Well they've wanted to kill those 3 divisions for a while now. bing should be dead already, surface maybe, not sure on Xbox tbh
Two influential Microsoft shareholders have been pushing the Redmond software giant to abandon what they view as non-essential product lines so that Microsoft can focus on its core strength: selling enterprise software to businesses. Nadella has spent the last seven months running Microsoft's $20 billion server and tools division, so he could be ideally suited to manage that transition.
Ballmer envisioned Microsoft as a "device and services" company and reorganized the company last year to better execute that vision. But now Ballmer is out — though still on the board — and with a new CEO come fresh questions about the fate of consumer tech at Microsoft.
Microsoft's Windows division has been facing shrinking profits; last year, the unit pulled in a net $9.5 billion, down from $11.6 billion in 2012 and $12.3 billion in 2011. Company filings suggest that the drop is largely attributable to declining demand for Windows among consumers, even as sales of Windows to businesses remain strong. The same division also reported a $900 million loss on unsold Surface tablets. The online services division, which oversees search engine Bing, reported a loss of $1.3 billion in 2013 — less than the previous year but still in the red.
Some investors have suggested that Microsoft spin off its money-losing consumer products and focus solely on the enterprise. Even the Xbox deserves to go, Paul Ghaffari, the wealth manager for Microsoft co-founder Paul Allen, said last year.
But Robert Bontempo, a management professor at Columbia Business School, is skeptical that Nadella will be able to chart his own course on the matter. "You're asking for Nadella to walk into a board meeting and look Ballmer and Gates in the eye and say, 'The decisions you've made over the past two decades are a mistake,'" said Bontempo. "That's going to take some serious strength of character."
ValueAct [holds 0.8% shares of MS] has been a critic of Microsoft's strategy and — like Ghaffari — wants the company to consider shedding some of its investments in consumer technology. ValueAct also reportedly wants the company to unbundle its offerings, such as Microsoft Office, so that they can be used on other platforms besides Windows.
"Microsoft has historically had a supportive board," said Bontempo. But with the addition of Morfit [representative of ValueAct], Bontempo said, "this is going to be an extremely toxic environment ... There's going to be a lot of tension."
That tension could come in handy for Nadella, who will need political cover to pursue broader changes at the company.
But there are some early signs that Nadella is interested in continuity with his predecessors rather than a radically new strategy. The Indian-born engineer asked — and got — Gates to step away as chairman of the board so that Gates could advise him on products and devices. Whatever Gates's qualifications for this job, it's clear Nadella recognizes his own weaknesses when it comes to consumers. It's also suggestive of Nadella's faith in the "device" part of Microsoft's "device and services" mantra.
Though no longer chairman, Gates will remain on the board of directors. Analysts say the programmer-turned-philanthropist has exerted a strong influence at Microsoft behind the scenes, even as he's kept a low public profile at the company.
I think the reasoning for Xbox is that for overall profit compared to everything else, it is insignificant. Like, if ms lost Xbox, virtually nothing would change. So investors want to cut the fat so to say.
I don't see Nadella being too sold on the idea. Not only has Gates always been a proponent of it (and he's going to be more involved at MS going forward), things like that Xbox Reader app that was mentioned today point us towards MS being more invested in the Xbox brand, not less. Rouge investors will always want things (especially things they see as producing short-term gains), but if the board & Gates/Nadella still believe in the vision of the Xbox, it's not gong anywhere for a while.
This isn't really anything new. It's the same two shareholders that have been wanting this for a while; it's just suddenly news again because Nadella's been announced as the new CEO. Nadella's already said he's keen on carrying on with the devices and services approach so I can't see anything coming from this. At least not for many years anyway.
right now the unprofitable xbox division is denying market share needed for another potential 1st party to break into the core industry.
Though I feel nobody is going to move in with Xbox gone other than maybe Nintendo. Microsoft blew away fortunes just to break in, something that Amazon/Google/Apple aren't going to do when their platforms push a difference philosophy all together.
I hope MS stays in because they increase the over all competition that forces companies to play to integrity instead of shareholder pockets. I would almost guess a lot of the Xbox Ones policies were intentionally trying to kill it from it's current market position and turn it into a living room cash box.
Shocking News: Investors invest to get a return on their investment
They are right, though. All the resources MS throws at Xbox would likely be a significantly stronger ROI strengthening the enterprise product line. Xbox is out in left field compared to where MS is making money these days.
On the Devices side, it's one of the stronger revenue generators (billions). I don't think Surface and Windows Phone are anywhere close yet.
With Nadella at the helm, and Gates at his side, there is just no chance of this happening. Both of them believe that productivity and entertainment are key to Microsoft's future, with devices that enable innovative experiences (premium hardware), and Xbox is their only entertainment brand.
If MS gives into business only then Amazon, Google, and Apple will eat away at everything Microsoft does that much easier. I get why investors want it, but it's a really fucking stupid idea for the longevity of Microsoft.
It is not about profit it's about return on investment. The thing they argue is that while still perhaps profitable the cost of investment in the xbox division (hardware, software, marketing etc.) which is a pretty large sum instead should be handed to other divisions where the money would produce further income.
Xbox is actually an established brand with an entire ecosystem built around it. Not sure about the Surface as I've only handled it in-store.
Bing is okay but it's difficult to unseat Google after all this time. That dream will never come to fruition, similar to their insistence on continuing IE as a legitimate competitor in the browser space.
Will be interesting to watch this chapter of Microsoft unfold. If I was CEO, it'd be hard not to cut areas of little value regardless of the investment. Sunk cost is sunk cost.
Investors want MS to reach consumers through what they're best at, aka software. Not hardware.
They want MS to put Office, Outlook into everything. They want MS's services to be pervasive into every inch of the technology, regardless whether or not it's Android or iOS.
Once upon a time, they could leverage the fact that they owned a large part of the technology space to push exclusivity of hardware ( PC with Windows ) + software (Office, etc), but investors are seeing that it's impossible for MS to overthrow Android/iOS, so they want MS to get in bed with them instead of trying to switch customers over to Surface.
That's a pretty loaded title with only marginal support for getting rid of the gaming division in the article. Bing and Surface make sense as - once again - MS late entry into a crowded field has flopped. The gaming division - without any financial information not mired in rumor - seems healthy when not shuffled into MS's other losing non-windows ventures.
Surface? Sure. MS was way too late to the tablet market. I don't anyone expects them to be as profitable as Apple in that space. Same thing with Windows Phones and the Zune.
Bing? Maybe? I've used it before when I'm lazy, but it's really not a good search engine. Everyone I know uses Google as default. They have to make some advertising revenue from Bing though right?
Out of those three, Xbox seems like the most somewhat stable brand. Even thought it's probably not selling as well as they had hoped, it seems like the revenue from Xbox Live subs and dashboard ads would be free money for MS.