With Microsoft CEO Steve Ballmer on the way out, there are increasing calls for other dramatic changes at Microsoft, including selling off its money-losing Bing search engine. Should Microsoft sell off Bing, or would doing that do serious harm to Microsoft's future?
Well before Ballmer resigned, analysts have been saying that Microsoft should sell off Bing. Back in May, Nomura Equity Research analyst suggested in a report that Microsoft consider selling off Bing. GeekWire reports that he wrote the following:
"While we like Bing as a service, we need to look at this from an ROI and strategic perspective. If Microsoft could sell or even give Bing to Facebook or Yahoo and eliminate its operating costs and get a Traffic Acquisition Cost (TAC) back to monetize the traffic that Windows/Internet Explorer or Xbox in the living room can drive to Bing, this might generate perhaps $1.0bn of profit and positive FCF rather than be a drag of a similar magnitude. If this were returned to shareholders, this could add nearly 1% incremental to the dividend yield, in our estimation."
Ballmer was always a big Bing backer, and now that he's heading out the door, there are calls again for Microsoft to sell Bing, with a resurgent Yahoo! as a potential buyer. That's what Forbes contributor Eric Jackson suggests. He echoes Sherlund's arguments, and adds that Microsoft's Online Services Division, where Bing lives, has lost $10.9 billion since 2005, according to Business Insider.
Sherlund is certainly right that selling off Bing will have a short-term ROI. No doubt it would also give a short-term boost to Microsoft's long-languishing stock price.
But short-term ROI and stock prices are one thing, and the long-term health of a company entirely another. And selling off Bing would seriously harm Microsoft in the long term. Bing technology is being used throughout the company, not just in the Online Services Division. For example, it's a key part of Microsoft's plan to extend its tentacles into the living room via the Xbox. Research done for Bing is being used by Microsoft in its "big data" plans, including machine learning. It's integrated throughout Windows 8, especially in a whole new category of apps that deliver fast-changing information and multimedia from the Web. And it's certainly central to making money in mobile search. Most of these areas are potential big-growth areas, where Microsoft needs to have a presence if it wants to grow.
So if all you care about is a short-term stock boost, then selling off Bing makes sense. But if you're looking to the future of the company, Bing is well worth keeping.