Posted on 11/17/2010 7:37:37 AM PST by Still Thinking
Microsoft's annual meeting of shareholders in Bellevue this morning was pretty much the standard routine -- except for one question toward the end.
The company's nine-member board was reappointed and a lone shareholder proposal, to establish a board environmental committee, was rejected. CEO Steve Ballmer touted the company's revenue and earnings growth. Shareholders complained about the stagnant share price and pressed for a higher dividend. Ballmer talked about Microsoft's product pipeline and finance chief Peter Klein noted that the company has returned more than $170 billion to shareholders in the form of dividends and stock buybacks over the past decade. (Note: Total amount of shareholder return corrected since original post.)
But then there was the question from a man who described himself as "another frustrated shareholder for more years than I care to admit." After citing the share price and conceding Microsoft's core product strength, he asked, "Maybe we have the model wrong. ... Is it time to consider breaking this company up?"
It was more than an idle question, given that Goldman Sachs proposed essentially the same thing last month. Ballmer and Bill Gates, who both fought to keep the company intact during the company's antitrust era, find themselves defending their integrated model once again, but this time in front of the company's shareholders.
Here's what Ballmer said during the meeting.
"I obviously don’t think it is time. I don’t think it would be useful. I think it creates economic dis-synergies, in fact. 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, disciplined look and in almost all cases, the market goes the other way. All of the people we compete with in devices will be in phone, PC and TV, which in our case means Xbox, windows and Windows Phones. It’s Apple, it’s Google, it’s us. Divesting something only means creating a harder time competing for all relevant parties . The operating systems that are popular on clients also tend to be popular on servers. They’re all based around Linux technology. We happen to build our server business on Windows technology. It creates dis-synergy in fact to split our server and enterprise business from our client business."Our Office business doesn’t fit neatly, it’s not a consumer business only, or an enterprise business only. Bing is a super-important area for us, not just because of search itself, but a lot of the most interesting stuff that’s going to happen relates to this notion of understanding users and understanding the world, and being able to connect them. Search is the first place you do that. Statistically you type anything you want to, and we take a guess at what you meant. Turns out there are a lot of things you want to be able to do that with. Almost everything in computing, if you stop and think about it, you want to be able to express intent and have the system be smart enough. ... That general technology base is essential to the company, absolutely essential, and we build it through search, and we built it by being disciplined, and getting after that as a market. Yes, it’s expensive, but I would never think about not doing that. I think it’s fundamental to who we are, where we’re going, and the rest of our businesses."
Gates, the Microsoft chairman, then added this:
"I agree with what Steve’s saying there, 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 a lot of synergy across the company, and it’s been a real strength. You look at the evolution of Office, and how it uses the cloud, you look at the evolution of some of the gaming assets and how those connect to the communications things we’re doing. I don’t think there’s a line where you’ll find net simplicity by trying to create a new company."
Will be curious to hear what people think. At the very least, it's notable that the topic of a voluntary breakup keeps coming up, and Ballmer says he has given it a "proper, disciplined look."
Ping.
It’s not in my natural genetic makeup to think that way
Not the kind of mind I would want running an ideas company.
As a strong open-source user and advocate, I have plenty of issues with how Microsoft has done business over the years. But breaking them up doesn't solve anything long term.
“Posting this isn’t advocacy one way or the other on the idea,”
advocacy for tech companies seems to be in vogue
Ballmer and Gates seem to be right on with their thought process.
Just way too early for such a thing considering that MS is going through a major renaissance right now.
MS stock isn’t for excitement and entertainment, it’s for consistency. And I’d rather have their stock, knowing that it preforms over the long term, rather than one based on hype, that could die at any moment, that’s at $300.00.
Not that I would even be in the market these days anyway.
But they're looking at it not as a punitive measure, but as a move to potentially improve the company from the point of view of customers and shareholders. I tend not to see how it would help anything.
I understand; I phrased my comment poorly, and using the AT&T breakup as a comparison didn't help clarity, sorry. :)
What I meant was that if I had MSFT stock over the years, I'd be mighty unhappy now, because for a decade they've been unable to get things off the ground; they've been stagnating. That's poor business, relying on 90% marketshare and throwing proprietary weight around with little benefit to anyone.
Like the Empire in Asimov's Foundation Trilogy, they have already lost, even though Redmond (Trantor) still has the lights on. It'll take another 5 years at least to see that Microsoft actually crossed the river a couple of years ago.
Maybe they can reinvent themselves, but with their historical business model, it'll be damned difficulty and painful. And they have to get rid of Ballmer before that process can even begin.
Bad idea. Microsoft has a growing strength of powerfully interconnecting its products, same as Apple is famous for. For example, Windows 7, Windows Phone 7, XBox, XBox Live and IIRC Zune are starting to all work together fairly well in their Microsoft ecosystem. Managing this across multiple companies would not be quite as easy.
That's what people were saying about Apple when they topped 200. You know, those people who missed out on a 50% return on their investment. Apple stock has performed as well as or better than Microsoft over the last ten years, growing solidly for six years while Microsoft stagnated. That's not a hype blip. That's performance.
Definitely must get rid of the man who not only failed to see most modern trends and business models, but denigrated them. Definitely have to get rid of the man who refused to acknowledge that Vista was WAY off track and behind schedule.
Oh, OK, gotcha. Yes, Ballsmer is an idiot (and from what I hear, an asshole as well).
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