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 Here are Xbox's pros and cons:
PRO
IT IS PROFITABLE IN THE LONG TERM: The Xbox business has been profitable for
the past few years, according to Yusuf Mehdi, Microsoft's vice president of
strategy. Mehdi says the company sees the gaming industry growing from an annual
$66 billion to $78 billion in 2017. And Microsoft hopes to broaden the Xbox's
appeal with features that make it more of an entertainment hub.
CON
IT WILL BE A SHORT-TERM PROFIT DRAG: Nomura analyst Rick Sherlund estimates
that the Xbox platform will lose at least $1 billion for Microsoft in 2014 and
may not be profitable for another year or so after that. He says a spinoff, even
to existing shareholders, would immediately boost Microsoft's profits and stock
price. And the timing is right. The company is expected to name a new CEO to
replace Steve Ballmer soon and is re-examining its future.
"I can understand the emotional attachment people have to Microsoft owning
Xbox," he says. "But if you're trying to bring in new management here and have a
course correction, I think this is one of the places you've got to take a look
at and reassess."
___
PRO
ITS AUDIENCE IS HUGE: The Xbox Live online gaming and entertainment service
has some 48 million members worldwide, many of whom pay $5 a month. More than 80
million Xbox 360s have been sold worldwide, providing a user base for Microsoft
to sell things like music subscriptions, video rentals, more games and the new
Xbox One. The platform is also a window into Microsoft services such as Bing
search, Skype Internet calls and SkyDrive cloud storage.
CON
BUT IT'S NOT AS BIG AS WINDOWS: More than a billion people worldwide use
Windows personal computers, and focusing efforts on polishing Windows 8.1 could
have a bigger payoff.
___
PRO
IT'S A POPULAR BRAND: "There are not a lot of products that Microsoft makes
that people are pumped and excited about. Xbox is one of them," says Mike
Hickey, a games industry analyst with The Benchmark Co. "To punt that would be a
mistake."
CON
IT'S SLIGHTLY OFF-BRAND: Microsoft prides itself on making software and
products that help people to be more productive. But Ballmer, at his final
shareholders meeting as CEO on Tuesday, acknowledged the common sentiment that
video games can suck up huge amounts of time. "I'm sure we'll lose my
14-year-old for the better part of the next weekend," he said referring to the
Xbox One's launch.
___
[to top of second column] |
PRO
IT'S A SOURCE OF INNOVATION: If Microsoft hadn't entered the
hardware business, it might not have been able to build the Surface
tablet on its own, says Dean Takahashi, author of "Opening the Xbox"
and "Xbox 360 Uncloaked." The company has also developed gesture-
and voice-recognition technology with its Kinect sensor for Xbox.
"They developed some very useful skills in moving into this
business," Takahashi says.
CON
INNOVATION HAS BEEN COSTLY: Microsoft took a $1 billion charge
in 2007 on Xbox hardware defects and a $900 million charge on unsold
Surface inventory this year. And it's not clear whether the
company's new user-interface technologies are as advanced as they
need to be to make money. As several reviewers have noted, Kinect's
voice-recognition ability is hit-and-miss. ___
PRO
IT POSITIONS MICROSOFT IN THE LIVING ROOM: Microsoft's Xbox 360
and Sony's PlayStation 3 each sold more than 80 million units
globally. Pulling even with the game console leader was a key
strategic win for Microsoft because it prevented Sony from taking
over the living room. The strategy was intended "to create a halo
effect for other Microsoft consumer devices," according to Evercore
analyst Kirk Materne.
CON
BUT THE WORLD'S GONE MOBILE: By pouring time and energy into a
home-bound console, Microsoft largely missed the mobile devices
revolution. IHS predicts Microsoft's Windows platform will be the
operating system in just 6.5 percent of tablets and 3.9 percent of
smartphones shipped worldwide this year. Together those devices will
account for 1.2 billion unit shipments. Sherlund says dominating the
living room "was a good idea 10 years ago." ''Apple and Google did
an end run around you with smartphones and tablets," he says. "You
had your eye on the wrong ball."
[Associated
Press; RYAN NAKASHIMA, AP Business Writer]
Copyright 2013 The Associated
Press. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
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