Reconsidering the Break Up of Microsoft

Microsoft is into too many things. Operating systems, office suites, programming languages, games, game consoles, laptop/tablet computers, publishing, back-end software, mail subsystems, bookkeeping, keyboard and mouse manufacturing, cloud services, font development, database software, retail operations, phone operating systems, etcetera, etcetera. It's time to break it all up.

I have been pounding the drum for carving Microsoft up into smaller companies for years. The first break up idea I suggested around 1995 was simple. One division for consumer, another for enterprise. Done. That morphed into the Windows operating system division on one side, and everything else on the other.

Time passed and it became apparent that Microsoft was best off dividing into three pieces: consumer, enterprise, and entertainment (with the Xbox and gaming stuff going into the third company). Then came the idea that Redmond should be four companies. And as it gets bigger, it should become even more companies. Perhaps the only reason it has not been done before is that the perfect formula for an effective divesture has not been realized.

But I've got the perfect plan. Microsoft should spin off subsidiary after subsidiary and becoming a holding company only.

The reason for this, of course, is to benefit the shareholders and the customers. (It would also assist the poor souls who work at Microsoft. They live with management that employs the unfair and unproductive stack ranking system of employee evaluation. This managerial approach guarantees people getting routinely fired no matter how good they are.)

If the company was busted into multiple pieces, the individual parts would be worth more than the whole. This is not uncommon in these situations, where bloat and inefficiency burdens a company like Microsoft. Plus, it would be more fun to work there.

That said, Microsoft makes a lot of money, and has great margins--so why fix what isn't broken? Because it is the right thing to do. Microsoft would finally provide investors some relief from a dead money stock that has not budged in a decade. Plus, it will give Steve Ballmer some breathing room to take one of the new elements and have some fun.

Many of Microsoft's initiatives began as full blown and profitable companies, bought and folded in to the corporate whole. The same process could easily be reversed to the benefit of all. Most of the companies bought by Microsoft lost momentum once Microsoft got hold of them. Some, like FrontPage—the Web editing system—had to be closed down after languishing under the Microsoft umbrella.

Spinning off dubious investments would be a great benefit to Microsoft and its shareholders. Creating whole new companies would be an even better idea. But rather than split the existing Microsoft into pieces and creating several entirely new corporate entities, Microsoft should repackage itself--as a new corporation with investment in many, many interesting subsidiaries. Microsoft could spend the next decade spinning off entity after entity. It would actually create jobs and most likely provide a massive combined revenue larger than Microsoft would ever achieve today. Launch a new IPO while retaining a good percentage of the ownership of each would be a lot smarter than the thankless task of trying to run the mish-mosh behemoth that is Microsoft today.

It should begin with the Xbox Gaming Corporation. Spin it off! Let them develop outside of the octopus. This way the group can avoid future corporate meddling, which is the hallmark of Microsoft's failings.

Does anyone at Microsoft even consider these sorts of things? Well, they should.