Microsoft Would Rather Leave the Game Industry Than Sell Its Xbox Division

Sources have told AllThingsD that Microsoft chief executive officer, Steve Ballmer, is planning a major restructuring of the company. The idea is to rebuild the company around devices and services in consumer and enterprise markets was a focus mentioned by Ballmer in his letter to investors on October 2012. This could lead to a bigger role for Don Mattrick, President of the Interactive Entertainment Business at Microsoft. With this development, news industry analysts were quick to share their thoughts on the matter. 

Independent analyst Billy Pidgeon, told Games Industry International.

“I don’t think this scenario is likely at all. I can’t see the upside of a deal like that for Microsoft or for a potential buyer at any time, but particularly before the Xbox One launch such a move would be beyond stupid.”

Wedbush Securities’ Michael Pachter doesn’t believe it’s as crazy to sell off the Xbox branch, but he doesn’t see an advantage to spinning off the Xbox either, especially before the Xbox One Launch.

“I don’t think there are many synergies with the core enterprise software business at Microsoft, so I see little benefit in their being combined and little detriment if they were to split up. There is synergy with Skype, so as long as those were packaged together, I think Xbox would be fine as a standalone company.” 

Asif A. Khan, CFO of Virtue LLC.

“I think the Xbox division would probably get a better valuation by itself than it is in the current conglomerate form of Microsoft as Xbox is outgrowing the sluggish Office and Windows divisions. That being said, I think it is very unlikely that Microsoft would spin it off. The idea that another company like Samsung would acquire that spun off Xbox division is even less likely. Xbox is the only thing that has investors excited about Microsoft, so it makes little sense to divest of the division.”

Microsoft seems to be in a difficult spot with its Xbox brand between how people see the company and financial reality.

Sony recently went through a similar idea back in May when Daniel Loeb, CEO of Third Point LLC and owner of six percent of Sony, proposed splitting its profitable entertainment branch in order to bring it to the public. Stocks for Sony went up after the Xbox One reveal while Microsoft’s went down.

On one hand, the Xbox is what interests the investors and is keeping people interested. But the bottom line financially is that Microsoft could do without the Xbox branch. Given its only been a week since the Xbox One reveal I find it highly unlikely that the restructuring will involve selling the Xbox branch. At least not immediately. Perhaps, a restructuring is what they need.  What are your thoughts on the matter?