Tuesday, September 20, 2005

Break it up

Today’s reorganization of Microsoft proves just how far this once formidable competitor has fallen.

As a recent
BusinessWeek cover story illustrates, Microsoft is now so internally-focused that it is acting more like the business dinosaurs whose size and slowness Microsoft so skillfully exploited to put itself on the business map back in the early 1980s.

Microsoft used to mock competitors who used the courts to fight their business battles. So it is more than a bit ironic that Microsoft found itself in court recently trying to keep the head of its China business from bolting to Google – a battle which Microsoft largely lost.

Microsoft’s size is becoming a huge competitive disadvantage. Its different groups battle each other for market hegemony even as its top executives try to get related business units to cooperate. And its stock price remains far below where it peaked in 2000, making it awfully difficult to keep and attract talent that can go to a place like Google whose stock price rose from $80 to $300 in 13 months.

Microsoft’s directors should consider whether the costs of keeping Microsoft together are greater than the benefits. If I was a Microsoft shareholder, I would want to own pieces of 10 highly aggressive small companies that could compete without needing to check in with the mother ship every time they wanted to introduce a new product. Such small, aggressive competitors make better places for top entrepreneurs to apply their talents.

So my message to Gates and Ballmer is simple: Break it up!

Friday, September 09, 2005

Profiting from Katrina

Catastrophes can be profitable. Just ask those who have been rebuilding Iraq – such as Bechtel National, Fluor, and Halliburton -- after our government trashed the country to protect the US from non-existent WMDs. But that is old news.

What’s new is that the former FEMA director, Joseph Allbaugh, whose college roommate,
Brownie, was so recently lauded for his performance as Allbaugh’s replacement by the current oval office occupant, is now a lobbyist for companies that have already won a heaping $700 million piece of the $62 billion Gulf Coast reconstruction pie.

After leaving FEMA in March 2003, Allbaugh, who managed the 2000 Bush-Cheney campaign, founded
Allbaugh Co., a lobbying-consulting firm with many clients in the disaster-relief business, including:
  • the KBR division of Halliburton (HAL); and
  • the Shaw Group (SGR), a provider of engineering, design, construction, and maintenance services to government and the private sector.

These Allbaugh connections have paid off to the tune of $700 million – here’s how:

Investors who bought into the W-Industrial Complex (WIC) index back in January 2001, which has since climbed 153% while the S&P 500 lost 8%, could have gone along for this administration’s special blend of corporate welfare. It may not be too late to get on board.