MS Investors want MS to sell Xbox division because It hasn't made money yet

Perhaps the gaming market cannot support 3 major competitors...I think i remember Pachter saying something similar in one of his videos

http://www.eteknix.com/microsoft-investor-wants-to-fire-ballmer-and-sell-xbox-division/

 

ouch!! after a decade Xbox still hasnt' made any profit

-Damien-

Looks like it's only 1 company really complaining and Microsoft's Xbox division has been making profits over the last 5 years. I doubt M$ will be making any changes. M$ needs to work more on their software, as that's where they've always been strong in terms of profits. They are doing tablets, phones and MPEG players like Zune and are losing money in those areas. They want to be like Apple with hardware sales, but they keep overprices these products which keeps consumers away. Their tablets were original more expensive then the IPads.

Okay, saw you guys talking about this yesterday - there are certain topics many people here are woefully unequipped to effectively discuss. ValueAct owns 1% of MS's stock, but what you need to understand is that that is a very, very high number in relation to this. Just to put it in perspective, both Balmer and Bill Gates own slightly more than 4% of MS' stock right now.

We've seen stories like these pop up over the years, and this is a sentiment that has been shared among its investors for a few years now. The two biggest notions that have been explored by the dissenters amongst the board is that:

A) Microsoft needs to refocus its efforts in software/OS development and enterprise services.
B) Microsoft needs to get out of Hardware Devices.

Microsoft, as a company, has financially failed in all of its hardware outings so far, Xbox included. MS has made profit, as of right now, on Xbox in the last 5 (going on 6) fiscal years, but the return is a drop in the bucket compared to what the losses were prior and how much MS has continued to invest. To put it in perspective, Xbox division Lifetime To Date is a little over 6 billion dollars negative! The early days of Xbox coupled with the fiscal years of '05, '06, & '07 of the 360 caused them to lose a tremendous amount of money that the division has yet to recover. If you consider this along with their other hardware attempts (the Kin (no, not the kinect, Kin was a mobile device), Surface, Zune, Windows Phone), and its understandable that investors want to have the company focus on the things that have been making it money, which is software/OS and enterprise services.

Timeliness of this report coming out and Ballmer's announcement that he is retiring is no mere coincidence, it's the kind of stuff that occurs regularly during big corporate shake ups. Recently, Ballmer took over the direct handling of Xbox after Mattrick left. He restructured the company in the hopes of having them  be better equipped to shift into a "hardware & services" role to better challenge Google, Amazon, and Apple. The biggest threat to the Xbox division in how the board of executives will feel in this proposition is in the investment of funds MS has put into the Xbox One.

Microsoft has probably invested somewhere between 2.5 & 3 billion dollars into the Xbox One; 1 Billion in games, 1 Billion in marketting, and .5 to 1 Billion in the hardware itself. If you add that to the money Xbox has already lost Microsoft, and if Xbox as a division is not well on its way to returning to profitability within 18 months after the One's launch, there is a pretty big chance that MS will spin off Xbox into its own seperate company with a large stake in it rather than keeping them afloat on their own dime.

ValueAct has been saying this for years and nobody cares because they only own 1% of Microsoft's stock.Zero5000X

Do you know what ValueAct is?  They only own 1% of the company, but they represent a much larger share.  Their MO is to buy a small amount of stock in a stagnant company like Microsoft and then to pump up its value by contacting other investors and cause changes in the company together.    ValueAct headed the investor group that advocated Balmer's firing, so they've proven to have gained support within MS.  If ValueAct wants MS to sell Xbox, then there's a good chance of it happening.

In reality, the xbox division has been a failure.  MS didn't invest in xbox just to sell hardware and software.  They bought into a strategy to own the consumers' living rooms, giving them an avenue to push their software and to sell advertising.   That space they are after is about to be fillled by Smart TVs and increased use of hooking up computers to TVs.  

Sony went through a similar push to sell off Playstation, which failed.  That one makes sense though.  Their console division utilizes a lot of other company components.  Bluray was a good example of Playstation and Sony supporting each other.  There is very little direct connection like that between Xbox and MS.

Shareholder wars.

The numbers don't lie. Overall the Gaming Division at Microsoft has been sucking the company dry. Note the bar on the far right:

arredondo

You know those numbers also include other devices such as Zune and Surface right??

Xbox, Zune and Surface are all part of the Entertainement Devices division. Zune and surface have definitely dragged the ED division down while Xbox has been profitable for a couple of years now. Another thing you need to realize is that M.S. understood when they launched the original Xbox that it was going to take a huge initial investment for M.S. to get well established in the console market. M.S. was ready to lose 3-5 billion dollars in order to re-coup those costs way down the line once the Xbox brand was established with consumers. Now that MS is established it would be beyond stupid for them to just bail out. What M.S. needs to do is get rid of Zune and Surface.

The Surface flopped big, xbox one is next.

Then Nintendo and Sony will follow.

At the end, this will be the last console gen. PC will be king, all devs will code for PC, everyone will play on PC, superior platform :cool:

[QUOTE="arredondo"]

The numbers don't lie. Overall the Gaming Division at Microsoft has been sucking the company dry. Note the bar on the far right:

 

 

 

 

EG101

You know those numbers also include other devices such as Zune and Surface right??

Xbox, Zune and Surface are all part of the Entertainement Devices division. Zune and surface have definitely dragged the ED division down while Xbox has been profitable for a couple of years now. Another thing you need to realize is that M.S. understood when they launched the original Xbox that it was going to take a huge initial investment for M.S. to get well established in the console market. M.S. was ready to lose 3-5 billion dollars in order to re-coup those costs way down the line once the Xbox brand was established with consumers. Now that MS is established it would be beyond stupid for them to just bail out. What M.S. needs to do is get rid of Zune and Surface.

Zune is part of Microsoft's game division?

[QUOTE="EG101"]

[QUOTE="arredondo"]

The numbers don't lie. Overall the Gaming Division at Microsoft has been sucking the company dry. Note the bar on the far right:

 

 

 

 

Kinthalis

You know those numbers also include other devices such as Zune and Surface right??

Xbox, Zune and Surface are all part of the Entertainement Devices division. Zune and surface have definitely dragged the ED division down while Xbox has been profitable for a couple of years now. Another thing you need to realize is that M.S. understood when they launched the original Xbox that it was going to take a huge initial investment for M.S. to get well established in the console market. M.S. was ready to lose 3-5 billion dollars in order to re-coup those costs way down the line once the Xbox brand was established with consumers. Now that MS is established it would be beyond stupid for them to just bail out. What M.S. needs to do is get rid of Zune and Surface.

Zune is part of Microsoft's game division?

Xbox is cool, but by our estimates Microsoft has not made money at this believes Rick Sherlund. HE believes they havent made money. Who knows what his definition of "made money" is, but Xbox has been profitable since 2007 with the launch of Halo 3, and that INCLUDES all monies lost from Xbox and RROD. http://arstechnica.com/gaming/2007/10/strong-halo-3-launch-helps-microsoft-to-first-ever-profit-on-gaming/navyguy21

Oh please profitable my ass they spend more than 1 billion in RROD on july 2007 + the normal loses of the console,they loss 1.9 billions.

http://www.joystiq.com/2007/07/20/xbox-division-has-1-9-billion-loss-blame-red-rings/

The first profist came on 2008 if you can call them profits,MS loss 3.1 billion total from 2005 to 2007.

[QUOTE="navyguy21"]Xbox is cool, but by our estimates Microsoft has not made money at this believes Rick Sherlund. HE believes they havent made money. Who knows what his definition of "made money" is, but Xbox has been profitable since 2007 with the launch of Halo 3, and that INCLUDES all monies lost from Xbox and RROD. http://arstechnica.com/gaming/2007/10/strong-halo-3-launch-helps-microsoft-to-first-ever-profit-on-gaming/tormentos

Oh please profitable my ass they spend more than 1 billion in RROD on july 2007 + the normal loses of the console,they loss 1.9 billions.

http://www.joystiq.com/2007/07/20/xbox-division-has-1-9-billion-loss-blame-red-rings/

The first profist came on 2008 if you can call them profits,MS loss 3.1 billion total from 2005 to 2007.

Entertainment & Devices turned an operating profit of $167MM in the period Jul thru Sep '07

And $357MM in the period Oct thru Dec '07

Full FY results for Jul 07 thru Jun '08 were $426MM

[QUOTE="blackace"]

[QUOTE="-Damien-"]

http://www.eteknix.com/microsoft-investor-wants-to-fire-ballmer-and-sell-xbox-division/

ouch!! after a decade Xbox still hasnt' made any profit

arredondo

Seems there is only ONE investor screaming abot this (ValueAct). They only own 1% stake in M$. I don't see this as a big deal. A similar thing like this happened with Sony as well. One of their investors wanted Sony to split their divisions. What did Sony do. They said NO!! That's pretty much what Microsoft will say to this investor. Stuff like this happens all the time. Not a big deal.

They invested $2 Billion into Microsoft and get to see all the real numbers about the poor financial health of the XBox division. You know better than they do?

You can invest about $35 and buy one share of MS and have access to the same information. Actually you can just look it up on the MS website if you want, but with a share you could attend the annual general meeting, vote, raise a ruckus, whatever floats your boat.

It is a fairly common mistake to believe that some shareholders have more information than others or know anything that isn't public information. That woud be insider trading and is illegal. The size of these companies, their army of lawyers, etc makes that highly unlikely.

Also, ValueAct or Third Point (in Sony's case) are horrible investors from a management view. The moment these folks enter and start talking 'shareholder value' is the moment you realize that the snakes are loose. They are all about short term and whatever drives up the share price. Then they bail out, collect their profit, and move on to the next victim. Whether the moves are wise in the long term doesn't really matter to them.

Did the RROD's do that?

Maybe this is why the Xbox One looks like a giant VCR? 

They wont for the same reason they keep the Radioshack in my town open despite it being "in the red" for years, public perception of a brand.

[QUOTE="navyguy21"]Xbox is cool, but by our estimates Microsoft has not made money at this believes Rick Sherlund. HE believes they havent made money. Who knows what his definition of "made money" is, but Xbox has been profitable since 2007 with the launch of Halo 3, and that INCLUDES all monies lost from Xbox and RROD. http://arstechnica.com/gaming/2007/10/strong-halo-3-launch-helps-microsoft-to-first-ever-profit-on-gaming/tormentos

Oh please profitable my ass they spend more than 1 billion in RROD on july 2007 + the normal loses of the console,they loss 1.9 billions.

http://www.joystiq.com/2007/07/20/xbox-division-has-1-9-billion-loss-blame-red-rings/

The first profist came on 2008 if you can call them profits,MS loss 3.1 billion total from 2005 to 2007.

[QUOTE="R3FURBISHED"]

The Xbox has been the best selling console for the past ~30 months in the largest market in the world - it is very easy to spin numbers however you want.

tormentos

And yet they have sell half of what the Ps2 sold in those same 8 years and a huge part of the number is RROD units.

The xbox has make money,sadly the money they make had not make up for all they loss since 2001,so they have 12 years on ther market that the loss still out do the profits,why else do you think the xbox one is a weak console that cost $500 an why do you think MS was pushing so hard for no used games as we know them and only need it,they wanted to kill pirates which were many on 360,maximaize profits by requiring live for eveything again,and by controlling the used sales market.

Prove it.

Prove to me that 360 sales include RROD sales. Give me some links, not your "Oh, I am an expert" crap. Because, if MS included RROD sales, then the 360 has the highest game attachment rate in the history of consoles.

So, again... Prove it.

http://www.eteknix.com/microsoft-investor-wants-to-fire-ballmer-and-sell-xbox-division/

 

ouch!! after a decade Xbox still hasnt' made any profit

-Damien-

There are a lot of people that think the console market is not worth it anymore, too much expenses for little to no gain. Both Sony and MS this gen didn't really kill it with profits, especially compared to the other divisions. Taking in consideration phones, tablets and laptops becoming more and more mainstream and powerful plus they see the new console of Nintendo performing horribly as a bad sign. Sure the pre orders for PS4 right now are pretty good but those that usually pre order are the most avid fanboys and hardcore gamers. After 5 or so million consoles are sold will it keep selling like that, will the casual market support them?

That is to be expected, there is some doubt. However is too late now for MS to even consider it. They already spend the money on R&D and preparing the new console. Would be foolish to give it to someone else without giving a try tnext gen too and see how it goes. 

Plus the living room market is still an untapped gold mine although have fun owning that market with a $500 box.

edidili

The Xbox has been the best selling console for the past ~30 months in the largest market in the world - it is very easy to spin numbers however you want.

R3FURBISHED

best selling =/= profitable

[QUOTE="-Damien-"]

http://www.eteknix.com/microsoft-investor-wants-to-fire-ballmer-and-sell-xbox-division/

ouch!! after a decade Xbox still hasnt' made any profit

delta3074

[QUOTE="Alpha_S_"]

[QUOTE="arredondo"]

The numbers don't lie. Overall the Gaming Division at Microsoft has been sucking the company dry. Note the bar on the far right:

 

 

 

 

Netherscourge

Also note that while the total is negative, the last few years have been profitable - MS knew that the with the original Xbox they were investing in something that was going to grow long term and it's taken untill recently with the 360 for it to show a return on that investment.  Now it's up to the X1 to continue the trend and justify the xbox - though they don't appear to be off to a great start. 

Based on those numbers, it will take 3 or 4 more years for them to just break even.

 they'll probably lose even more money with the disater that is XBONE so they wont ever break even. just go even more negetive.

[QUOTE="Netherscourge"]

[QUOTE="Alpha_S_"]

Also note that while the total is negative, the last few years have been profitable - MS knew that the with the original Xbox they were investing in something that was going to grow long term and it's taken untill recently with the 360 for it to show a return on that investment.  Now it's up to the X1 to continue the trend and justify the xbox - though they don't appear to be off to a great start. 

SonySoldier-_-

Based on those numbers, it will take 3 or 4 more years for them to just break even.

 they'll probably lose even more money with the disater that is XBONE so they wont ever break even. just go even more negetive.

[QUOTE="SonySoldier-_-"]

[QUOTE="Netherscourge"]

 

Based on those numbers, it will take 3 or 4 more years for them to just break even.

delta3074

 they'll probably lose even more money with the disater that is XBONE so they wont ever break even. just go even more negetive.

[QUOTE="tormentos"]

[QUOTE="R3FURBISHED"]

The Xbox has been the best selling console for the past ~30 months in the largest market in the world - it is very easy to spin numbers however you want.

StormyJoe

And yet they have sell half of what the Ps2 sold in those same 8 years and a huge part of the number is RROD units.

The xbox has make money,sadly the money they make had not make up for all they loss since 2001,so they have 12 years on ther market that the loss still out do the profits,why else do you think the xbox one is a weak console that cost $500 an why do you think MS was pushing so hard for no used games as we know them and only need it,they wanted to kill pirates which were many on 360,maximaize profits by requiring live for eveything again,and by controlling the used sales market.

Prove it.

Prove to me that 360 sales include RROD sales. Give me some links, not your "Oh, I am an expert" crap. Because, if MS included RROD sales, then the 360 has the highest game attachment rate in the history of consoles.

So, again... Prove it.

Meanwhile at Nintendo:

[QUOTE="delta3074"][QUOTE="SonySoldier-_-"]

 they'll probably lose even more money with the disater that is XBONE so they wont ever break even. just go even more negetive.

DerekLoffin

[QUOTE="delta3074"][QUOTE="DerekLoffin"] Your link is about profit within a quarter, they are referring to profit over the entire Xbox+360 and now One's lifespan. MS got themselves into quite a hole with the original and the early 360, so they are still a ways off from profitability for that division, and that is assuming One hold's current profit, which it probably won't.Shensolidus

[QUOTE="Shensolidus"][QUOTE="delta3074"]It's still making Profit, thats the point, only a stuipid investor would sell a division that is actually recouping it's losses.delta3074

But there is no guarantee that it the Hardware Devices or EDD division will EVER become profitable as an entity. Since the division started with the original Xbox, if you add in the other devices and their losses (so far), the situation is ALMOST nearing a 10 billion dollar loss for MS as a whole, 6 billion of which are still unresolved for Xbox (this includes the Kin, Zune, Surface, & WIndows Phone).

ValueAct as an entity has been persuing this for a few years and they have now gotten enough influence to be put on the board, and all they have wanted was to oust Ballmer and cut the non-software & non-Enterprise divisions of MS. The company's stock has only gone down since Ballmer has instituted his 10 year plan to shift to a Devices & Services company. The day before Ballmer took the CEO chair in 1999, MS had almost 700 (or more) Billion dollars in pure capital. The day he announced his retirement, they are around 250 Billion. They are going to look to make some drastic moves and soon. For more info look here: http://allthingsd.com/20130825/ballmer-departure-from-microsoft-was-more-sudden-than-portrayed-by-the-company/

[QUOTE="delta3074"][QUOTE="Shensolidus"] Its making a small profit now, and they have yet to post their R&D and deployment costs for the X1, which is estimated to be around 3 Billion. It's not as pretty as you think it is, but that doesn't mean Xbox will cease to exist either. It just means MS will most likely spin them into their own company with a majority stake in them. Of course, they'll give them a full Fiscal Year to hit profitability. Hopefully the 360 will be able to recoup that cost next year... :\Shensolidus

But there is no guarantee that it the Hardware Devices or EDD division will EVER become profitable as an entity. Since the division started with the original Xbox, if you add in the other devices and their losses (so far), the situation is ALMOST nearing a 10 billion dollar loss for MS as a whole, 6 billion of which are still unresolved for Xbox (this includes the Kin, Zune, Surface, & WIndows Phone).

ValueAct as an entity has been persuing this for a few years and they have now gotten enough influence to be put on the board, and all they have wanted was to oust Ballmer and cut the non-software & non-Enterprise divisions of MS. The company's stock has only gone down since Ballmer has instituted his 10 year plan to shift to a Devices & Services company. The day before Ballmer took the CEO chair in 1999, MS had almost 700 (or more) Billion dollars in pure capital. The day he announced his retirement, they are around 250 Billion. They are going to look to make some drastic moves and soon. For more info look here: http://allthingsd.com/20130825/ballmer-departure-from-microsoft-was-more-sudden-than-portrayed-by-the-company/

[QUOTE="Shensolidus"]

[QUOTE="delta3074"]Thats the point,sell it when it stops recouping it 's losses, get as much money back as you can, Profit increases the sale value of the division, when it looks like it's going into Back into Negative profit you dump it for a lump sum.delta3074

But there is no guarantee that it the Hardware Devices or EDD division will EVER become profitable as an entity. Since the division started with the original Xbox, if you add in the other devices and their losses (so far), the situation is ALMOST nearing a 10 billion dollar loss for MS as a whole, 6 billion of which are still unresolved for Xbox (this includes the Kin, Zune, Surface, & WIndows Phone).

ValueAct as an entity has been persuing this for a few years and they have now gotten enough influence to be put on the board, and all they have wanted was to oust Ballmer and cut the non-software & non-Enterprise divisions of MS. The company's stock has only gone down since Ballmer has instituted his 10 year plan to shift to a Devices & Services company. The day before Ballmer took the CEO chair in 1999, MS had almost 700 (or more) Billion dollars in pure capital. The day he announced his retirement, they are around 250 Billion. They are going to look to make some drastic moves and soon. For more info look here: http://allthingsd.com/20130825/ballmer-departure-from-microsoft-was-more-sudden-than-portrayed-by-the-company/