Bill Gates Rejects Call To Break Up Microsoft - InformationWeek

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11/17/2010
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Bill Gates Rejects Call To Break Up Microsoft

Tech legend tells frustrated shareholders there's nothing to be gained by splitting company into consumer and enterprise units.

Microsoft chairman Bill Gates and CEO Steve Ballmer dismissed a shareholder's call to break the company up into smaller operating units, arguing that Microsoft is better off as a single entity.

The exchange took place Tuesday at Microsoft's annual shareholder meeting in Seattle. The unnamed investor described himself as "a frustrated shareholder" who is tired of seeing the company's share price languish in the mid-$20 range for the past decade while shares of rival companies like Apple and Google have skyrocketed.

"Is it time to consider breaking the company up, taking these great core businesses that we have, and getting shareholder value by divesting them into maybe not eight, maybe four, maybe six, I don't know what the right number is but is it time to break up Microsoft?" the shareholder asked.

Ballmer rejected the idea but, somewhat surprisingly, implied such a move has at least come up for discussion in Redmond.

"I obviously don't think it's time; I don't think it would be useful," said Ballmer. "I think it creates economic dissynergies, in fact. It's not—you know—how do I say this—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," Ballmer said.

A number analysts, shareholders and commentators have over the years suggested Microsoft would create more value by splitting its consumer and enterprise businesses into separate units, arguing that products like, say, the Xbox have little to do with back-end computing technology like SQL Server.

But Gates said there are threads that connect all of Microsoft's businesses, even if they are not always apparent.

"I agree with what Steve is saying," said Gates, who was also present at the shareholder meeting. "In that the Microsoft brand, the scale of Microsoft Research on a worldwide basis, the intellectual property we build up, the way we hire and train people, there's lots of synergy across the company and it's been a real strength," said Gates.

"If you look at the evolution of Office and how it uses the cloud, if you look at the evolution of some of the gaming assets and how those connect to the communications things we're doing, you know, I don't think there's a line where you'd find net simplicity by trying to create a new company," said Gates.

Microsoft shares were up .19%, to $25.86, in early trading Wednesday.

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