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Ballmer sees no value in splitting Microsoft up

Responding to a shareholder question at the annual meeting, Microsoft's chief says the company derives a lot of synergy from its multitude of product lines and research efforts.

Microsoft's Steve Ballmer at the company's 2011 annual meeting.
Jay Greene/CNET

BELLEVUE, Wash.--Microsoft's chief executive told the company's shareholders at its annual meeting this morning that there is no benefit in breaking the company up.

"There's nothing that I see in creating fundamental value in splitting the company up," Steve Ballmer said in response to a question about unlocking value by cleaving the company.

Microsoft benefits, Ballmer said, from synergies it's able to drive across the company. The Xbox game console, for example, uses technology from the company's Bing search engine, as well as voice recognition technology that comes from the company's research unit. There's no good way to separate units from one another.

"The company doesn't invest in things that are idly independent," Ballmer said. "Drawing a set of arbitrary boundaries is quite hard."

Separately, Ballmer said the company's Xbox video game console, already the top-selling console in the United States, has a "clear line of sight to be No. 1 in the world." He noted that when the Xbox debuted a decade ago, it was "banished" to the basement in his house where his three sons played.

"Last year, we introduced the Kinect for Xbox, and everything has changed," Ballmer said.

Kinect has introduced more social games. What's more, it allows users to interact with the console using voice and gestures, making it easy to navigate video content as well as games.

"Now, not only do we have the Xbox upstairs, but I was instructed to bring games home for Grandma and Grandpa for Thanksgiving this year," Ballmer said.

The annual meeting, which often serves as a pep talk for shareholders, had a few moments of shareholders challenging Microsoft leadership. One shareholder asked pointedly why the company buys back so much of its stock rather than returning that money directly to shareholders, presumably via a larger dividend."

Microsoft Chief Financial Officer Peter Klein noted the massive amount of cash returned to shareholders in the past and said the company also needs to invest its cash.

"Our approach is to balance," Klein said.

Another shareholder asked Microsoft Chairman Bill Gates how he thinks the company can boost it stock price, which has traded in a fairly narrow range for most of the last decade. Gates, in his only comments at the meeting, played up the company's strong balance sheet. And then he noted that the market would respond to innovation.

"The big thing is the new products and the volumes of those products," Gates said. "The opportunity as the world's best software company is very strong--as strong as it's been."

And as the meeting was adjourned, some of the several hundred shareholders attending were still keen to ask questions. One yelled from the back of the conference hall in the Meydenbauer Center, a few miles down the road from Microsoft's Redmond, Wash., campus, that the company should continue the meeting. Microsoft didn't oblige.

For the most part, Ballmer talked up the opportunities in front of the company, as well as the financial performance of the last year.

"It's an exciting time for this company and for our overall industry," Ballmer said. "We will see more change and more innovation in the next few years than we've seen, perhaps, in the last decade."

He was particularly keen on Windows 8, the operation system analysts expect will arrive toward the end of next year. Microsoft previewed it to developers in Anaheim, Calif., in September. The operating system will be the first from Microsoft that makes touch computing core to the experience.

"We're seeing to it that no one has to compromise on the experience they want," Ballmer said.

The official orders of business were to elect the company's nine-member board, to vote on executive compensation, to vote on how often shareholders should vote on executive compensation, and to vote on a shareholder proposal to establish a board committee on sustainability. Shareholders elected Microsoft's slate of directors, and followed the company's guidance on the compensation issues. Only 4 percent voted for the sustainability matter.