Microsoft May Lose Xbox On Ballmer Exit [REPORT]

Microsoft Corporation (NASDAQ:MSFT) is nebulous and indistinct from a corporate structure point of view. Despite a recent reorganization, the company is involved in many businesses that don’t really seem to fit in at Redmond. After recent losses related to its Surface tablet, the company’s hardware sector has come under fire. It may see the company lose one of its first hardware offerings, the Xbox.

Microsoft May Lose Xbox On Ballmer Exit [REPORT]

The Xbox is part of Microsoft’s profitable entertainment division but apart from the company’s tablets, it’s the only hardware offering around. Because it is hardware in a competitive business, the division has low margins compared with the rest of the company’s business, and it doesn’t quite fit in. Spinning off the division could unlock value for the company’s shareholders.

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Microsoft Xbox spin off

Microsoft Corporation (NASDAQ:MSFT) could spin off the entertainment division in order to unlock value for shareholders, and it might be a good decision. Many analysts do not believe that the Xbox division does not fit in with the company’s core business, which is selling software and services to enterprise customers.

If Xbox was to be spun off, however, it would mean that Microsoft Corporation (NASDAQ:MSFT) is really giving up its ambitions to be Apple Inc. (NASDAQ:AAPL). The Xbox division is one of the company’s most successful, purely consumer efforts of all time. Cessation of business in that sector would mean giving up the heart of the company’s ecosystem, a concept so thankfully borrowed from Apple Inc. (NASDAQ:AAPL).

Xbox may fail on its own

If the Xbox division were to be spun off, it might be good for Microsoft, but the resulting company would face some big problems. There is only one big independent gaming hardware company: Nintendo. Nintendo is not a particularly strong performer, and manages to keep its business by operating differently to the Microsoft Corporation (NASDAQ:MSFT)’s Xbox.

Nintendo rarely releases expensive games consoles with the latest and greatest hardware, nor do they wrangle with publishers on exclusivity for major titles. The big expenses involved in running a game hardware company, particularly as a new console is being launched, means that cash reserves are needed.

An independent Xbox will not have Microsoft Corporation (NASDAQ:MSFT) subsidies through the bad times, and that will make it weaker than its major competitor Sony. Investors in the spin-off will be aware of this weakness. An independent Xbox may not be worth as much as some think.