"The search business and even Xbox, which has been a very successful product, are detracting from that. We would want them to focus on their best competencies," he said.
"My view is there are some parts of that operation they should probably spin out, get rid of, to focus on the enterprise and focus on the cloud."
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The Microsoft board has shown a new "receptivity to getting outside views," Mr. Ghaffari said, adding that the search for a successor to Mr. Ballmer was being handled well.
If the board opts for rumored candidate Alan Mulally, currently chief executive of Ford, Mr. Ghaffari suggested he be paired with another executive with technology product experience. Other shareholders have questioned the recruitment process, including the issue of whether Mr. Gates may circumscribe future strategy.
Mr. Ghaffari, a hedge fund industry veteran and former portfolio manager at Soros Fund Management, was hired by Mr. Allen in 2010 to run his eclectic mix of investments, which range from sports teams and space travel to real estate and US tech stocks.
Mr. Ghaffari also revealed that he hoped to plough some of Mr. Allen's fortune into Twitter's initial public offering. Vulcan analysts attended investor presentations in New York this week, and predicted the flotation would get "a little bit crazy."
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Twitter has a strong platform for growing ad revenue, he said, "and they've just begun . . . If Google is now in its fourth or fifth inning and Facebook is now in the second or third inning, Twitter is barely in the first inning," he said. "I hope we get some shares."
Steve Ballmer announced in August that he would step down as chief executive of Microsoft after 13 years at the helm, in what was seen as an admission that the PC pioneer lacks the leadership needed for the mobile era. He had come under pressure after a faltering start for Windows 8, Microsoft's attempt to make an operating system that spans both PCs and tablet devices.
ValueAct, an activist investment firm, took a stake in the company and has pushed for board representation. The company's most recent quarterly earnings were buoyed by computer shipments to business customers, even as PC sales to consumers declined.
Two years ago, Mr. Allen revealed that Bill Gates had tried to buy out his stake in the company for $5 a share when he left in 1982, and that his own offer to sell for $10 was turned down.
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The investment went on to make him one of the richest men in the world, with Mr. Allen since selling most of his shares to fund a broad investment portfolio, the purchase of professional basketball and football teams and his philanthropic activities.
—By Stephen Foley and Richard Waters of the Financial Times