10 Reasons Satya Nadella Can't Sell the Microsoft Xbox Division

By Don Reisinger  |  Posted 2014-03-10 Print this article Print

Microsoft's new CEO Satya Nadella has kept his plans for the software giant close to the vest. After being appointed chief executive, Nadella wrote an email to employees, telling them that the company must be quicker on its feet and able to provide better services across the cloud and its software product line. Absent in all of his comments surrounding Microsoft, however, has been the Xbox division. At the turn of the 21st century, Microsoft jumped into the gaming space, thinking that it could take on Sony and Nintendo and fill a void left by Sega. Although the original Xbox took some time getting off the ground, the Xbox 360 became a favorite entertainment device for millions around the world. Microsoft's Xbox Live has become the envy of all other online-gaming services. Yet, speculation abounds that Nadella will try to trim the fat at Microsoft and sell off the Xbox division to another company. Xbox doesn't fit into Nadella's vision for Microsoft, reports say, and he's willing to drop the division for the right price. But Nadella should consider such a move carefully. While gaming might not fit into Microsoft's core enterprise software and services business, the Xbox division is too big and too important for Microsoft to sell off even as it tries to move deeper into the mobile hardware market. Read on to find out why.

  • 10 Reasons Satya Nadella Can't Sell the Microsoft Xbox Division

    by Don Reisinger
    10 Reasons Satya Nadella Can't Sell the Microsoft Xbox Division
  • It's Too Valuable to Sell

    It's hard to put an exact figure on the value of the Xbox brand, but considering it generates billions of dollars a year for Microsoft, it's safe to say that any company that would want to acquire the division would need to shell out a significant sum of money. For Microsoft, such a sale might be profitable, but it would be awfully hard for the company to actually find suitable buyers, given how much the division would fetch on the open market.
    It's Too Valuable to Sell
  • It's the Link to the Living Room

    The living room is becoming a hot battleground for major companies. Google has moved there with Chromecast, Apple has its Apple TV and several other companies, like Roku, are offering hardware to bring entertainment to televisions. Microsoft is already there with the Xbox 360 and Xbox One, and its platform is arguably the best in the business. Why give that up?
    It's the Link to the Living Room
  • Game Industry Sales Will Jump

    According to research firm NPD, which tracks most closely the game industry, sales across the space will jump considerably in the coming years as consumers invest in new consoles, like the Xbox One, and software sales again pick up. Now is not the time to be ditching the industry—especially when, in Microsoft's case, it's offering one of the most popular consoles right now.
    Game Industry Sales Will Jump
  • Who Wants a Loss-Leading Console?

    One of the issues for Microsoft is how it's going to sell its console to another company. Granted, sales are strong, but it's believed that Microsoft is losing money on every unit it sells. So, while the console's revenue might be strong, it's hard to believe that too many companies would want to acquire a device that has a sagging bottom line. Eventually, that will change. But for now, Xbox One development costs are too high to justify acquiring the company.
    Who Wants a Loss-Leading Console?
  • Nadella Does Care About Hardware

    Although Satya Nadella didn't specifically cite the Xbox One as an important component in his company's plans going forward, he did say that hardware will be a key focus of his. Since the Xbox is arguably Microsoft's most successful hardware product to date, why would Nadella sell off the division? It doesn't add up.
    Nadella Does Care About Hardware
  • What About Recent Franchise Buys?

    Microsoft recently acquired the rights to the "Gears of War" game franchise. The company also owns "Halo" and has been trying hard to build out its first-party offerings. It doesn't make much sense to pay so much for a popular franchise like "Gears of War" if the next move would be to sell the entire division. Microsoft, at least from the outside, seems poised to continue building out its game library.
    What About Recent Franchise Buys?
  • Microsoft Would Abandon Its Consumer Push

    Microsoft seems increasingly concerned that the consumer market is leaving it behind. Customers are buying up Apple and Samsung devices and leaving Microsoft's products on store shelves. So, Microsoft has responded by saying that it wants to attract more consumers to its products. What better way to do that than to offer a product, in the Xbox, that is designed specifically for consumers and integrates fully with the company's other services, including OneDrive? It seems like the Xbox is the perfect way to keep customers coming back to its many services.
    Microsoft Would Abandon Its Consumer Push
  • The Competitive Market Seems Optimistic

    Competition is always an issue in the games industry, but things are actually looking up for Microsoft. While Sony's PlayStation 4 is the top-selling hardware on the market, Nintendo's Wii U is all but dead, leaving Microsoft with only one main competitor. Better yet, Sony's strength is in Asia, where Microsoft has spent little time promoting its brand. In the Western world, Xbox might be poised for outright success over the long term.
    The Competitive Market Seems Optimistic
  • Xbox Live Is a Major Asset

    It's hard to overstate just how important Xbox Live is to Microsoft. The service is in one sense an online-gaming platform, but in another, a gateway to the company's many other services. Microsoft's Xbox Live provides access to digital content—the great frontier in home entertainment—and integrates with the company's services on the PC and in the cloud. Xbox Live is too important to be let go.
    Xbox Live Is a Major Asset
  • Only Competitors Could Afford Xbox

    Here is perhaps the biggest roadblock standing in Microsoft's way: The only companies that might be able to dole out the billions to it would take to acquire the Xbox division are Microsoft's competitors—Google, Sony and Apple. Sure, a surprise company might come along and try to buy Xbox, but that seems unlikely. It's hard to see Microsoft wanting to sell its Xbox division to Google, Apple or Sony.
    Only Competitors Could Afford Xbox
Don Reisinger is a freelance technology columnist. He started writing about technology for Ziff-Davis' Gearlog.com. Since then, he has written extremely popular columns for CNET.com, Computerworld, InformationWeek, and others. He has appeared numerous times on national television to share his expertise with viewers. You can follow his every move at http://twitter.com/donreisinger.

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