Microsoft's Ballmer: Splitting Company Would Be Wrong Move

Microsoft CEO Steve Ballmer responded to frustrated stockholders by saying splitting Microsoft into smaller companies would curb its competitive edge.

Microsoft CEO Steve Ballmer told investors Nov. 15 that breaking up the company would weaken its ability to compete against the likes of Apple and Google. Some shareholders have been suggesting Microsoft break into smaller independent units as a way of boosting its stock price, which remains largely stagnant.

During a question-and-answer session at Microsoft's annual shareholder meeting, reports The Wall Street Journal, Ballmer said that splitting the company along its divisions "means creating a harder time competing for all relevant parties." That came in response to a self-described "frustrated" shareholder, who asked whether a split-up should be considered.

Ballmer also added that a breakup would create "economic dis-synergies," according to a Bloomberg report.

Microsoft recently announced strong results for the first fiscal quarter 2011, with revenues of $16.20 billion and net income of $5.41 billion. That represents a 25 percent rise in revenues over the same quarter last year, when the company wrestled with a recession-driven lack of spending. The company claimed year-over-year growth in all business segments, although it still relies on traditional product lines such as Windows and Office for the majority of its revenue.

Microsoft is pursuing an "all in" strategy with cloud-based services such as Office Web Apps and Windows Azure, although those initiatives have yet to generate the same substantial cash flow as Xbox or Windows 7. The company is also trying to reverse its declining market share in smartphones with Windows Phone 7, its competitor to Google Android and the Apple iPhone.

Ballmer has also tasked himself with reorganizing Microsoft's upper echelons, recently naming three new presidents to key divisions within the company. That follows the departures of several key executives, including former Microsoft Business Division president Stephen Elop. Chief Software Architect Ray Ozzie also announced he is leaving the company.

During the shareholder meeting, Ballmer defended his plans to sell 75 million shares of Microsoft by the end of 2010. He holds around 4 percent of the company's stock, second only to former CEO Bill Gates with just over 7 percent.

"Both Bill and I retain very substantial interests in the company," Ballmer reportedly told the audience. "If you look at the amount of shares sold by insiders it's really a very small percentage of all the shares that sell, it's not a material factor in the stock price."

Gates routinely divests himself of Microsoft shares to help fund his Foundation, which pursues philanthropic endeavors in a number of countries.