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

“…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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