Former executive suggests Microsoft spin off Office and Windows to boost cloud computing business
Former executive suggests Microsoft spin off Office and Windows to boost cloud computing business.
Former Microsoft executive Ben Slivka said in an interview that the company should spin off its Windows and Office businesses in order to boost its growing cloud computing business. “The right thing for (Microsoft) to do is probably bet the future on the cloud computing business,” said Slivka, who was formerly general manager of Microsoft’s consumer and commerce division.
The Azure cloud infrastructure designed to power business applications has become Microsoft’s star product, and it’s by far the most daunting for Amazon Web Services, which currently dominates the market. competitor.
Microsoft has dominated operating systems and productivity software for decades, and Azure’s impressive growth has brought new interest to the tech giant. Microsoft shares are up 51% in 2021, compared with about 27% for the S&P 500 over the same period.
Internal conflict could hinder Azure’s continued growth
Slivka, who owns 100 shares of Microsoft, said he doesn’t want internal conflict to hinder Azure’s continued growth. Historically, Microsoft has lost out to Apple and Google in mobile devices, he said .
“The people who ran the Windows business [at the time] had constraints on how many people were responsible for developing the mobile operating system, limiting what they could do,” Slivka said. “Windows dominated (and thus limited the mobile OS business).
Microsoft restarted its mobile strategy three times, and in the end phone makers and developers simply gave up.”
In 2015, Microsoft took a $7.6 billion write-down on the company’s $9.5 billion acquisition of Nokia’s equipment and services-related assets. Four years later, Windows 10 Mobile’s market share slid below 1 percent, and Microsoft discontinued support for the mobile operating system.
For the past few years, Microsoft has been willing to give up parts of its business.
In 2015, the company sold its Bing map assets to ride-hailing giant Uber, agreed the following year to sell Nokia’s feature phone assets to Foxconn and HMD Global for $350 million, and spun off imaging company Vexcel.
Slivka formed the Internet Explorer team after joining Microsoft in 1985 and left the company in 1999. “I know how important Windows is to Microsoft,” he wrote in a 1997 email to Microsoft co-founder Bill Gates, which later became the U.S. Department of Justice A government “exhibit” in the antitrust case against Microsoft.
But he also said that Microsoft “isn’t going to go down tomorrow” and doesn’t need to make a deal to divest its Windows and Office businesses right away .
The pull effect of Windows and Office
However, few analysts seem to agree with Slivka.
Analysts say Windows and Office continue to lead the market today, and these products help attract customers to Azure.
Technology industry research firm Gartner said in its latest annual report on the market that over the years, these products have allowed large companies to build trust in Microsoft, which is why they choose Azure.
“The trust Microsoft has built over time still represents a very lucrative future for Azure,” Wells Fargo analyst Michael Turrin said in an interview. One of my views Yes, Office is also a ‘moat’ for productivity, and there’s a lot of power in bringing these products together.”
At the same time, people want to be able to invest in a leaner public cloud company, he said.
For example, many in the tech industry and on Wall Street are speculating that Amazon will spin off Amazon Web Services, even though the company has repeatedly said it has no plans to do so.
Turling estimated in a November report that Azure would surpass Amazon Web Services in market share by 2028, giving Microsoft the equivalent of a “buy” rating in the report.
He predicts that by the end of 2023, Microsoft’s market value will reach $3 trillion, of which Azure will occupy half of it.
Last September, Wells Fargo announced a plan to use Azure and Google Cloud.
It was reported at the time that Microsoft’s chief commercial officer, Judson Althoff, said Microsoft had a “long-standing relationship” with the 169-year-old Wells Fargo.
In addition, once Microsoft abandons Windows and Office, the company’s revenue prospects will be significantly affected.
In the third quarter of 2021, more than a third of Microsoft’s revenue came from Office products and its cloud services (excluding Azure) and Windows.
At the same time, these products are also very profitable.
Analysts at UBS estimated in November that Windows would contribute 12% of Microsoft’s total revenue, while the gross profit contributed by the business would account for about 17% of Microsoft’s total gross profit.
Microsoft has been increasing Azure’s gross margins for years, but analysts don’t think it’s close to Windows.
Microsoft declined to comment on the prospect of spinning off Windows and Office.
