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Microsoft Co-founder Thinks Company Should Split

By - Source: Tom's Hardware US | B 28 comments
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While Microsoft continues its search for its next CEO, co-founder Paul Allen suggests a split. The chief investment officer suggested by way of his own accounts that manager Paul Ghaffari said that consumer businesses like Xbox and Bing pull resources away from the company's heavy hitters – software and business-to-business services.

Ghaffari, speaking to the Financial Times said, "The search business and even Xbox, which has been a very successful product, are detracting from that. We would want them to focus on their best competencies. My view is there are some parts of that operation they should probably spin out, get rid of, to focus on the enterprise and focus on the cloud."

In real terms, it's hard to imagine Xbox breaking away from the core of Microsoft – game console development and research is hugely expensive on the front-end. Bankrolling that kind of tech isn't easy for a company that doesn't have a multi-billion dollar business to piggy back on. Just ask Nintendo. Most of the key Xbox selling points come from its integration with the Big M, and without that, a single dud could kill the smaller company.

Interestingly, former Nokia CEO Stephen Elop said that he would kill off Bing and sell the Xbox division if he were to become Microsoft's CEO.

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  • -1 Hide
    the1kingbob , November 12, 2013 8:11 AM
    Do they really think the company could turn a better profit if they weren't investing money into a profitable gaming console? I really don't understand it. Microsoft is trying to get a strangle hold on business (which they pretty much have) and take over the home entertainment system and mobile. This over looks their huge stake in personal computing. They want to be what you use when you are working, general computing, mobile computing, and home media entertainment. They have done a good job so far of all these things (although mobile has kind of sucked, they have tripled their percentage... still a pretty big failure thus far). I don't understand why they want to down size (which in these guys eyes, mean cutting of profitable limbs). They could probably turn a better profit margin, but less profit overall. I guess profit margins make the investors happy...
  • 5 Hide
    InvalidError , November 12, 2013 8:34 AM
    Quote:
    Do they really think the company could turn a better profit if they weren't investing money into a profitable gaming console?

    Yes - if they have better places to invest that cash and associated other resources into.

    Another problem when a company is pulling so many strings in so many directions is that they lose track of what is important and cross-contaminate products with things that do not necessarily belong together.
  • 0 Hide
    hannibal , November 12, 2013 8:42 AM
    It is about the profit compared to investement. If the profit they get is not big "enough" (a guite relative term as you can expect) they are willing to drop it. The problem is can they get better profit margins in somewhere else... That may be douptfull in this situation. But at this moment they want to pick the best parts and leave the rest to someone else...
  • 1 Hide
    Shankovich , November 12, 2013 8:51 AM
    "Just ask Nintendo." Nintendo has profited more from their hardware sales than Microsoft has the last decade.
  • 1 Hide
    realAMDfreak , November 12, 2013 8:52 AM
    BING is definately a failure. It might have some market share in the roundabouts of Yahoo, but it does not seem to be profitable.

    When it comes to XBox, it still sells well.

    The problem with Microsoft is more strategic. The MS Boat does not seem to go in the right direction.
  • -1 Hide
    may1 , November 12, 2013 8:52 AM
    theking1bob
    Downsizing and specialization are very different.
    Historical facts and today's business norm indicate MSFT really should specialize through dividing its company.
    Full integration of PC system in our daily lives simply will not work, and a lot of white collar workers prefer to separate the two from each other. That way they stay productive because there are no distractions while working.
    Look at Win8 for example. Is that a successful product as an all-in-one approach to daily computing?
  • -1 Hide
    bmwman91 , November 12, 2013 9:12 AM
    Wow, I am sure that having Elop and Allen say this stuff will be GREAT for Xbox One sales. "Hmmm XB1 or PS4...well, at least I am pretty sure that Sony isn't going to abandon their product."
  • 0 Hide
    jasonpwns , November 12, 2013 9:33 AM
    I'll take my PC.
  • 3 Hide
    ninjustin , November 12, 2013 10:04 AM
    The Xbox wouldn't be much without it's Windows like OS and Bing is so intertwined into probably both Windows and the Xbox that it would be silly to separate them. Making a "loss" in one division when it helps prop up the whole business is a smart "loss".
  • 1 Hide
    sun-devil99 , November 12, 2013 10:12 AM
    "Another problem when a company is pulling so many strings in so many directions is that they lose track of what is important and cross-contaminate products with things that do not necessarily belong together."

    Hmm...much like Windows 8 Metro..er...Modern Interface on a desktop PC. Microsoft seemed to fail to understand one interface does not fit all devices. They can't understand why people are so reluctant to go to Windows 8. They can't understand people don't want a Windows Phone or Surface on their desktop PC. Now, don't get the impression I don't like Windows 8. Been using for about six-months now but with Classic Shell. Sometimes I forget I am even running Windows 8,and not Windows 7. That is until I happen to move my mouse to the right-side and get the charms bar.

    I use Bing, I use Google, just depends on the computer. Keep in mind I only use those for searching and I don't pay attention to the ads. Don't own a gaming console so, cain't comment there. Been using Android phones for the past 2+ years. Looked at Windows Phones, but found the lack of 3rd party apps a reason not to choose them. Plus swiping between screens vertically just seems so wrong and unnatural.
  • 0 Hide
    JOSHSKORN , November 12, 2013 10:33 AM
    They don't need to get rid of XBOX. Just Bing.

    Also, IMO, Windows needs to become one single installation file for both the PC (to include Desktops and Laptops) and Mobile devices (to include tablets and SmartPhones).

    If they could somehow partner with Google, where Google allows them to use their search engine on their phones, and Google allows it's Android users to install Windows on their phones, such an alliance could potentially destroy Apple. However, for this to work, SmartPhones would have to become much more robust. Right now, I believe the iPhone 5s is the most cutting-edge, because of the 64-bit SoC. When a Windows SmartPhone becomes as powerful as the XBOX One/Kinect in one device...that would kill the competition. That, and when its consumers understand the principle of docking and utilize it to its potential.
  • 0 Hide
    kanoobie , November 12, 2013 11:22 AM
    The competition in the market is tough and he is right about "software and business-to-business services" being their bread and butter. I don't care much for Bing, but selling off parts of the company seems like only one part of a business strategy. Times are changing, but what vision does he have for the company leading it into the future? There is no mention of mobile devices in the article.
  • 0 Hide
    mugiebahar , November 12, 2013 11:31 AM
    Never thought I would say this, Balmer please stay! These guys are dumber then people think. While bing is a loss, its a loss leader as it were. And Xbox is part of the whole long term plan. Xbox is the only thing you are doing much better in that would be hard for apple or anyone just to jump in on. Even a 50/50 split between ps4 n xbox is still great. If xbox goes I don't see myself worrying about buying MS products much anymore. Sad but true, as what I have is good enough and most things PC will be going cross platform or made for other platforms. Also who would buy xbox and then agree to use windows as The OS? They would change to Linux Base for sure, back words compat is not an issue as its not even an issue for companies now since they don't care about that. I think those guys are to old to see the future and want to get a fast buck. But since they are just die and leave it where it is today, just make windows better by making work like 7 more (8.1 is better but not good enough) then you will be better off.
  • -2 Hide
    mugiebahar , November 12, 2013 11:31 AM
    Never thought I would say this, Balmer please stay! These guys are dumber then people think. While bing is a loss, its a loss leader as it were. And Xbox is part of the whole long term plan. Xbox is the only thing you are doing much better in that would be hard for apple or anyone just to jump in on. Even a 50/50 split between ps4 n xbox is still great. If xbox goes I don't see myself worrying about buying MS products much anymore. Sad but true, as what I have is good enough and most things PC will be going cross platform or made for other platforms. Also who would buy xbox and then agree to use windows as The OS? They would change to Linux Base for sure, back words compat is not an issue as its not even an issue for companies now since they don't care about that. I think those guys are to old to see the future and want to get a fast buck. But since they are just die and leave it where it is today, just make windows better by making work like 7 more (8.1 is better but not good enough) then you will be better off.
  • 0 Hide
    InvalidError , November 12, 2013 11:34 AM
    Quote:
    There is no mention of mobile devices in the article.

    Seeing how Surface tablets (at least the first generation) were one of Microsoft most spectacular market failures in recent history since Zune, I doubt it would be wise for Microsoft to try getting into phones first-hand. They bought Nokia, might as well use them for something much like Google and Motorola.

    Spinning off Xbox as a wholly owned subsidiary wouldn't be such a bad thing - it would at least provide a clear demarcation point between the gaming-oriented business and the everything-else one to help each side focus on their end of things.
  • 0 Hide
    bmwman91 , November 12, 2013 11:36 AM
    HP has divided itself and its offshoots have been reasonably successful. Agilent Technologies was HP's instrumentation division and they are still considered a top-tier equipment maker. Avago optoelectronics was HP's opto division and they are still a big player out there too.

    Now, for Xbox I see it being a bit harder since they leverage a lot of MSFT software on their platform. If Xbox became its own thing and had to license Windows on each box, that would certainly not help the per-unit cost. And Live...they would need to lease datacenter space from MSFT, and/or build their own. Or maybe not. HP has a history of co-locating with its offshoot companies, and maybe MSFT would consider that too, if it ever came to it.

    Realistically, I don't see MSFT splitting it like that after they have invested so much into their devices and services branches. Still, I feel like it isn't entirely confidence-inspiring to consumers to have leaders / potential leaders talking about "abandoning" a product that is just now launching, particularly given the rocky trail it has been over in the last few months.
  • 0 Hide
    red77star , November 12, 2013 1:27 PM
    Microsoft lost a direction.
  • 0 Hide
    InvalidError , November 12, 2013 1:56 PM
    Quote:
    Microsoft lost a direction.

    I would say they have found too many. Now they have to pick which ones they really want to invest in if they want to maintain or improve their position in them.

    Companies like Blackberry that were one-trick monkeys of sorts lost direction: they got distracted from their core business chasing side-markets, failed to pay attention to rising competition in their core market and let it slip through their fingers in the process. Amateur's mistake.
  • 1 Hide
    back_by_demand , November 12, 2013 2:28 PM
    Ballmer may look like a shaved chimpanzee but he oversaw Microsoft as a business manager and eventually CEO to the biggest company in the world. Allen is a bitter also-ran and Elop was shipped off to Nokia because he wasn't good enough to hit the top at Microsoft internally. When the real CEO arrives, we will find Elop just signed his own death warrant.
  • 0 Hide
    CaedenV , November 12, 2013 3:31 PM
    What on earth is wrong with MS? It wouldn't be so bad if I didn't like them so much. First they want to become a device and service company, now they want to be a business software company and spin off their consumer hardware and software divisions? I am not a fan of Balmer, but he must have had to deal with a lot of crap in his position.

    If MS just had a good, clear-headed leadership then they could turn all of their hodgepodge products into a series of product lines that create value rather than distraction and compatibility woes. Changing things like Office into a membership is a good idea... just not at $100/year for joe consumer (no matter how much 'value' is in it, that price is about $75-50 too high). Having a game console is a dead end street, but turning that console into a computer line, part of which happens to have a focus on gaming, would be a great idea! Having music and video services is also a great idea, but let's not turn those services on their head every 3 years and scare people away from it! Games For Windows, Xbox game services, Windows Game Store... all great ideas, but think about it for 5 minutes and make a single flexible licencing service rather than a bunch of little services. MetroUI is awesome, and having a unified UI between such a wide variety of devices should be applauded, but at the same time give those backwater people their start button back to avoid so much bad press. A winRT tablet is not a bad product... a $500 winRT tablet is a bad product. Adding Office to it doesn't help add value for most people. Strip office out of that thing and sell it for a more appropriate $250-300 and watch it succeed, and offer Office as add-on software or as a 365 package like it is for just about everything else (same with WP's office). Having a console is not a bad thing, having online DRM is also perfectly fine and normal (and is required for just about every other game device these days from PCs to phones and is not a problem), but having a $600 console which spies on it's clients and has no 4K support when you expect the hardware to last 10+ years is a problem. Having a device with 500GB of space when games are 50GB each is a problem. Make kinnect optional, or if you absolutely must have voice commands (which you should, and should bring to win8) then put the mic in the controller or console and make the camera bit optional. And for goodness sake, when a new TV standard is coming out then you should at least have video playback support for it even if you can't play games at that resolution! And finally, subsidize that puppy to get units out the door, you will more than make up for it in overpriced game sales! Having a phone is awesome (seriously, WP is great people, give it a try), but surely MS is a large enough company to work on catching up on hardware support while adding simple highly demanded features like being able to attach a document from the email app rather than starting the email from the office app! I know that such features will finally be coming next year, and there are plenty of other things that won me over to overlook such annoyances, but there is no way that feature (and others like it) is going to take a few programmers more than a week to fix, and the lack of those kinds of features are going to scare off more users (specifically professionals and businesses with money to burn) than the lack of quad core CPU support or 41mp camera support.

    Seriously, MS is just so close to being good on so many fronts! And yet it seems like every time they manage to find some sort of product synergy they manage to mess it all up. A blind monkey would have better odds. But after things like this it seems to me that MS needs a new board of directors rather than a new CEO.
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