high regard despite the fact that he's an outside advisor to the company now and not involved in day-to-day activities. But it's hard to imagine Microsoft breaking up under the tutelage of its famous cofounder, diminished role or not. My suspicion is that less sentimental leadership would have made this happen years ago.