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[video] Xbox One Could Break Microsoft in Two

Stocks in this article: MSFT AAPL SNE NFLX

NEW YORK (TheStreet) -- If the new Xbox One from Microsoft (MSFT), the flagship of its "One Microsoft Strategy," does not sell well, the first order of business for the new chief executive officer could be to oversee the split up of the company.

High tech behemoths like Apple (AAPL) and Sony (SNE), which produces the main competitor to the Xbox with the Playstation, have been under pressure from activist investors. Carl Icahn staked out a position in Apple to force the company into a $150 billion share buyback program. Sony is under pressure from Daniel Loeb of Third Point to impose "...a more disciplined management approach..." Microsoft has already made a significant concession to ValueAct Capital Management, a hedge fund that bought less than 1% of the shares earlier in the year, by allowing its president, G. Mason Morfit to join its board in early 2014.

Based on the performance of the stock, there was certainly no reason for Steve Ballmer to go; the share price for Microsoft is up more than 40% in 2013. But according to a recent article in The Wall Street Journal, the board of directors pushed Ballmer out due to his inability or unwillingness to make changes. What does the board want from the next chief executive officer?

In the words of Preston Gralla in Computer World, "The board and investors clearly want someone interested in breaking with Microsoft's past and is capable of doing it quickly."

"Breaking with Microsoft's past" could mean splitting up the company if the sales of the Xbox One disappoint. The Xbox One is a significant test of what Ballmer's "One Microsoft Strategy." That was the effort of Ballmer to break through the divisions of Microsoft and have all work together on products. From that, more customers will result for more Microsoft products and services. As Julie Larson-Green, the Executive Vice President of Microsoft for Hardware, stated in
Bloomberg Businessweek, "It's more than a gaming platform. We're thinking more about our devices as a stage for all of Microsoft."

As for how it acts on that stage, Microsoft was described by Stanford University's Vivek Wadhwa as akin to "the former Soviet Union." Hardly an outside observer casting stones from an ivory tower, Wadwa wrote in the Washington Post that, "My former students and friends who work at Microsoft tell me that they love the company, but are stifled by its bureaucracy, turf wars and central planning."

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