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Microsoft CEO candidate would consider selling Xbox

Microsoft CEO candidate would consider selling Xbox

Fri 08 Nov 2013 3:45pm GMT / 10:45am EST / 7:45am PST
Business

Stephen Elop reportedly open to significant changes in strategy if appointed to head software giant

With Microsoft looking to appoint a new CEO for the first time in 13 years, it's to be expected that the change in leadership could precipitate a change in focus for the company. A Bloomberg report today underscores just how significant that change could be.

For example, if Nokia's Stephen Elop (one of four reportedly on the company's shortlist) gets the nod as CEO, Microsoft could find itself selling off the Xbox business. Citing three people with knowledge of Elop's thinking, Bloomberg reports that the cell phone maker executive would shift the company's focus around its Office productivity software, expanding the programs well beyond the Windows ecosystem, onto a variety of platforms including Android and iOS.

Beyond that, Elop was said to be open to selling or shutting down some of Microsoft's major operations in order to further improve its focus. That would put the future of both the Bing search engine and the Xbox brand in question should they be deemed not critical.

Nokia declined to comment for Bloomberg, while a Microsoft spokesperson said, "We appreciate Bloomberg's foray into fiction and look forward to future episodes."

Elop already appears headed to Microsoft regardless of the CEO appointment. When Nokia sold its Devices and Services division to Microsoft in September, the cell phone maker said it expected the executive to transfer over along with the business. Elop has already worked at Microsoft once before, and was head of the Office division leading into the launch of Office 2010.

This isn't the first time someone has floated the idea of selling off the Xbox business. Nomura analyst Rick Sherlund has been calling for Microsoft to unload the gaming operation since June.

24 Comments

Jeff Kleist Writer, Marketing, Licensing

359 215 0.6
Popular Comment
Shutting down or selling Bing is a good idea, since it's redundant, and no one uses it in purpose

Selling Cbox right now would be stupid

Posted:11 months ago

#1

Bruce Everiss Marketing Consultant

1,692 594 0.4
Xbox is a bottomless pit.
Microsoft's share price would surge if they got rid of it and concentrated on areas where they can make money.

Posted:11 months ago

#2

Jeff Kleist Writer, Marketing, Licensing

359 215 0.6
That's what they're doing. If what they're trying to do with X1 pans out, which is looking promising, they'll be rolling in it

Posted:11 months ago

#3
Bing whilst not frankly very good, at least not from my own personal attempts to use it, may well prove necessary in future Ai driven computing attempts, devices such as future phones, tablets and information based computing need a source of information they should focus on improvement with it, selling the xbox brand however would be a mistake, as its Microsoft major presence in the family home these days, also its a viable business capable of generating major profits, there seems to be no logical sense to breaking off into a separate company other than to loose money long term in return for more minor short-term gain, fine for an investor who cares nothing about the survival of the company and everything about lining their own pockets, but a very bad idea for the company itself and its long-term survival.

Posted:11 months ago

#4

Adam Campbell Associate Producer, Miniclip Ltd

1,183 975 0.8
I think Xbox is a significant part of the Microsoft ecosystem, especially now with Windows 8 and Windows Phone integration. I dont think the value is just about numbers at all.

Posted:11 months ago

#5

Frank Trottier Analyst programmer

23 23 1.0
As a programmer it would be a relief to see Microsoft control over the 3D pipeline (Direct X) go away. I welcome AMD and it's refreshing idea with Mantle API and their engineering direction with their hardware. Not see Bing being pushed would be a relief too. Best bang for your bucks ?

Posted:11 months ago

#6

Paul Jace Merchandiser

942 1,428 1.5
I've been calling for them to get rid of Bing for awhile now. As Jeff said, there is no point to it when you consider that everyone already uses google for all their search engine needs. Thats why every few months Microsoft offers contest for people who use bing for their web searches. Google would never do that because they have no problems with people constantly using their site everyday. But despite their effort Microsoft needs to realize that bing is just a second rate search engine that will never take any of google's market share.

As for Xbox, anyone who would consider selling that division off doesn't deserve to be the CEO of Microsoft. The first Xbox made no money. The 360 has(and still does) made alot of money. And presumably the XBO will also make the company alot of money. If they want to get rid of divisions that don't make money then by all means offload bing and any of their other projects that never gained any significant ground. But the Xbox division shouldn't even be in the conversation of things to offload.

Edited 2 times. Last edit by Paul Jace on 9th November 2013 1:57am

Posted:11 months ago

#7

Morville O'Driscoll Blogger & Critic

1,590 1,446 0.9
Questions to ask about the XBox division:

Generally speaking, how long did the 360 take to become profitable? How likely is it the One is going to take as long, or longer?
Specifically, how much are MS paying in licensing costs?
How confident are they in the manufacturing-process and life-expectancy of the One? Any possible RROD-type melt-down will cost, both financially, and in reputation.
How much could MS get, not only for the XBox division, but for other facets of the games department? Rare, for instance.

And add to that... How much will their stupidity cost them? The news that a guy who got his One early because Target broke release, gave positive opinions on it, then got his machine banned will, once again, set-back MS's PR, and cost them money.

Obviously it should be in the conversation of things to off-load, because no company should be complacent about its assets. But equally obviously, I think, it makes no sense to leak that there's considerations of off-loading it - it devalues the brand, and shows a lack of confidence in your product.

Edited 2 times. Last edit by Morville O'Driscoll on 9th November 2013 11:24am

Posted:11 months ago

#8

Murray Lorden Game Designer & Developer, MUZBOZ

199 72 0.4
Popular Comment
Don't think he'll be getting the job, after making comments that lead to articles like this one.

Do you think Microsoft are going to be happy with articles flying around the inter-trons - just as Xbox One launches - that suggest a possible future where, "If this guy gets in charge, Xbox might be dropped off the back of a truck and basically no longer supported?"

I don't think Microsoft will be looking favourably on such comments, even if Elop didn't intend that meaning at all!

Edited 1 times. Last edit by Murray Lorden on 9th November 2013 11:59am

Posted:11 months ago

#9

Klaus Preisinger Freelance Writing

1,136 1,174 1.0
If the new philosophy was "hardware & services", then you'd expect other news. Or you might question the credibility of this rumor.

If you can say one thing about MIcrosoft these days, it is that their prices are being raised aggressively. Unbundleing Exchange from Server versions of Windows. Raising the price of Office 2013 and Win 8.1 while axing the predecessors faster than the original Xbox. The Xbox One is not the only MS product consumers wish had a better price.

Strange days ahead for Microsoft.

Posted:11 months ago

#10
Why buy windows or office when you can have other OS and software - or freee

Posted:11 months ago

#11

Adam Campbell Associate Producer, Miniclip Ltd

1,183 975 0.8
As a programmer it would be a relief to see Microsoft control over the 3D pipeline (Direct X) go away. I welcome AMD and it's refreshing idea with Mantle API and their engineering direction with their hardware. Not see Bing being pushed would be a relief too. Best bang for your bucks ?
It would take a lot more than selling off Xbox for a heavily installed, highly influential API like DirectX to go away.

If people want DirectX to be reduced in relevance, it will take alternatives to show why they're better and provide a better path for advancement. OpenGL's progression, has arguably been quite slow and ES even slower.

Mantle is very exciting, but it is only relevant for one type of architecture from one semiconductor company. So which API can provide a more optimal, higher performance approach for everything? We'll have to work on that one and see.

Edited 1 times. Last edit by Adam Campbell on 9th November 2013 7:12pm

Posted:11 months ago

#12

Paul Shirley Programmers

178 150 0.8
If XBone fails to support the new 'services' direction Microsoft has taken it should be sold or shuttered, compared to the margins in the truly profitable parts of Microsoft it's just dead weight even with the most optimistic spin on profits. It's going to be months or years before that decision can be made. But if it does succeed in being the services platform MS hope for, games will be just a minor part of what it does.

If XBox was still just a game platform I have no trouble believing it would be sold quickly by any new CEO. But it's now so intimately tied to the Microsoft Cloud it's hard to believe any buyer could be found for XBone, a device crippled without it's network even after the half hearted backtracking. However much Elop might want to kill it with another 'burning platforms' memo, I don't see him convincing the board to allow it if a sale is impossible.

Anyway, if the new CEO isn't an external appointment Microsoft are dead. When Gates went they understood change was needed but chose to change the perception of the company without actually changing much on it's policies or direction. So we sat through over a decade of complete stasis under Ballmer. If you want Microsoft to be successful that can't happen again and an internal appointment all but guarantees it (make no mistake, Elop is an internal candidate). I'd quite like to see Elop break Microsofts stranglehold on the desktop though ;)

Posted:11 months ago

#13

Matt Jeffries Senior Producer, Telstra

18 17 0.9
Lol. Half you "experts" don't even spell Xbox correctly - it is X-b-o-x. Not XBox. There isn't, and has never been, a capital B in Xbox.

Edited 1 times. Last edit by Matt Jeffries on 11th November 2013 4:03am

Posted:11 months ago

#14

Morville O'Driscoll Blogger & Critic

1,590 1,446 0.9
Half you "experts" don't even spell Xbox correctly
Oh, the hu-manity. :p

Posted:11 months ago

#15

Alfonso Sexto Lead Tester, Ubisoft Germany

822 654 0.8
Sure releasing a new console and selling the business must be taken as a joke. Look at youtube for example; you first create the service, then you make it grow and THEN you sell it.
Seeing all those preorders and all the 360 sold worldwide I can't imagine any reasons to get rid of that business. If they did they would provably get quite some money since it would be an appealing offer (if somebody in the world would be able to pay it, that is)

@Bruce:
They get a lot of money through royalties with each game sold on that platform. Think about all the CoD and GTA sold. It makes money and it makes a lot.

Posted:11 months ago

#16

Alfonso Sexto Lead Tester, Ubisoft Germany

822 654 0.8
@Matt
Thanks for the compliance and terminology guidelines heads-up man. Now, would you like to join the conversation we "experts" were having?

Note: I suggest you save that kind of tone for Gamespot or Kotaku. That kind of "lols" are not very welcome here.

Posted:11 months ago

#17
Yes.

As I was saying to the reports of "10 year lifespan", this is the biggest danger to the XBone. MS have effectively unlimited money - but they still need to generate a good return for their shareholders. And other than Live, XBOX has never managed to do that.

So if the PS4 gets a good lead in the US, Microsoft starts "looking" like a loser ... this could impact on the share price. And the best way to boost that share price, will be to kill off the XBOX for good.

MS make almost all of their money from Office & Windows ... and this is where they should focus. If they end up losing those markets (or even losing significant market share), it could destroy the company.

Posted:11 months ago

#18
I'm not sure if Office or Windows has lasting power in this era of computing. I suspect Android, is their best performing platform. Everything else should go free!

Posted:11 months ago

#19

Andrew Animator

148 158 1.1
Another balanced commentary from Bruce.

Posted:11 months ago

#20

Nick Wofford Hobbyist

180 190 1.1
Microsoft's entire ethos is that they want to own the living room. They tried with PCs, hoping that people would all have their towers under the TV. Well that didn't happen. So MS needed a box that millions would use, that would be a service (and hence a continuous cash crop), and would never be able to leave the space under your TV by its nature. I wonder what devices are like that.....

Oh! It's the gaming console! The X1 is the first step that MS is taking towards the smart home idea that's been around for decades. It's always been their game plan, and it'll never be sold. That's basically quitting as a company.

Posted:11 months ago

#21

Aleksi Ranta Product Manager - Hardware

280 129 0.5
"Citing three people with knowledge of Elop's thinking"...so we are talking mindreaders then?

Posted:11 months ago

#22

Robert Ilott Build & CM Engineer, Criterion Games

25 49 2.0
As an ex-Nokia employee (until August 2011) you can imagine how good a CEO I think Elop is.

Posted:11 months ago

#23

Philippe Ledru Consultant & Writer

6 2 0.3
I think the fact that this website is game-oriented makes us lose sight of the fact that the Xbox division is by no means the bulk of MS profits; overall it usually accounts for less than 10% of the company's profits —when it breaks even, which hasn't always been the case. Just consider this chart to get an idea: http://www.businessinsider.com/chart-of-the-day-microsoft-operating-income-by-division-2010-2
MS earns money by selling Office, Windows, and Server/Tools to a lesser degree.

MS is often likened to Google and Apple because they're all "big shiny IT names" which more often than not occupy a major space in our digital lives, but these comparisons don't hold much water if you consider their core business. They're rivals at the edge of their business, not at the core. Apple sells hardware above all, bundled with dedicated OS's, and as such they compete with MS over their Windows products, but MS is above all a software provider. On top of which their core audiences are quite different. Google is another beat entirely, which likes to swing at both, but never losing sight of their own business, monetising web services.
- Apple aims at wealthy end-consumers and artistry business; Windows aims at consumers and business at large (much less specialised than Apple's targets, much bigger numbers with lower margins). Beyond that, the bread-and-butter of MS is Office, and as they like to remind observers, they totally own that market business-wise. There's much less competition between these two than geeks would like to admit. Conversely, Apple rocks with iPads over Surface, but then again hardware is far from being MS's core activity.
- Google and MS have totally different core businesses originally, they actually used to be quite complementary (and still do to a large extent). It's only because Google is trying to hit MS strongly over Office with their online software that there's competition there, but then again: how many companies ditched Office in favour of Google Docs? Unlike MS, Google lives by monetising web search with adds (Bing being anecdotical in the wider scene, the big challenger being Yahoo) and provides some online software to a few consumers; unlike Google, MS lives by selling software to businesses.

When you consider all of this, Elop's take on MS is realistic, and probably sound in terms of strategy. MS just can't lose Office, so it makes sense to put most efforts on this product family. Their situation with Windows is a bit more problematic in a world that's shifting from desktops towards smart terminals (which iThings and tablets in general are), but that's only considering the consumer side of the market. The business side isn't about to ditch desktops; if one thing it will integrate touch devices on top of classic computers. Likewise, I'd wager consumers will still need some form of "powerful black box" at home; granted possibly more obfuscated and evolving towards home-streaming (think nVidia's and Apple's innovations in this respect which could totally rely on a "server-like" big black box power-packed with CPU/GPU power, so as to marry ubiquity with horsepower). That is, until cloud computing becomes the norm, but then again, network connections aren't there yet for the consumer market (we're far from 99% optical fiber from ISP's to homes). MS has a decade to manage that transition.

Finally, as far as the Xbox is concerned, and unsurprisingly if you consider all of the above, MS just isn't very good at it. They don't know how to cater to gamers as well as Sony, Steam, or Nintendo do/did. It's just not their core business, and it shows. Gaming is also a very unstable market where you can go from top to bottom in a few years —just ask Sega, Atari, Nec, SNK… Leaders come and go. It's just not reliable, and bluntly put, not profitable enough for a company such as MS. Apple and Google aren't even trying (yet), probably because until they figure out a "key golden strategy", there's just no point in pouring billions at facing Sony and Nintendo (and admittedly they get their share by just running app stores on their mobile/tablet OS). And the period is just bad to make a dent in the gaming market when convergence threatens the very existence of consoles. So with an established brand such as Xbox, if I were MS, considering making a joint-venture with a capable company able to run the console, where MS would hold a minority of the capital (just enough to reap profits), wouldn't seem like a bad idea. Can't chase too many horses simultaneously. Just imagine a Steam-ran Xbox for instance, backed with MS financial power, lead with Valve's legendary touch with gamers… now that may have the potential to seriously hurt Sony or Nintendo.

Therefore, I think Mr Elop isn't a bad candidate. Actually he may be bold enough to change the IT scene enough to swing the wind in favour or MS anew. He may even consider using Nokia's mastership of engineering to finally nail it in the touch business. Just like owning a PlayStation isn't a reason not to buy an iPad or a Nexus, I don't think the Xbox is a necessity to compete in the touch market (trivial assessment), and MS needs to make convergence/ecosystems much better if Windows is to survive against Android/iOS. Which the Xbox doesn't help, at all.

Edited 3 times. Last edit by Philippe Ledru on 14th November 2013 2:57pm

Posted:11 months ago

#24

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