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!