Some think this means it's time to buy Redmond. Windows 8 is coming out. It may be gaining traction in mobile, thanks to better software and a full-court legal press. It has a cloud. It has the Xbox. Its name matters more in enterprise software than any other.
Investors have concluded that Microsoft is too big to succeed. Its product lines are too disjointed. Its product portfolio has a lot of losers and not enough winners. It's lost the buzz, the zeitgeist; it's not cool anymore.
I'm old enough to remember when Microsoft was indeed cool, when stories of Sam Walton being cheap and down-to-earth were reworked and applied to Bill Gates, when it was an exciting company run by “kids” who knew what their goals were and knew what they were about. No more.
The problem is that nothing Microsoft does moves the needle much. So what if it got $150 million in royalties from HTC for its patent claims against Android, and might get the same from Samsung (OTC:SSNLF), with the promise of even more from Amazon's (AMZN) Kindle Fire? Against nearly $70 billion in annual revenue, it doesn't move the needle.
The aim of the suits isn't the money, Microsoft will argue, but wooing those key OEMs back to its side, away from Google (GOOG). Certainly those OEMs are now saying nice things, but will it be reflected in final sales -- not just for phones and tablets, but services and products?
Microsoft will argue that all its operations work together, that its Azure cloud ties together loyal Xbox users downloading movies with corporate data sets running Sharepoint. But that's nonsense. Those are different businesses with different customers, different needs and different margins. More important, they are different brand images. If there isn't loyalty to the Microsoft brand in consumers' hearts (and there isn't) then how can one boardroom fit all those different markets, with their different needs, inside it?
It can't. The problem with Microsoft is that we don't know what it stands for. We know what Apple (AAPL) stands for. We know what Google stands for. We know what Amazon and even IBM (IBM) and Oracle (ORCL) stand for. What does Microsoft stand for? All of that, they'd say. None of that, the market replies.
If Microsoft is to become a successful tech conglomerate, its various units must have the chance to fly on their own. If Microsoft's enormous value is ever to be recognized again by the market, it should do what the government wanted in the 1990s and break up.
Not completely, just to run tracking stocks. A Windows business, a mobile business, a games business, a cloud business, each with its own stock and its own balance sheet. Like EMC (EMC) and VMWare (VMW). At least then the unit managers would know where their self-interests lie -- and it's not always in Redmond.
Disclosure: I am long IBM.