Ballmer Says Microsoft Breakup Not in Cards

Approximately a decade ago, Microsoft was continuously pressured by the government to break up its large corporation into smaller businesses. The government was hesitant about a monopoly forming and believed that smaller businesses would provide better competition for Microsoft.  The company was able to weather through the government's pressure and has til this day, remained as one entity.  Now the company faces the same question from a new face, its stockholders. 

At Microsoft's recent annual stockholders meetings, Chief Executive Steve Ballmer and Chairman Bill Gates attempted to calm the numerous investors who were becoming skeptical about their stock in the company.  Due to generally bland trends within Microsoft's stock, stockholders are wondering if the company would be more competitive if it broke down into individual businesses.  The rationale behind this is that the status quo set up of Microsoft is extremely centralized and Microsoft is unable to maintain such a large company while continually providing innovative and efficient products quickly to the public.  Arguably, decentralizing the company would allow stockholders to invest in areas of Microsoft that they believe are thriving as opposed to the company as a whole.  Therefore, hypothetically, when Xbox does well, stockholders won't feel the effects of poor Windows Vista sales.

The Chief Executive responded to the question of breaking up the company by dismissing it.  He indicated that now isn't the right time for the company to break up because it would reduce Microsoft's value by making it more difficult for the company to compete.  While the article didn't provide a warrant behind that claim, a rationale that was evident later in the article was that Microsoft's products are sold to both consumers and corporations, splitting up the company could potentially undermine their holistic ability to sell products.  Bill Gates, formed CEO and a current board member, shared Mr. Ballmer's view by claiming that the current company's structure allows for "a lot of synergy" between the company's research and branding efforts. 


Unfortunately, Microsoft's comments regarding the company didn't resonate well with the shareholders.  Much of their anger comes from Microsoft's inability to reignite its share price even though their recent operating system, Windows 7, had record sales.  Key analysts have indicated that there is unlocked potential for Microsoft to break up their company.  It could create a spin off based upon their consumer businesses that would be beneficial to the company.  There is a substantial amount of commotion regarding this issue  because Microsoft's shares have fallen 15% since the beginning of the year.  As Microsoft consistently competes with Google and Apple, they're slowly falling behind in sales.  One of Ballmer's solutions to their problems was a process of financial diversification that involved selling up to $75 million in shares this year.


Whether or not this process will work is unsure as of now.  With Google and Apple consistently producing new and innovative products, it will be an uphill battle for Microsoft to retain it's position as a leader in the tech industry.


Cite:


http://online.wsj.com/article/SB10001424052748704312504575618731948970368.html?mod=WSJ_Tech_LEFTTopNews