LiveSoft: Spin-off Windows Live with an IPO?

John Battelle provocatively ponders whether Microsoft should split off its Windows Live products as a new company. He thinks that search and web innovation in general is where the Redmond company is getting judged - not on its core products Windows and Office. And he says in this regard Microsoft's "gravitational mass" is getting in the way of public perception - and by extension I suppose stock market performance. John goes on to suggest:

"Take Search, Live, and a good chunk of MSR (research) and make it a separately traded division of MSFT. Take the damn thing public. Imagine that IPO!

Let's call this new company LiveSoft. It spins out with exclusive licenses from MSFT for integration with Windows and Office. For infrastructure support and access to patents/IP/research/human capital. All the stuff it needs from Mommy Microsoft, it can have. But, it's kicked out of the nest, and run by a real madman/woman, someone who lives to run this shit."

While this would certainly help Microsoft innovate and compete with upstarts like Google (well ok, it's a big upstart!) and hundreds of Web 2.0 startups, I suspect that the planned 2006 Windows/Web integration in Vista is going to be too important for Bill Gates and Steve Ballmer to let go of. Recently Mary Jo Foley quoted Blake Irving, Corporate Vice President of MSN, on the topic of Vista and Web integration:

"Increasingly, you'll see packaged software that's 'Live-Ready,'" says Microsoft's Irving. "This means software that is designed to work in concert with an Internet service. To deliver these experiences, Live-Ready client-side software must be capable of connecting to the Windows Live 'cloud' and must have the necessary plumbing and infrastructure."

While Windows Live services won't require Vista to run, nor will Vista be dependent on Live Services, the two will definitely work better together."

Windows Live is key to Microsoft's plans for Vista and Windows in general. Given that Microsoft is said to have up to 50 new 'Live' services in the works, the integration between Windows Vista and these Live services is a huge part of Microsoft's competitive strategy against Google and Yahoo.

So while it's tempting to dream of an IPO for a new spinoff company called LiveSoft, wouldn't that rob Gates and Ballmer of a certain amount of glee if indeed their Live products do trump Google? I think the Microsoft honchos would sooner throw a thousand chairs than give up bragging rights on that one! No, Windows Live is staying right where it is in the Redmond offices.