Jim Cramer Blog

Microsoft is in the process of being a victim of large numbers. The company is so large that it will take a mind-blowing innovation to generate a 10-15% increase in revenue. In addition, because they are so large, they are constantly being scrutinized by the world's governments regarding monopolistic issues. This has obviously been built into the stock for years as it has traded in a range from $25-30, back and forth, year over year. How are they going to attract new investors? The kind of investors that I'm talking about are those who buy new innovative stocks by the likes of Google and Apple (both of which I'm bullish). The investors that put their money into these type of stocks are young, more risk-tolerant, and are looking for other similar companies to throw more of their hard-earned money into. This is the money that will make this stock move. But, the only way to attract these new investors is to split this company up. This is the perfect timeframe to do so after the delay of their new Vista operating system (too much bureaucracy to get things done on time). Break the company in two parts. Software for internet and the other software for hardware. It seems that the major news sources that have been highlighting Microsoft have to deal with their recent battle with Google over buying a stake in AOL, and the overall development of their MSN search. It is obvious that the company's sector of greatest growth is going to be in their internet sector. They need to concentrate on this and flush out the rest of their holdings into a different company. Their growth rate, revenue growth, and overall investor sentiment would be significant. It's virtually impossible for Micrsoft to move in any meaningful way without this breakup. Even if there is major growth in their internet holdings, and they become more and more successful with MSN search, it will be difficult to see an overall bottom line difference with all the software and products that Microsoft supports. Breaking the Microsoft's internet sector into it's own company would put Google in a very vulnerable position. They would directly compete as opposed to competing in a round about way. And remember Microsoft is a seasoned veteran when it comes to managing a world technology power. Google is still learning, which is evident by the accidental slip of the CFO in an "official/unofficial" press conference that their overall search engine growth was beginning to slow . Google still has a lot of growing up to do. This new company could potentially have the same kind short and long-term growth that will drastically increase their diversity of investors and finally move this company in a forward direction.