According to analyst Rick Sherlund who’s been following Microsoft and it’s business for 20 years, the company’s Xbox division was ‘generating’ $2 billion in losses though a source in Business Insider.
The Xbox division under Microsoft’s Entertainment and Devices, which also holds Windows Phone and it’s Android royalty payments have been declining through revenue and operating losses for the past few years.
The Entertainment and Devices group seemed to have been profitable through investors eyes, but Sherlund said that it was mostly due to Microsoft’s Android royalty payments which in revenue had a 95% margin, making it pretty profitable. Through the revenue made in payments, Microsoft was able to hide the poor performance of the Mobile and Xbox groups from the fact that were and still are burning money out of the company. Sherlund suggested that if investors stop backing the Android royalty payments from Microsoft, the company would be losing $2.5 billion on Skype, Xbox, and Windows Phone and of that $2 billion losses would be on the Xbox platform.
Sherlund believes for the good of the company’s future is to spin out the Xbox platform. He sees it as stray in Microsoft corporate ecosystem that just doesn’t fit in with what they are doing.
But hey wouldn’t you know it, CEO candidate for Microsoft Stephen Elop is conducing to sell off the the Xbox business and kill off Bing if he does become CEO of the company by a Bloomberg report. Reasons for it was to sharpen up the company’s focus on emphasizing Office software programs like Microsoft Word, Microsoft Excel and Microsoft PowerPoint on multiple smartphones and tablets like from Apple and Google.
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