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Bill Gates: "If MSFT CEO Nadella wants 2 spin off @XBox biz I'm absolutely for it."
- Thread starter Darksol
- Start date
Andodalf
Banned
So bill Gates says that he sees Xbox as a part of MS's long term strategy, and we have a thread about how it means that he and the CEO want to kill Xbox. Which the CEO didn't say. It was a hypothetical.
Link to full context for next page http://www.foxbusiness.com/markets/2014/05/05/buffett-leery-social-media-stocks-ipos/
Right its like no one read the edit in the OP and are still posting based on incorrect title alone.
infiniteheteroskdasticity
Member
Spin Off <> Sell
It just means Xbox becomes its own independent company with its own CEO and corporate structure. This would unlock value within it and leave Microsoft to focus on their transition to a pure services based company. They'd still own a controlling stake and get a large chunk of any profits but they wouldn't have to deal with the day to day running of it. They'd also be able to divide up any losses as well as attract other partners. This is also what Dan Loeb wanted Sony to do with all its entertainment divisions including Playstation.
I was originally in favor of this because it would help MSFT attract a higher multiple on its share price by getting it out of the low margin hardware business and improving their gross margins. They'd have also have been able to get some extra cash out of floating a stake in Xbox through an IPO or private placement. I do not think this a good idea now because of the difficult Xbox One launch as well as current market conditions. The market seems to be rotating out of low profit high buzz stocks (Tesla, Netflix, Amazon) and back into value stocks with sound fundamentals (Apple, Intel and ironically Microsoft).
It just means Xbox becomes its own independent company with its own CEO and corporate structure. This would unlock value within it and leave Microsoft to focus on their transition to a pure services based company. They'd still own a controlling stake and get a large chunk of any profits but they wouldn't have to deal with the day to day running of it. They'd also be able to divide up any losses as well as attract other partners. This is also what Dan Loeb wanted Sony to do with all its entertainment divisions including Playstation.
I was originally in favor of this because it would help MSFT attract a higher multiple on its share price by getting it out of the low margin hardware business and improving their gross margins. They'd have also have been able to get some extra cash out of floating a stake in Xbox through an IPO or private placement. I do not think this a good idea now because of the difficult Xbox One launch as well as current market conditions. The market seems to be rotating out of low profit high buzz stocks (Tesla, Netflix, Amazon) and back into value stocks with sound fundamentals (Apple, Intel and ironically Microsoft).
shinra-bansho
Member
It's more nuanced than the edited quote in the OP, based on the Seattle Times post.
Gates responses to Bing and Xbox are very different. The implication is that he wouldn't support the spin-off of Bing/search, as he doesn't see it as a separable part of the company, elaborating on how it fits into a greater strategy.
He does not say the same of Xbox.
Also, as elaborated on above people seem to be confusing selling off a division and its assets and spinning out a child company.
Gates responses to Bing and Xbox are very different. The implication is that he wouldn't support the spin-off of Bing/search, as he doesn't see it as a separable part of the company, elaborating on how it fits into a greater strategy.
He does not say the same of Xbox.
Also, as elaborated on above people seem to be confusing selling off a division and its assets and spinning out a child company.
funkystudent
Member
I wonder how much xbox is worth. Like how much would Amazon need to shell out if they wanted to buy it. How many billions?
Nothing invisible about it.
I think part of MS replacing Ballmer was that Gates will regain a bunch of control.
Nothing invisible about it.
I think part of MS replacing Ballmer was that Gates will regain a bunch of control.
Andodalf
Banned
The title is a quote of a tweet of a paraphrase of Bill Gates giving a pc answer to a hypothetical question.
infiniteheteroskdasticity
Member
~$10-13b in my view. Its current status as a money maker is iffy but there is real value in the Halo and Gears IPs as well as the 10s of millions of Live users. Their movie/tv businesses are inconsequential but would be very likely to be bundled with Xbox. Kinect has gone from being a buzz product that would have added billions to the final pricetag to a complete non factor (another reason they should have done it in 2012 if they were serious).
I think you're being unfair to Bill Gates in your second point. He seems to go out of his way to free Nadella's hands every time.
MikeE21286
Member
What if Gamestop bought it?
That'd be a crazy thing
That'd be a crazy thing
Yoda
Member
The subsidiary option is really the only thing on the table. Selling the division outright would get insanely messy given Xbox has quite a bit of that scared proprietary code on it. Not to mention that I'm not sure how'd they'd manage the Azure integration. They'd have to rent it out initially or not sell Live with the division. That alone might dissuade buyers. I think at the end of the day Microsoft just doesn't want the entertainment division making its profits looking less impressive, it is for all intensive purposes paying for itself, but it would seem that the margins just aren't making it worth the time in their eyes.
schaft0620
Member
This validates that its been absolutely for sale as of jan. 14
schaft0620
Member
Invested? Its a division reporting at a loss.
fluffydelusions
Member
This is known as the Sunk Cost Fallacy, and anyone with a background in finance knows that it is irrational. It doesn't matter how much money they have put into the Xbox in the past. That money is gone. The future is all that matters.
GoofsterStud
Member
If by crapping on you mean reporting bigger losses, then yes.
You think Xbox is worth as much as Nintendo, who have far more important/bigger IP and are themselves valued that high mostly on the basis of their cash reserves? Damnnnn.
no way would this happen. MS is desperately trying to break into the consumer electronics industry (zune, bing, surface, windows phone... xbox is the most successful attempt thus far)
yes they have successful relationships with their corporate clients, but as the saying goes, expand or die. well "die" isn't really applicable for a mega-corporation like MS, but the thinking is sound.
yes they have successful relationships with their corporate clients, but as the saying goes, expand or die. well "die" isn't really applicable for a mega-corporation like MS, but the thinking is sound.
Imperfected
Member
To the people who are asking "Why is this news?":
Bill Gates remains an absolutely enormous shareholder in Microsoft, for the moment. The fact that he would not directly oppose an initiative to spin off the division is going to rally the smaller investor groups who were already pushing for this, but were having trouble due to even their combined voting power being dwarfed by his alone.
He doesn't have to "support" the new CEO as some sort of cheerleader. He remains an incredibly powerful shareholder in his own right, and the only reason he doesn't exercise more direct control over the company is entirely by his own choosing. Even him simply saying that he wouldn't throw his weight against something is a pretty big deal.
Bill Gates remains an absolutely enormous shareholder in Microsoft, for the moment. The fact that he would not directly oppose an initiative to spin off the division is going to rally the smaller investor groups who were already pushing for this, but were having trouble due to even their combined voting power being dwarfed by his alone.
He doesn't have to "support" the new CEO as some sort of cheerleader. He remains an incredibly powerful shareholder in his own right, and the only reason he doesn't exercise more direct control over the company is entirely by his own choosing. Even him simply saying that he wouldn't throw his weight against something is a pretty big deal.
Who's gonna register the kickstarter?
schaft0620
Member
If Nintendo has the cash they say they do I don't get why they just don't pay the $5 billion to own Xbox.
Not really true. The number of shares he owns reduces year on year. Ballmer now owns more stock than Gates does.
Bill Gates has been selling his stock steady over the past decade, since he stepped down as CEO. It goes towards the Bill & Melinda Gates Fund. I think I've read he sells 20 million shares per quarter, and in on track to have zero MS shares within 4 years.
fluffydelusions
Member
gaf servers would explode
Imperfected
Member
Pocket change.
Just checked Google, and Gates now owns 330m shares. So he owns 4% of the company.
schaft0620
Member
Seriously though your are right if Xbox reports at a yearly loss Nintendo would absolutely be in place to buy it. They are the only ones with that on hand.
Imperfected
Member
Yes, which is four times the combined amount of the voting bloc that was making waves by demanding that X-Box be spun off in the first place. This isn't the type of company where a family or small group of founders control 50% or more of the corporation between them. 4% is considerably diminished from his CEO days, but it still makes him one of the most powerful single voters among shareholders.
The fact that he was always presumed in the past to be against any attempts to spin off Bing or X-Box was one of the major roadblocks that groups like ValueAct Capital had to getting any sort of traction for their initiatives. Knowing going in that you need several times as many voting shares as your entire holding group has to even break even tends to put a damper on attempts to get a movement going.
nintendo didn't get their coffers full like they are by writing a bunch of $5 billion dollar checks.
TheRealTalker
Banned
Google, Amazon, maybe even Facebook seeing as they are expanding their horizons
"if" Nintendo ever did sell themselves I'd say Disney would jump in just for the chance to grab all those memorable characters and expand their plan for world entertainment domination
But in all honesty both of these guys are going anywhere
schaft0620
Member
Dead right but they are backed in a corner right now no?
Louis Cyphre
Banned
By mid-2018 he will have no ownership left in the company.
Imperfected
Member
As attractive as the Amazon option may be on a synergistic level, I'm not sure they actually have the capital (or capacity to raise it) to buy the X-Box division and necessary support structure outright. I suppose part of spinning it off could be turning it into a joint venture that Amazon gains a significant stake in, but at best I think you'd be looking at them acquiring assets (developers) piecemeal.
Google almost certainly has enough money, though I'm not sure they have any interest. Their primary focus when it comes to acquisitions seems to be getting "frontier" development tech concerns; lots of stuff that screams "the future of X". More and more by the day, the X-Box division looks less like the future of anything and more like ten-years-too-late of something.
They'd probably be more interested in some sort of AR/VR project than a home console with questionable market growth potential. Again, though, they could probably make use of some of the existing assets committed to the division in the case that it were sold in pieces.
(I mean, they would probably love to have Kinects in homes gathering user data for advertising purposes, but after seeing the backlash against the "spycam" they're probably going to look for a road to that destination that hasn't already got the bridge burned.)
Dreamgazer
Member
Approximately 330 Million shares at around 4% ownership.
He's been reducing his shares annually since he stepped away from the CEO position.
Ballmer supposedly has more shares than he does now.
(Gates is still the 2nd largest individual shareholder and top 5 overall shareholder.)
ValueAct got traction, they have the same amount of voting power that Gates has on the Board of Directors now.
Louis Cyphre
Banned
Precisely and this deal was set years ago on how many shares he sells per quarter. The good thing for Mr. Gates is he's making an incredible amount of money as prices remain high for shares on Microsoft. In the last 5 years stock prices have doubled.
njean777
Member
No, not really. Nintendo could blow us away with a new console. Who knows what nintendo is doing right now.
well they seem to have a plan involving QOL in the medium term and a unified console/portable architecture in the long term. how successful all that will be is any ones guess, but buying gaijin gaming platforms just doesn't seem to be the nintendo way. the people in charge seem too old and stuck in their ways for that.
schaft0620
Member
I completely agree with you that is why want to know your personal feelings, buying xbox how better off are they?
I chuckled.
This quote effectively means nothing. I may think Xbox division sucks ever since RROD, but whatever, this quote is not worth taking beyond its context. Xbox is currently integral to MS flawed device strategy, but i think they see the problems so they'll pivot
GoofsterStud
Member
I agree completely.