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SJ Mercury: Would Microsoft's parts be more or less valuable than the whole?

Apr 28, 2000, 17:18 (8 Talkback[s])
(Other stories by Matt Marshall)

"...analysts say that if Microsoft is broken up by the judge into two or more different pieces, shareholders may not fare very well. That's contrary to conventional wisdom about breakups of big companies -- that the sum of the parts are worth more than the whole. Splitting a company into different operating divisions, the logic goes, will unlock hidden value because the separated parts will be able to focus more efficiently on their core activities."

"However, that logic doesn't work so well with Microsoft, says Jonathan Berk, a finance professor at UC-Berkeley. He says the company has benefited from the synergies created by the different parts working together. "If you split the companies into different parts, they'll be making less than the whole," he says."

"...Microsoft has profited so handsomely partly because of its monopoly status in the operating system market, at least if you accept the argument of the Justice Department. "If the Justice Department is right," Berk says, "then I'd have to believe that dividing up the company makes the total package worth less."

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