Time to Break Up Microsoft? Paul Allen Thinks So

The man who helped Bill Gates found Microsoft says he thinks it's time to break up the massive Redmond, Washington-based tech firm. Paul Allen says Microsoft should consider spinning off some of its businesses, including Bing search and Xbox.

Allen and Gates founded Microsoft in 1975. Today, Allen holds a $2 billion stake in the firm.

Allen didn't speak directly to the media on this issue. Instead, Paul Ghaffari, the chief investment officer who manages Allen's $15 billion fortune, made the statements on behalf of Allen at the Financial Times Investment Management Summit.

Microsoft Distracted by New Businesses

Ghaffari said that both he and Allen feel that Microsoft has become distracted by many of its newer businesses, including the Bing search engine and the Xbox video game platform.

Ghaffari expressed Allen's feeling that Microsoft would be able to produce a better software product if it allowed Bing and Xbox to become independent.

After insisting that Bing and Xbox are "detracting" from Microsoft's core software and customer services businesses, Ghaffari said it's time for the firm to "focus on their best competencies." (Source: cnet.com)

"My view is there are some parts of that operation they should probably spin out, get rid of, to focus on the enterprise and focus on the cloud," Ghaffari added.

Microsoft has spun off businesses before. Past spin-offs include Inrix, Zumobi, and InishTech, all of which started life as projects developed by Microsoft's research labs.

Bing a Big Loser, Analyst Says

Allen is hardly the only expert pushing Microsoft to focus on its core products. Prominent tech analyst Rick Sherlund recently outlined how much Microsoft spends on Bing.

"We estimate Microsoft has lost $17 billion with Bing over the past 10 years," Sherlund said. "It is not important that Microsoft receive $5 or $10 billion for Bing ... but rather that it eliminate about 20 cents per share in annual losses." (Source: bgr.com)

In other words, Microsoft would be better off without its search business.

Like Ghaffari and Allen, Sherlund says he sees a bright future for Microsoft so long as it focuses on the businesses that really count.

Sherlund added that he believes the firm should hire Ford chief executive officer Alan Mulally to replace outgoing CEO Steve Ballmer.