Xbox business spinoff? Could be possible with Ballmer out of the picture

Microsoft has seen better years. Between backlash due to initial Xbox One DRM policy, a slow adoption of Windows 8, and friendly competitor mudslinging dialog, it would seem this year Microsoft is having a tougher-than-usual time. Microsoft has been in the beginning stages of a *major* transition to that of a devices and services company while preparing for the launch of the Xbox One and the much anticipated Windows 8.1 upgrade. To add even more craziness into the mix, Steve Ballmer recently announced that he will be departing the company within 12 months allowing for a fresh new CEO to take the reigns and continue on his "One Microsoft" vision. 

We had already said that they weren't having a fantastic year and there are some stock holders that are looking at the CEO switch as an opportunity to possibly spinoff the Xbox brand as it seems mature enough to break away and make it on its own. Microsoft as a whole has lost $280 billion in market value (Ouch!) in recent years after struggling to gain tablet and smartphone market share as well as gain traction with Windows 8.

So let's stop and think. Is a spinoff of the Xbox business actually possible and would it be a good idea? 

First off, it ultimately depends on the new CEO. With Ballmer out of the picture, a fresh new CEO from the outside could be looking to take drastic steps in an attempt to put Microsoft on the right track and put some money in the bank at the same time. The Xbox division is worth an estimated $20-30 billion dollars, a pretty penny for a relatively small part of the company. A CEO picked from within Redmond however would probably stop the very idea of a spinoff right in it's tracks and continue with the plan to unify Microsoft into a device and services company just the way Ballmer intended it.

Secondly, we should remember that the whole purpose of the "One Microsoft" vision is to bring about tight product integration with services that consumers want. Get rid of the Xbox and you essentially lose a very critical piece of the pie. If Microsoft wants to be and stay serious about hardware and services, it would be taking many steps back if it were to sell its business that builds its most successful piece of hardware. As Microsoft builds its unified vision, the ecosystem of hardware will become a very important asset.  Microsoft isn't going to control the living room with PCs running Windows XP Media Center Edition.

As for this one, only time will tell, and the choice is ultimately in the hands of the CEO-elect and shareholders. We doubt and would personally hate to see the two split, but we will go ahead and download "Friends Never Say Goodbye" to our Zunes on the off chance a breakup goes down 12 months from now.

Source: Bloomberg

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