Microsoft’s “One Microsoft” Reorg Promises to Add Pieces of Google’s Business Model

As Todd Bishop notes in an article on Microsoft published on November 1, 2013 on the GeekWire website, “[t]he chief investment officer for Vulcan Capital [Paul Ghaffari], the investment arm of Microsoft co-founder Paul Allen, says the company’s next chief executive should look at spinning off its consumer products — including its Bing search engine and Xbox game console.”

I don’t agree with this notion. I think the “One Microsoft” reorganization has already started to produce favorable results. If Microsoft opts to divest itself of Bing, and/or Xbox, a hindrance to further progress may be created. More than anything else, I think the “One Microsoft” reorganization creates an opportunity for the company to incorporate pieces of Google’s business model, which, per the latest Microsoft quarterly earnings report, are already contributing to profitability and revenue growth.

The most profitable Google product has always been its search engine, online advertising, business. Microsoft’s “Bing” search engine is mentioned in the press release for the quarterly earnings report as one product line experiencing dramatic growth as compared to other components in the company’s product mix. Why impede growth in this lucrative business segment?

As well, Xbox has become, arguably, the most popular game console on the market. There’s no doubt spinning Xbox into a separate business, or selling it to another company, could be very profitable for Microsoft. But I think there is much more potential in the game console business for Microsoft, especially when Xbox is rolled into the same business unit with their Surface tablets and their Windows Phone smart phone business. The “Google Play” online store, one can argue, is contributing meaningful revenue to Google’s results. So why shouldn’t Microsoft continue to pursue a competitive business model around this product?

Mature ISVs like Oracle, and SAP are struggling. Neither of these businesses has a consumer component. The hardware business at Oracle, entered into when Oracle bought Sun Microsystems, is strictly focused on enterprise business customers, comparably sized organizations in the public sector, and players in the IaaS market. Per Oracle’s last quarterly report, this segment is not doing very well. So I don’t see where imposing a focus strictly on business computing opportunities will pay off for Microsoft.

I’m wondering if Vulcan’s comments have more to do with some of the personnel changes necessitated by the “One Microsoft” reorg, than anything else.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2013 All Rights Reserved

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