Belluzzo Expected to Join Microsoft's Internet Unit
Mountain View, California, Aug. 24 (Bloomberg) -- Richard Belluzzo, who yesterday resigned as chairman and chief executive of Silicon Graphics Inc., is expected to join Microsoft Corp. to run its rapidly growing Internet activities.
Belluzzo is likely to take the position and is the best choice, even though he wasn't Microsoft's first choice, said Rob Enderle, analyst at Giga Information Group. Belluzzo is expected to start around Sept. 1, according to the Wall Street Journal, citing people familiar with the matter. Belluzzo and Microsoft declined to comment.
Since November, the world's largest software maker has been seeking a top executive who can build its Internet businesses, which are facing tough competition from America Online Inc. and Yahoo! Inc. Belluzzo, 45, would bring a suitable business and technology background to Microsoft, Enderle said. ``He would have the right skills set,' Enderle said. ``He would know the language, the players, the resources.'
The hiring of Belluzzo is likely to delay Microsoft's plans for issuing a tracking stock to more fully reflect its Internet activities, which center around the MSN network of Web sites, Enderle said. Those activities comprise MSN network, MSN Internet access, WebTV Networks, desktop finance software and electronic- commerce software.
Last month, Microsoft said it was considering issuing a stock encompassing its online activities to reflect the higher valuations enjoyed by Internet companies, though no decision had been made. ``That would depend on Rick,' Enderle said. ``He's the person that's going to make that decision.'
In addition, Microsoft Chairman Bill Gates opposes a tracking stock. ``His objections are about implementing it,' said William Epifanio, an analyst at J.P. Morgan who has a ``buy' rating on Microsoft. Gates has expressed concern about the complexity of stock options for employees, for example, Epifanio said.
Still, Belluzzo, with a background of working at computer hardware companies, appears to be an unusual choice for an industry that's predominantly run by executives with media or consumer marketing experience, other analysts said. ``Who the hell is this guy? He ran an unsuccessful company for a couple years in an industry that's not related at all,' said Bruce Kasrel, an analyst at Forrester Research. ``Someone who knows how to build a business around media properties' would be a better choice.
Belluzzo resigned SGI after a largely unsuccessful 19-month effort to restore the No. 4 maker of computer workstations to health. SGI said Belluzzo, who had joined Silicon Graphics in 1998 from rival Hewlett-Packard Co., left to take a non-CEO job at a company that doesn't compete with SGI.
Belluzzo did return SGI to profitability in its most recent quarter after seven straight quarters of losses. That might be attractive to Microsoft, whose online unit is losing money, said Kasrel. ``(Microsoft President Steve) Ballmer probably wants someone who's more into making money and losing less because he's not happy with the red ink coming out of that unit,' said Kasrel.
Microsoft has been rebuffed repeatedly in its nine-month search for an online executive.
Brad Silverberg, a former Microsoft executive who oversaw the development of Windows 95, turned down an offer, analysts said. George Bell, president of Excite At Home Corp., said he was approached by Microsoft and declined the overture.
America Online has more than 20 million subscribers to its flagship service and its CompuServe online unit, compared with an estimated 1.8 million MSN subscribers, according to Jupiter Communications.
Microsoft rose 5 3/4 to 92 3/16 in trading of 60.2 million shares, making it the most active U.S. stock. SGI fell 1 9/16 to 10 7/8.
¸1999 Bloomberg L.P.
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