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Will Netflix, Inc. (NFLX)’s Reed Hastings Join Microsoft Corporation (MSFT)?

This won’t work at Microsoft

This kind of single-minded focus could be great in some situations, but would not turn out well at Microsoft. Last year, Microsoft earned operating income of over $8 billion from its server and tools division, operating income of over $9 billion from its Windows division, and operating income of over $16 billion from its Microsoft Business division. (Note: Microsoft has since reorganized its business units.)

All three made significant contributions to Microsoft’s earnings power, although the Business division (which included Microsoft Office) was the biggest cash cow. One of Elop’s best qualifications for the CEO post is that while he has been CEO of Nokia for nearly three years, he was the head of the Microsoft Business division before that. He is thus intimately tied to Microsoft’s legacy software business as well as its new growth initiatives in the device space.

Microsoft doesn’t need a CEO like Hastings who is prone to pick a pet project and make it the best it can be. Microsoft needs all of its business units to be the best they can be. The stakes are high, as Microsoft faces serious competitive threats on multiple fronts. A CEO who might let one (or more) of the balls drop in order to focus on another one is not a good candidate to run Microsoft.

The article 1 Big Reason Why Reed Hastings Joining Microsoft Doesn’t Make Sense originally appeared on and is written by Adam Levine-Weinberg.

Adam Levine-Weinberg is short shares of Netflix and long December 2013 $275 puts on Netflix. The Motley Fool recommends Google and Netflix. The Motley Fool owns shares of Google, Microsoft, and Netflix.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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