Microsoft’s Bungie Jump

October 8, 2007 8:25 AM

Microsoft’s Bungie Jump

Microsoft’s decision to spin back out Bungie Studios foreshadows bigger things—and perhaps problems—to come.

When Microsoft bought Bungie seven years ago, breakup loomed over the software giant. About two weeks before the acquisition announcement, U.S. District Judge Thomas Penfield Jackson ordered that Microsoft be broken into separate desktop applications and operating systems companies; earlier, the judge had ruled that Microsoft violated U.S. antitrust laws.

I thought then, and still think now, that Microsoft should have one-upped the government by voluntarily splitting into two or even three companies—the third for consumer products, including the Web. Microsoft escaped Jackson’s breakup order, but its stock is stuck at early 2000 levels. A voluntary Microsoft breakup likely would have delivered more shareholder value and could have forestalled or even prevented the Google problem faced today.

Now, Microsoft must spin out Bungie—making it independent, again—presumably to save the talent. With Microsoft’s stock languishing, and the prospect of new millionaire minting far in the future, why would developers of hot games want to hang around? Microsoft is going to find keeping the good talent increasingly difficult without the promise of big payback—like in the bygone days when the company had a hot stock and riches to share with employees.

Microsoft has gotten too much pot belly in its middle age. It’s time for the company to lose some weight and have some progeny. Like people, companies grow old and they die. Who remembers FAO Schwartz, Montgomery Ward or Trans World Airlines? TWA logos appear in futuristic movies like “Blade Runner” or “2001: A Space Odyssey.” But the airline had no future, at least as a brand, after 2001. Some companies, like AT&T, have gone through a death and reincarnation ritual. But die they did. Microsoft could live, and thrive, through its children. The spinoffs.

If Microsoft is to survive and thrive, there must be more Bungie jumps. I suggested a few months back that Microsoft should create small crack groups unfettered from current products to undertake new projects. That’s not enough. It’s time that Microsoft starts promising employees more spinoffs—that there will be the big stock pay off down the road. Why not make five-year plans? If such and such group achieves such and such goals, there would be a spinoff in five years.

The Bungie spinoff is a Microsoft crisis. While the spinoff is right, what necessitated it is not. Who wants to work for a coach potato that lives off the fat of the past? Office and Windows are still the main rainmakers. Microsoft has yet to score another big profit maker—and there have been many attempts. In the gaming category, Bungie is a winner, and one Microsoft couldn’t afford to lose.

But how much other talent does Microsoft bleed? Bungie should be the first of many spinoffs. Otherwise, Microsoft will become that rich old fart who’s in everybody’s way, but has too much money for anyone to offend.