Business: Microsoft: A busy week

By Jeff Lipsey

Finally, Microsoft is doing something worthwhile to shake things up. It has been two years since shares were anywhere near $30 per share, and Microsoft has done little to add value to the firm. Sure, they added the Xbox gaming system, but that has yet to see a profit. Microsoft sees the urgency to act brought upon them by Google and Yahoo.

Microsoft’s first big announcement came on Tuesday when they announced a reorganization of their corporate structure. According to Microsoft’s CEO Steve Ballmer, the changes will “align our Business Groups in a way that will enhance decision-making and speed of execution.” In this reorganization, Microsoft will create three new divisions: Microsoft Platform Products & Services, Microsoft Business Division and Microsoft Entertainment & Devices Division.

Before the reorganization, Microsoft had a questionable way of making decisions, with the majority of the choices being made at the top of the organization. Thirty years ago when Microsoft first started, this process was successful. At that time, the executives could make all the decisions because they had time to waste. No longer are they in that slow-paced world and Microsoft realizes that.

In order for them to keep up with the Google empire, Microsoft had to take major decision-making rights away from the top executives. By doing so, Microsoft will probably gain a little ground on Google, but more likely plugging a leak in the proverbial Titanic that Microsoft is. Although this reorganization will help Microsoft by speeding up future processes, they still have a long way to go before they become the dominant technological power they once were.

Another piece of Microsoft gossip, according to the New York Post, includes their possible buyout of America Online from Time-Warner. At one time Microsoft’s largest competitor, America Online also needs to shake things up after losing over eight million subscribers during the past three years. The increasingly popular DSL and Broadband Internet alternatives took away the majority of computer savvy dial-up customers from AOL, while the low-cost alternative of Net Zero straddled AOL into an uncomfortable median of non-profitability.

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The combination of Microsoft and AOL would give MSN, Microsoft’s Internet segment, a nice boost. Microsoft will need all the ammunition it can get if it plans on making a run at the powerful Google, let alone at runner-up Yahoo. America Online still has a large user base close to 20 million and the addition of the extra advertising revenue would help Microsoft pick up more market share.

Maybe Microsoft will be able to rebound after such a long slump. It took a big first step last year after paying its first dividend, and with the corporate restructure and acquisition of AOL, Microsoft could become an Internet powerhouse, again.

Stock Pick of the Week

With volatile gas prices, another hurricane on the way and an increase in interest rates, finding a stock that is unaffected by all three is a rather daunting task. One sector that has been relatively safe is the entertainment industry.

This week my recommendation is Sirius Radio (SIRI). I have approved this stock since it traded at under $3 per share less than a year ago today, and with their recent increase in revenue forecast on Monday I like it even more. With nine figure contracts to both the NFL and Howard Stern, Sirius definitely has a lot of risk involved. But with risk comes reward. Trading at over double the price a year ago and having lost 10 percent in the past week, Sirius is a good buy. Price: $6.58.

Jeffrey Lipsey is a senior in Business. His column appears on Thursdays. He can be reached at [email protected]