I'm with the investors, MS should spin this company off or sell it. As an investor they look look at forecasts, market segment, etc and obviously, the MS Games Division is nowhere near breaking even. I applauf Nintendo on that end on knowing how to make alot of revenue in the haming industry without constantly beefing up specs. Those first party titles are a goldmine.
-
Hey, guest user. Hope you're enjoying NeoGAF! Have you considered registering for an account? Come join us and add your take to the daily discourse.
Microsoft Investor Wants To Fire Ballmer And Sell Xbox Division
- Thread starter Syphon Filter
- Start date
Imperfected
Member
I would hope someone at Micosoft cares to do a full accounting of their expenses, as running entirely off the logic of investors only keeps your company afloat for as long as it takes them to realize a way to make a personal profit while sinking the corporation.
I don't doubt that when the X-Box Division presents their profit projections for the One they're careful to sweep the R&D costs under the rug by any means possible, but I'm equally certain that the shareholder group trying to axe them has an equally-meticulous number cruncher pouring through their ledgers, eager to point out every unbalanced expense as a reprise of the OG X-Box and 360's shortfalls.
They are keenly aware of how much they've spent on this, and no doubt have a number in mind for exactly how many consoles they have to move to make it worthwhile. How much of that information they obfuscate from other departments is another matter entirely, of course, though they have to provide some estimation to prevent the dissenting voice from being the only one heard.
Iacobellis
Junior Member
I guess I disagree. IMO being the most popular in the USA is pretty much the biggest it gets. I mean ya, being huge in Europe is grand and all, but then why do they want to make it big in the USA market? ( i'm not talking consoles here.. i'm talking music, movies all of it.)
Also for me, interesting you say it was Sony that made the Xbox the blockbuster it was. It couldn't be because of the great online play and games it had/has. I don't know. Maybe you're saying MS and the Xbox has a chance again to take the lead then since Sony made early mistakes (and that was while the console was out) and MS has made mistakes (before the console has even launched)
So maybe like in dumb and dumber.. You're saying there's a chance.
No one in their right mind would think the Xbox One could survive with the way it is heading.
Dude you can't be serious. No big investor is as incredibly shortsighted as you expect them to be.
Whether or not that's true, I could see a lot of investors being very skeptical of the potential success of the Xbox One at this point...
miDnIghtEr20C
Banned
a chart from 2011?
miDnIghtEr20C
Banned
Are you being serious? With the way they're heading? Wha? Xbox One is going to do just fine.
Do you think it's going to sell less than the Wii U?
edit.. sorry for the back to back post.
I have a really hard time understanding some of you that agree Apple, Google, and Amazon are significant threats and then suggest Microsoft should consider getting rid of their most popular consumer brand.
Apple, Google, and Amazon each have their hands in consumer and business markets, and each is making strides in growth in both markets.
Microsoft needs to stay the course with their portfolio, but embrace and stay on top of emerging trends, as well as work on consumer perception. Not easy things to do, but they have to if they want to survive.
Apple, Google, and Amazon each have their hands in consumer and business markets, and each is making strides in growth in both markets.
Microsoft needs to stay the course with their portfolio, but embrace and stay on top of emerging trends, as well as work on consumer perception. Not easy things to do, but they have to if they want to survive.
HigherLevel
Member
Bill Gates is the richest man in the world. I mean if he wants MS to do something who can really stop him?
Imperfected
Member
As a purely hypothetical exercise, if I were a short-sighted investor increasingly nervous about the X-Box One's profits - and perhaps one who never warmed up to the idea of investing so much into console gaming to begin with - I think I'd be looking to shop around for a buyer sometime very soon after the holidays.
No matter how dismal the situation gets, the X-Box One should be able to sell out launch allocations with relative ease. That's a strong position coming to the bargaining table: you can point at the fact it sold out, point at the upward trend from the OG onward to 360, and make some vague speculation about how it's going to move eighty million in seven years. The buyers may be skeptical of the claim, but it at least remains plausible. "Our sales numbers are as good as they could literally be right now," is a pretty strong stance.
There's a time limit associated with it, though. As soon as a week goes by without the X-Box One stock being bought up, there's hard numbers in play for what kind of week-to-week sales the buyer could expect to see moving forward. You can still make a strong case for sales increasing with expansion of the software library, but if you have a Wii U-like fall-off in sales there's not much you can do to keep that from completely tanking your asking price.
That's if I was nervous that the sales projections will never again look as good as they will at the end of the launch window, though. I suppose if Microsoft's at all confident in the product moving forward - maybe because of Titanfall or other upcoming releases - they could hold out and try to find a buyer off the back of the uptick from those.
This is purely hypothetical, though. I don't think they'd be able to find a buyer who wouldn't be concerned that the sale of the division at such a pivotal time wouldn't be hugely damaging to consumer confidence in the brand. Between that and the extreme cost of purchasing the division right now - the buyer would have to absorb their existing expenses in the creation of the console more or less entirely - a sale is extremely unlikely until mid-generation, when the One's brand is established (for better or worse) and the total cost of the purchase would be far, far less.
No matter how dismal the situation gets, the X-Box One should be able to sell out launch allocations with relative ease. That's a strong position coming to the bargaining table: you can point at the fact it sold out, point at the upward trend from the OG onward to 360, and make some vague speculation about how it's going to move eighty million in seven years. The buyers may be skeptical of the claim, but it at least remains plausible. "Our sales numbers are as good as they could literally be right now," is a pretty strong stance.
There's a time limit associated with it, though. As soon as a week goes by without the X-Box One stock being bought up, there's hard numbers in play for what kind of week-to-week sales the buyer could expect to see moving forward. You can still make a strong case for sales increasing with expansion of the software library, but if you have a Wii U-like fall-off in sales there's not much you can do to keep that from completely tanking your asking price.
That's if I was nervous that the sales projections will never again look as good as they will at the end of the launch window, though. I suppose if Microsoft's at all confident in the product moving forward - maybe because of Titanfall or other upcoming releases - they could hold out and try to find a buyer off the back of the uptick from those.
This is purely hypothetical, though. I don't think they'd be able to find a buyer who wouldn't be concerned that the sale of the division at such a pivotal time wouldn't be hugely damaging to consumer confidence in the brand. Between that and the extreme cost of purchasing the division right now - the buyer would have to absorb their existing expenses in the creation of the console more or less entirely - a sale is extremely unlikely until mid-generation, when the One's brand is established (for better or worse) and the total cost of the purchase would be far, far less.
KoopaTheCasual
Junior Member
Are you honestly inferring that the Xbox division made $4.1 BILLION back in 2 years?
It'll do just fine. Once both systems start coming down in price they'll both do great on sales. All the power difference talk only matters to forum goers. If power was an issue, the PS3 would have cornered the US a long time ago and yet, in the US at least, the 360 continues to sell better. The Xbox One is still a much easier sell than the Surface line or Windows Phone for Microsoft because it's an established brand. Sales will be better than the 360 initially but I doubt we have another sales generation like the current one for both systems.
Iacobellis
Junior Member
It will struggle with that price tag. The general public, especially in America, want their Madden, Call of Duty, etc.. If they can do that for $100 less on the PS4 and get nearly the same (or even better) experience, then they will do just that.
Kageshinzo
Member
It's funny how many here are questioning the knowledge the investors and stockholders who routinely make and break millions daily have with regards to Xbox's future.
If they think Microsoft's entertainment and online services division (of which the Xbox brand is a part of, if I am not mistaken) is not making enough profit for the company's overall health as a whole, who are you to question their decision? They probably have enough number crunchers in their payroll that provide them enough data to make such decisions. Can the Xbox division be profitable? Sure. Will it make enough profit compared to if resources to it are diverted to more profitable divisions/products? That's the question some people here are not grasping.
These people probably make millions even before getting their breakfast. Meanwhile, majority of us here are aching to decide which title to get because we just don't have enough money in our wallet to get all the games we want in any given month and still have some left over for necessities.
If they think Microsoft's entertainment and online services division (of which the Xbox brand is a part of, if I am not mistaken) is not making enough profit for the company's overall health as a whole, who are you to question their decision? They probably have enough number crunchers in their payroll that provide them enough data to make such decisions. Can the Xbox division be profitable? Sure. Will it make enough profit compared to if resources to it are diverted to more profitable divisions/products? That's the question some people here are not grasping.
These people probably make millions even before getting their breakfast. Meanwhile, majority of us here are aching to decide which title to get because we just don't have enough money in our wallet to get all the games we want in any given month and still have some left over for necessities.
miDnIghtEr20C
Banned
Uhhhh.. not at all. But I am inferring that there could be money being made in the 2 years after that chart winning 2 years of sales in the USA in a row after that 2011 chart.
Kitschkraft
Member
Can anyone point me to some good Bill Gates war stories? I definitely would like to know more about this. Saw Pirates of Silicone Valley when I was young but that was it.
ThoughtsOfSpeaking
Banned
Are you reading the figures correctly? Do you honestly think the money made in the last two years is significant when the Gaming industy has been down overall YOY for that entire time?
I really think you have no grasp of the enormity of what you are looking at.
smarmyjerkface
Banned
Edit: double post
By struggle do you mean still outsell the Wii U easily over the holidays? I fully expect 3.5 to 4 million units sold by the end of March and the PS4 from 4.5 to 5.5 million in the same time if they can get marketing nailed. Microsoft will come out strong starting in a few weeks with the marketing train hitting full stride. If Sony can market smartly, they will easily do the numbers I said.
Had these consoles launched 2-3 years ago, in the down economy, they both would have struggled. The US is back up and spending several hundred dollars on the newest piece of technology is something more people than you think would be willing to do. I fully expect both consoles to be well received.
watch the simpsons episode.
miDnIghtEr20C
Banned
What I do really think is that they're not going to kill off the Xbox brand. It's the leading selling console for 3 years in the biggest most popular place to be something in.
I doubt MS and USA company is going to kill off it's Xbox console. The one that hasn't lost sales to any other console in almost 3 years.
Sorry if that's so weird to believe I feel, but it is. The Xbox isn't going anywhere.
robertsan21
Member
we shall also have in mind that what happens if Xbox one is a failure and do not live up to the expected sales? at the moment it sure aint looking to bright on the xboned front...PS4 will dominate the market next gen, a more powerful and cheaper console. and if PS4 will dominate, then that might cause some issues internally with MS. How could they let this happen, making such an expensive box and still not being able to compare it with the power of PS4.
smarmyjerkface
Banned
Pepsi does just fine in second place. Burger King is still making profits.
InvaderZimmer
Member
That was the info I was after. Gates with 4.5% puts this whole thing into perspective.
I'm not sure why you think this means anything in relation to profit and revenue. the entertainment division's overhead and volatility(the game industry in general really) doesn't justify the risk vs reward, when compared to what actually generates true profits for a company. You are comparing a company that lost billions to a company that lost billions, you are not going to get your desired result, simply by selling more units.
Nintendo, by comparison, is a much healthier and more profitable "entertainment division" then either of them. MS has no reason to feel great about the xbox in relation to its investors. The demand is there, but it is clear that the company struggles to manage it enough to generate a consistent revenue stream. Tech already is a volatile, yet profitable, stock. Adding more volatility, specially in this market isn't going to be viewed an asset if it doesn't change its pattern.
Chobel
Member
Unfortunately the investors don't feel the same way, they only care about money, for now Ballmer and Gates are the only ones stopping them from ditching Xbox division.
Imperfected
Member
Of course they don't kill off the brand, at least not until the end of the generation. They sell it. There's a difference, you realize that, right? Multinational corporations with a horizontal structuring create, buy, and sell divisions all of the time to try and maximize the benefits of their market synergies.
Microsoft created the X-Box because they believed it was their road to the living room. Between then and now, they've (understandably) become a lot less concerned with being in the living room and a lot more concerned with the fact they're being shoved out of the house (and car, and pocket...) entirely by the rise of mobile devices. The "Windows-operated world" they envisioned is falling by the wayside in a reality where the average consumer gets most of their daily computer-related needs met by a smartphone that doesn't even run their proprietary OS.
The division's failed to achieve the goal they set out with, and failed to completely recoup the investment made into it. At this point if they could sell it off at a high enough price to at least break even, why wouldn't they? The X-Box is no longer integral to their corporate strategy, so to them it's a pure numbers game: is the potential future profit of this property worth the future risk for loss? If I were a Microsoft investor, I'd have to be rather emphatically saying "No."
I actually have very little doubt they would want to sell the division, I just don't think there will be anyone out there interested in buying at a high enough price to satisfy them. As such, they're likely to hold onto it for the immediate future.
davepoobond
you can't put a price on sparks
this post is full of wisdom, and i agree with every point.
the living room doesnt matter anymore. its all about nifty mobile devices that can be anything you want and you can take them everywhere with you. streaming services are the new "in" thing -- not owning your content. you don't need a server or a computer to do any of that stuff anymore.
the resources (time, staff, money, etc) that they are using to operate the xbox division could be better put towards something like bumping up Windows Phone, for instance.
they could be making the XPhone, even, and that would probably be better than the xbox
Really? It's not all or nothing?
What is this gray you speak of? It very much sounds beautiful.
killer rin
Member
These charts also include things like Zune and Kin, which probably total to a couple hundred million to a billion and Windows Phone which also totals to a couple hundred million or so.
The general public will buy what they perceive has more value, simple as. It's why Apple sells millions of Iphones and Ipads yearly when there are much cheaper alternatives. MS might lose out at launch but over the course of the generation whoever provides the best value proposition in terms of games and services will win this generation. It's not as simple as cheaper price. If it was, Kindle Fire's would be more popular than Ipads.
Extremely well said from a non gamer perspective.
I guess I disagree. IMO being the most popular in the USA is pretty much the biggest it gets. I mean ya, being huge in Europe is grand and all, but then why do they want to make it big in the USA market? (I'm not talking consoles here.. I'm talking music, movies all of it.)
Also for me, interesting you say it was Sony that made the Xbox the blockbuster it was. It couldn't be because of the great online play and games it had/has. I don't know. Maybe you're saying MS and the Xbox has a chance again to take the lead then since Sony made early mistakes (and that was while the console was out) and MS has made mistakes (before the console has even launched)
So maybe like in dumb and dumber...you're saying there's a chance.
Robbie Bach admitted that the 360 only succeeded because of Sony's constant foul-ups with the PS3.
Mr. Waffle
Member
MS has a strong history of just dropping products that don't produce. Investors probably see the one as a dead end. Cable integration, console gaming, expensive game development, and or expensive exclusive contracts, kinect.... all of these are on the way out... and will be mostly irrelevant to MS investors in 5 years. The question is:
Scrap it now, and eat the L&D... this won't hurt any of the other products produced by MS as far as public perception.
Keep it around, and watch it hemorrhage money for 5 years then scrap it because the tech is worthless in a world 5 years from now.
don't be surprised when they drop the one just as fast as they dropped the Xbox, zune, kinect 1.0, and everything else they drop without consideration for those who bought the product.
Just MHO of how MS works.
Scrap it now, and eat the L&D... this won't hurt any of the other products produced by MS as far as public perception.
Keep it around, and watch it hemorrhage money for 5 years then scrap it because the tech is worthless in a world 5 years from now.
don't be surprised when they drop the one just as fast as they dropped the Xbox, zune, kinect 1.0, and everything else they drop without consideration for those who bought the product.
Just MHO of how MS works.
Aquamarine
Member
As I said in the previous thread, it's all contingent upon Xbox One's ability to deliver. There's a wait-and-see approach when it comes to the division. Firstly, Ballmer has to go...these kinds of projects are the things that Ballmer wanted to keep around for whatever reason. Secondly, Xbox One has to underperform. If for whatever reason the console sells at record pace (think a Wii-level phenomenon) it may be worth it to maintain the division.
IEB is on the hot seat right now. When Xbox One performs the status quo or profitability shrinks, it's done (sold). With Ballmer gone there's finally a window of opportunity to cut away Microsoft's unprofitable divisions and re-allocate resources more appropriately.
It's interesting, because Xbox never represented a large amount of profitability for Microsoft. At best, it was a minor player, at worst, a drain on the balance sheet. It's quite out of favor with those who are interested in the profitability of the company.
For three whole years, eh? Three out of the eight years of this generation, three out of the 11 years Xbox as a brand has been on the market. What a wonderful record.
What you've essentially underlined is how fickle and difficult this market is. There's no brand loyalty beyond each generation, people invest in secondary consoles/handhelds/PCs or switch platforms at the drop of a hat once something interesting comes along and the price is right. Everything is interchangeable, nothing and no-one indispensable.
For an investor this is a red flag. Video game consoles are a volatile, high-investment, modest-margin market. Get it right and you might make a fortune, get it wrong and you're looking at sinking billions of dollars into trying to salvage something. Conversely, you might still get it right on paper, yet still lose money due to the market just not responding or something going wrong with a third party software or hardware component producer. Or you might come up with a disaster on paper that catches lightning in a bottle and makes you a fortune, but has no way of carrying forward once the initial hype dies off and you have no way of recreating for the generation that follows. Or you might make something that dies out of the gate but eventually claws its way back to relevance. Or you might do none of these things and find another option.
Microsoft have discovered these past 11 years that making a long-term investment in the console business is absolutely pointless. For every step forward they've made, they've made an equal number if not more backwards. The Xbox 360 has great momentum behind it yet the Xbox One looks very likely to struggle. Both products exist in their own vacuum, the success of the 360 doing little to lift the One, yet the failings of the One don't seem to drag down the 360. And it's not like the competition is doing any better. Nintendo created a new market of gamers and then spent three years destroying it again whilst alienating their old one, Sony threw away the market, gained some of it back, but have a handheld albatross hanging around their neck and no real solid plan for the PS4 apart from "at least it's not the Xbox One!"
And that's why, seeing this business as an investor, I'd want Microsoft out of the console market. The risk is high and the reward unpredictable at best. Momentum means nothing, great products mean nothing, brands mean nothing. It's all just a gamble.
Imperfected
Member
The one thing I could see that might miraculously save their relevancy within the company - aside from a complete windfall in terms of X-Box One sales and software/service attach rates - would, ironically, be Valve. Not so much the "threat" the Steam Machines pose to the console space, as I'm still not convinced many console-only gamers are going to make the jump, but rather the threat the entire initiative represents to Windows as a preferred PC gaming platform.
The fact that PC gaming enthusiasts are Windows users by default is something Microsoft has long taken for granted. There's a lot of value there, even beyond the guaranteed users: even if you were considering using another OS, you would likely reconsider because of PC enthusiasts telling you that a lot of software - most of it games - don't run on a competing OS. A major part of this was that they weren't especially worried about it; Windows was so deeply ingrained as the de facto operating system that they never felt a particular need to consolidate their strength. There wasn't any need to worry about Windows having especially strong market penetration with any given demographic, because Windows was ubiquitous across every demographic.
Now, though, they're getting to the point where they have to accept competitors offerings as legitimate threats to their market share. Apple's drawn an increasing number of people into their ecosystem through the iPod, iPhone, and iPad, and in particular is making strides with younger users. The value of China as a market means that simply pointing and laughing at their state-sponsored OS is less and less of an option moving forward, as the nation's digital renaissance rapidly creates a population of non-Windows users of incredible size. And now Valve is trying to tempt PC gamers - the one demographic Microsoft was absolutely sure could never leave them - into escaping their proprietary hold.
If I were at Microsoft, I might be looking at SteamOS and thinking to myself, "There's no way this will get enough users supporting it to become a viable software platform unto itself - not unless those Steam Machines sell a surprising amount." That thought rattling around in my head, I might see further investment into the X-Box One as a useful catspaw with which to try and stymie the success of the Steam Machines so that SteamOS fails to gain traction and there's no significant threat of Windows losing its status as the "only way" to play PC games.
Though, if I were to guess, Microsoft's brass probably don't actually have a firm grasp on exactly how valuable being, for all intents and purposes, the "exclusive" OS for the vast majority of computer games is. There's no memory there of when they weren't, after all, so the market effects are impossible to accurately estimate. I don't think they ever took much active interest in Steam, after all, and Games for Windows Live was a confused and perfunctory effort at best. They probably think that once they get their half-assed app store up and running everything will be sunshine and rainbows forever.
TheRedSnifit
Member
It's called "cutting your losses". Better to cut it now then five years down the line when it's sucked even more profit from the company.
Microsoft should be taking Valve extremely seriously. There are four main types of computer users with two being the casuals and the gamers. They've already lost the casuals to iOS and Android, and Valve now not only threatens their PC ecosystem in terms of games, but also their Xbox ecosystem. Given that Steam has like 50% to 70% of the PC Gaming Market, Valve is PC Gaming at this point and they are dictating that it moves away from Windows and towards SteamOS and Steam Machines.
Iacobellis
Junior Member
No real solid plan for the PS4? You have to be joking.
w1gglyjones
Member
XB1 definitely being watched carefully.
Sure, but each gen brings more costs. So while investors don't care about the sunk costs, they care very much about the multi-billion dollar investment required each gen.
Sure, if you just forget the whole "3 screens and a cloud strategy" they set in place nearly a decade ago and come up with your own.
MS needs to keep the Xbox brand. The hardware side of things kills margins, but once it's a multi-media entertainment service across any screen it has huge potential to be as big as anything Apple, Google, or Amazon bring to market. If anything, MS needs to put more into the Xbox brand and get people on mobile and tablet devices using it.