CNBC's Jim Cramer: Microsoft should spin off Xbox business

Jim Cramer is perhaps the most well-known person on the CNBC cable TV business news channel. His show, "Mad Money," has been parodied by others many times thanks to Cramer's loud personality and his percent for using weird sound effects

Cramer is also one of the hosts of CNBC's morning show "Squawk on the Street," and today he made some comments about Microsoft, based in part on what Microsoft chairman Bill Gates said about the company in an earlier interview today. Cramer says overall that he likes Microsoft, even though he personally doesn't care much about Windows 8.

One thing that Cramer did think Microsoft should do is a spin off of its Xbox business into its own separate company. He stated:

I would love, love, love, a piece -- not a tracking stock, but if they were to spin out Xbox, Xbox plus Netflix, if they bough Netflix ... I know people don't want to hear that, but Netflix is a powerful, younger person function and then you would see this company has a lot of weapons.

Of course, this is just Cramer talking, but the idea of Microsoft spinning off its Xbox business into a separate company has come up before. However, most people just don't see this happening anytime soon. In fact, if the rumors about the next Xbox using Windows 8 as its operating system are indeed true, then Xbox could be tied up even more with the company's overall "device and services" plans.

Source: CNBC

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Reed Hastings left the board of Microsoft last fall hope fully in preparation for an upcoming purchase. I hope MS will purchase Netflix, and it will be an outstandingly smart move if they do so. They need to rearrange the entire "subscription" value of Xbox Live.

Why would Microsoft do this?
They sold Mediaroom to Ericsson to focus on turning xbox into the ultimate entertainment solution, even at the expense of their former IPTV Partners.

"... but Netflix is a powerful, younger person function..." The only people I know that are using Netflix streaming now days are older and watching old movies. The younger people want to see the latest TV shows and right away but Netflix lacks that type of content.

Let's put some information in perspective:

MS Xbox "division" (right now, it is part of a big division):

Hit: Xbox360
Miss: Xbox

Performance 50%.

However, the xbox360 hit wasn't for free, MS loss money with the xbox360 during years and MS start profiting only during the latest years. Ms also closed may in-house dev teams and abandoned many franchises.

So, let's say that those problems are equal to a 5%. So, we have:
Hit = 45%, Miss = 55%. Then the safe bet is against the xbox "division".

ps: it is not about if xbox/360 is a good or bad product, it is about profit.

Information? Where? How on earth was Xbox a miss? It sold 24 million units, and initially it was selling faster than the 360. Also, it was the very first console of MS, rivaled by the Playstation 2, the bestselling ever console on Earth. So no, your rant is misinformation at best, but nice try. I won't even comment on your utterly nonsense extrapolation of these bold (but wrong) statements.

Brony said,
Let's put some information in perspective:

MS Xbox "division" (right now, it is part of a big division):

Hit: Xbox360
Miss: Xbox

Performance 50%.

However, the xbox360 hit wasn't for free, MS loss money with the xbox360 during years and MS start profiting only during the latest years. Ms also closed may in-house dev teams and abandoned many franchises.

So, let's say that those problems are equal to a 5%. So, we have:
Hit = 45%, Miss = 55%. Then the safe bet is against the xbox "division".

ps: it is not about if xbox/360 is a good or bad product, it is about profit.

Original Xbox was a miss? Are you drunk? It came in from nothing into the living room and ran toe to toe with mainstays. Second gen pretty much has put as the benchmark.

bviktor said,
Information? Where? How on earth was Xbox a miss? It sold 24 million units
Hate to say it, but you have answered your own question. Xbox was a failure, everybody knew it was going to be one. That doesnt mean it was bad product, or wasnt useful, but money wise, it was not a "success" if you base that success on the product itself. In context of the MS's entertainment strategy, it was the necessary foot soldier sent to test enemy lines. That was the price MS paid in order to bring us x360.

Xbox was by far from a Miss... it might not have gotten MS profiting right away but it establish them as a definitive player in the space. Much like every new player that enters the industry they are bound to come out loosing. MS stated this from the beginning that it was a long term strategy and they have won.

MikeInBA said,
Hate to say it, but you have answered your own question. Xbox was a failure, everybody knew it was going to be one. That doesnt mean it was bad product, or wasnt useful, but money wise, it was not a "success" if you base that success on the product itself. In context of the MS's entertainment strategy, it was the necessary foot soldier sent to test enemy lines. That was the price MS paid in order to bring us x360.

Um, how about no. Get familiar with the term of "royalty". Noone gets any money from the console *hardware*, particularly not in the humble beginnings. Still, MS made good money from game sales and xbox live, so how about not fooling yourself.

The original Xbox wasn't meant to be a hit. It was meant as a starting point for the company. It was the perfect Trojan horse because look at what happened for the xbox360. They almost owned the market with their second generation offering.
So in this sense the original Xbox was a hit because it did its job well.

He also smash discman, right before the zune.

He's also was right, zune failed against the ipod. Microsoft was giving the talk how they stick with the zune (in it for the long haul), it will compete against the ipod and it was just going to be slow to start, etc. I think he called it correctly in 2006.

Not saying the zune was a bad product.

He also recommended to sell Stark Industries after Tony Stark decided to stop selling weapons. Oh how wrong he was...

there has been talks like this in the past before...... people calling for the business division of MS to be spun off... well the business division is huge, and the home division depends on it!... spin Office off... well once again... depends on the business division... spin off the entertainment division..... well this one again depends on the home division and the business division... to spin off any part of MS could potentially hurt other parts when its a "major" division in MS...

Oh-oh. Cramer is usually a good "contrarian" indicator. Usually if he says one thing, the opposite really happens (yeah do look at his track record). I guess if he is bullish about XBOX, we should now start getting worried about XBOX.

Why, why would they do this? How does this make any sense?

"Here's one of the most healthy organs in my body, let me just cut it out and see how it does on its own... Don't worry, I'll be fine! "

Microsoft is re-positioning itself as a device and services company, why would it snap up one of the biggest media services around, and then spin-off both it AND it's most popular device brand into a separate company? Sure, that company would be a juggernaut, but it makes no sense.

Xbox is pretty much Microsoft's Trojan Horse into the living room and also one if its biggest chances to drive their services into the hands of consumers. Spinning off that lifeline would be.... insane.

The Teej said,
Microsoft is re-positioning itself as a device and services company, why would it snap up one of the biggest media services around, and then spin-off both it AND it's most popular device brand into a separate company? Sure, that company would be a juggernaut, but it makes no sense.

Xbox is pretty much Microsoft's Trojan Horse into the living room and also one if its biggest chances to drive their services into the hands of consumers. Spinning off that lifeline would be.... insane.


EXACTLY!

Not only that, but he is grossly underestimating the benefit Microsoft and it's XBox brand gets from leveraging other departments in the company. This would be truly moronic.

But it's Jim Cramer. When does he ever make sense?

To be fair, he didn't say that Microsoft should should spin off the XBox division. He was making a scenario of (if) they did what would happen to the stock.