Analyst Wants Microsoft To Break Up

It may finally be time for Microsoft to break up, according to one prominent Wall Street analyst.

Rick Sherlund, analyst at Nomura Securities, is calling for Microsoft to sell off its Bing and Xbox businesses. He also wants the company to focus more on getting Office software on Apple and Android devices, lay off workers and double its dividend.

You’re not alone if you’re suddenly getting a case of déjà vu. Microsoft survived multiple attempts by the U.S. Department of Justice more than a decade ago to break the company up into several “Baby Bills”, a Bill Gates-inspired pun on the “Baby Bells” breakup of AT&T. In the years since then, some analysts and shareholders have pleaded with Microsoft to split up.

Experts have typically suggested that Microsoft break up into two, separate companies: a consumer tech firm that includes Windows, Office and Xbox, and a business-centric company that sells tools like Windows Server, Sharepoint, Azure and Dynamics software. A number of analysts have also called the company “bloated” in the past, urging Microsoft to focus more on a smaller number of products.

But, according to CNN, Microsoft has long fended off such notions, arguing that its corporate customers are consumer customers too. The company wants to build one giant ecosystem of software, services and devices that will allow people to engage, connect, work and play throughout the day. The company declined comment for this story.

“We think there is likely to be a more substantive catalyst for change than we have seen previously in the history of the company,” said Sherlund in a note sent to clients last week. “There may be a more receptive group of frustrated shareholders to leverage in an effort to drive greater realisation of shareholder value at Microsoft.”

Sherlund is referring to hedge fund ValueAct, which bought a $2 billion stake in Microsoft in April. Sherlund expects ValueAct to rally other shareholders to demand change and gain some control of the board of directors. Though ValueAct has historically taken a far-less combative approach than other activist shareholders, Sherlund also notes that Microsoft likely doesn’t want to risk a public battle.