Microsoft CEO Candidate Stephen Elop Could Sell Xbox Division

Microsoft CEO Candidate Stephen Elop Could Sell Xbox Division - News

by Brent Galietti, posted on 08 November 2013 / 4,952 Views

Microsoft is currently searching for a new Chief Executive Officer to replace current CEO Steve Ballmer, who will soon retire. One of the rumored candidates is former Nokia CEO Stephen Elop, and if he has his way, he may sell off parts of the current Microsoft composition, including the Xbox division.

Xbox, go the opposite direction of this arrow.

According to an article on business website Bloomberg, Elop would focus on Microsoft's core businesses, such as Windows and strengthening the sales of Microsoft Office. He'd also be interested in selling or shutting down other businesses, with the Xbox and search engine Bing identified in the article as possibilities.

Nomura Holdings Inc. analyst Rick Sherlund said the sale of Bing and Xbox (in addition to other related business moves) could improve Microsoft's fiscal year 2015 earnings by 40 percent.

“Microsoft is trying to do too much, and these assets add no clear value to the overall business,” wrote Sherlund.

The idea of Microsoft selling the Xbox may seem strange, but the platform has consistently been a money loser for the company, with Microsoft reportedly hiding the brand's losses within the patent royalties section of its financial statements.

"If we start with the overall traditional [Entertainment and Devices Division] business that actually loses money before corporate allocations and back out the nearly $2 billion 95 percent gross margin Android phone royalties, we conclude that Xbox platform plus Windows phone and Skype lose about $2.5 billion per year, and we estimate that the Xbox platform may account for roughly $2 billion of this," Sherlund said. "This is contrary to conventional wisdom, we think investors do not realize how extensive the operating costs are for this business and it is concealed by the hugely profitable Android royalties."

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