Microsoft co-founder Paul Allen may want the company to spin off Xbox business

There's been lots of public advice from financial analysts in the past year who have claimed Microsoft would be better off ditching its consumer businesses, including a spin-off of its Xbox division. This week, the head of the financial investment group Vulcan Capital, Paul Ghaffari, said that Microsoft should consider such a spin-off.

However, the twist here is that Vulcan Capital is the investment firm that manages the $15 billion fortune of Microsoft co-founder Paul Allen. The Financial Times reports that Ghaffari believes that Microsoft should concentrate just on its business customers and that even a successful division like Xbox is a distraction from those enterprise efforts. He added, "We would want them to focus on their best competencies."

Ghaffari said that Allen, who still owns about $2 billion in Microsoft stock, is "intrigued and interested" in the upcoming changes at the company which will likely be made when a new CEO is selected to replace Steve Ballmer. Ghaffari added that he felt the search for a new Microsoft CEO was going well but did not get into specifics. It's unknown if Allen has any say in the CEO selection process.

Ghaffari also stated that he might put some of Allen's money into Twitter when that company started publicly trading in early 2014. He feels that Twitter already has a strong base for advertising and they have just started on those efforts, adding, "I hope we get some shares."

Source: Financial Times | Image via Microsoft

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Not sure I quite understand what spin off means? Does this mean creating a separate company that is just focused on Entertainment and separate from their Cloud, Server initiatives? If so, that might not be a terrible idea. Microsoft is too big, too much gets lost and forgotten.

Yes it would mean separating the Xbox brand into a separate entity from Microsoft

I is one of the dumbest ideas a so called money manager can come up with, there has to be something else going on in the background

Idiots need to understand the "business" market will soon get mixed up with the "consumer" market. Leaving one for the other will only cripple MS in future where Apple, Google and Amazon will rule.

Even if MS did break xbox off into it's own division not many consumers would even notice a difference. So of course the only people who would be upset over something like this is people who follow it, which isn't many people compared to the amount of people who don't follow tech stories.

Someone seems to recycle this rumor about once a month. It really makes no sense at all as lack of diversification is a much riskier position. Even if entertainment isn't a big part of revenue, it's a good hedge against a slow economy as entertainment spending tends to go up as business spending goes down.

Even if they spin off the xbox business they've still got a massive portion of their company not dedicated to businesses, their two biggest money makers, windows and office, make most of their money from consumers not business.

Having Xbox spun off and away from the massive talent pool of software and hardware developers MS has would be an insanely bad idea. Sure it would make more money to begin with, but once they start to struggle with pumping out new software and hardware it'd struggle and they'd lose sales.

Considering ms wants to become a device and services company losing their best selling device of all time would be a huge blow.

It's nice to want things but this is just more click bait fodder aimed at Sony fanboys who circle jerk to some utopian one console future they have dreamed up for themselves

Funny. One of the reasons Microsoft is having issues is because it essentially ignored the consumer space. It did not jump on key areas or when it did it was late to the game. It ignored the Mp3 player, it ignored the advancement of the smartphone, it ignored the tablet. Maybe ignored is too strong of a term but their slowness to react or take advantage technology that they had developed long before has hurt them now. In the past such mistakes would not been as earth moving. But that was when technology flowed from the enterprise to the home. Computers were mainly for business and moved to the home in 90's. But businesses still determined the direction of tech. Today the movement of tech is a mixed bag as tablets and phones from consumer use has forced or moved to invade the enterprise space. These devices and the fact they are new way of thinking is also transforming the enterprise. Missing the consumer space also allows individuals to create new brand loyalty and invest in other ecosystems. The enterprise control by Microsoft today is still strong but the lack of consumer push has hurt them in strengthening this important area, allowing others to make inroads. So the consumer market is key for Microsoft and Xbox is key as part of that overall design, loyalty and ecosystem. Xbox is not just a device but a marketing branding across platforms. Separating would not guarantee it to successful (a big backer is required to support these moves). As a separate company it could align itself with a competitor (Google Xbox). It may fail and ruin other Xbox consumer integrations (like music).

I think if Paul Allen really wants to look at things he owns that are money losers he could really start with several of his sports teams that are hemorrhaging cash.

They've never been all that interested in the gadget market, so I really wouldn't expect them to be leaders in mp3 players or phones. The Xbox was their first big hardware platform and that was really an offshoot of gaming on Windows. When it comes to the bottle line, they are almost completely a software company.

That would be a bad move, its all interconnected. Microsoft's business succes wont last unless they get their consumer side in order. Organizations are consumers working together. They like to bring their home toys to work. So unless Microsoft also focuses on consumers they will eventually lose marketshare on the business side as well.

In turn Xbox is an important building block in creating an ecosystem that can compete with Android and iOS. Granted Microsoft hasnt gotten the most of it so far and Xbox on WP and W8 is rather weakly implemented but they should strengthen it not diminish it.

I understand the argument of focusing on core competences, it holds true for most organizations. However Microsoft operates in an extremely complex market. You can't simply excel in one thing and expect to do ok. They need divisions such as Bing, Skype and Xbox to make the endproduct competitive.

Title of this post is very misleading! Paul Allen never made a comment about the Xbox. A financial adviser made a statement... very different than Paul making a comment.

dloendorf said,
Title of this post is very misleading! Paul Allen never made a comment about the Xbox. A financial adviser made a statement... very different than Paul making a comment.

that's what i was thinking. Microsoft right now is trying to have the same experience on all screens. The push for the reorganization is part of this effort also. They don't need to spin it off they have people that work on things in all there divisions. This rumor pops up all the time. The Xbox one is made to be profitable from the start unlike the 360. They are not losing money except for Bing.

If Microsoft's entertainment offerings labeled with the Xbox brand were to be spun off along with the console portion, it'd be extremely harmful to its overall efforts in the consumer space. Apple and Google both have their own dedicated music and video services, and Microsoft would have to find a way to make new services if it wanted to realistically compete in the mobile space.

It could allow the Xbox brand to expand much more, have more leverage and be more successful financially. Its like kids who live with their parents after high school, they'll have to leave at some point to start their lives.

Sounds good, I think MS is slowing them down. The rumor was that business decisions outside the xbox team hampered their vision and interfered with development of the Xbox one.

I think a spinoff of the Xbox division is a very good idea. As a separate company, the Xbox company spinoff can grow bigger and have more leverage. Having the Xbox division within Microsoft is like having your kids live at home after they graduate high school and attend college.

Why is that? I feel like Xbox has plenty of leeway under Microsoft, and honestly quite a few more advantages, given all the resources Microsoft has to offer. Kinect 2 is pretty much a product of Microsoft's Research Division, likely among other parts of the console. I don't see how it would grow bigger and have more leverage on its own.

Another example is the deal with the NFL - it's going to be pretty lucrative for Microsoft/Xbox and Xbox on its own wouldn't likely have the $400 million to shell out for it.

Many financial analysts have said this.
Just because the one in control of Paul Allen's money says it, it's newsworthy again?

The board is actually split on this issue with many taking this stance.

Time will tell, once they have a new CEO.

My belief is that If the Ford guy gets in, it will be all but guaranteed.

It sounds like they have no faith in Microsoft in the consumer market and they would like to minimise risk (as they see it).

Ghaffari is an investor that want to see MS disconnect itself from the consumer market in hope that the consumer and entertainment division will not drag down MS' profit in a quarterly or yearly basis. Basically, he wants his MS stock value to increase.

I think this is a great idea. After decades of ****ting down outright hostility onto its userbase, Microsoft has gotten to the point where they are too ashamed to put their own name on the one product left that doesn't incite instinctive fits of apoplectic rage. This would be a logical next step.

should've launched XBox mobile, to compete against Nintendo's 3DS & Sony's PS Vita.
Surface are too bloated for that purposes.

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