These recent tectonic moves in the tech industry in which huge titans break themselves apart in hopes of producing more value and gaining more entrepreneurial energy could serve as a harbinger at Microsoft — which now boasts a $373 billion market value.
Microsoft has resisted efforts to break apart in the past, even fighting against a government mandated breakup order that was issued by Judge Thomas Penfield Jackson on June 7, 2000. The landmark order was later reversed by an appeals court, and Microsoft went on its merry way, albeit with less stringent penalties.
However, one has to wonder what would have happened had Microsoft broken apart at that time. Could an entrepreneurial group at one of the units pushed harder on mobile? Would Ballmer have left the company earlier? Would more innovation come from Microsoft’s R&D labs?
With Satya Nadella at the helm of Microsoft now, there are no apparent signs that a break-up is coming.
However, one has to wonder how certain pieces of Microsoft fit into Nadella’s “cloud first, mobile first” world. Should that include Bing or Xbox or hardware? To this point, Nadella has said yes. But at some point that tune may change, especially as Microsoft doubles down on its core businesses and achieves new-found focus under its new leader.
It is also worth noting that Microsoft’s board is changing, with G. Mason Morfit of activist investor ValueAct Capital now holding a seat. Steve Ballmer — once a huge champion of a united Microsoft — is gone.
Pundits and industry watchers have discussed a breakup of Microsoft for years. In 2012, GeekWire’s Todd Bishop — a longtime proponent of breaking the company up — wrote about how the company could split into three business units (Windows Corp, Xbox Corp. and Office Corp.).
There are certainly downsides to this idea. As part of the same company, the different divisions are currently in a position to leverage common technologies and resources, and build on each other’s work, at least theoretically. Splitting up the company would take away that advantage and others that come from being under the same umbrella.
But that could be outweighed by the potential advantages, and the chance for each of these three big brands to be built by a company in control of its own destiny.
Is now the time to pull the trigger on this bold plan? Probably not, given that Nadella is still very much getting his feet wet in the new role. (Plus, the stock has performed well under his direction, so far).
However, at some point the breakup question is going to be posed, and Nadella will need to address it.
Interestingly, venture capitalist Marc Andreessen appeared on CNBC this week talking about all of the breakups, noting that it is a “major trend.”
“My guess is that every large tech company more than 20 years old breaks up,” he said. “In some point in the next five years, I think they all break up.” Andreessen notes the role of activist investors, but he also points out that big companies want to get to a smaller size so they can move faster.
What do you think? Is it time for Microsoft to split in two, or three?