Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Apple Inc. (AAPL), And Why Microsoft Corporation (MSFT) Selling Xbox Would Be a Mistake

Page 1 of 2

In the wake of Steve Ballmer’s planned retirement, there’s been a lot of talk about what Microsoft Corporation (NASDAQ:MSFT) should do. Some of that has centered around a possible break-up scenario, with Microsoft spinning off or otherwise selling some of its divisions, most notably, its Xbox-centered entertainment division.

This would be a colossal mistake, and it would destroy shareholder value. Alone, the Xbox division would face existential risks; at the same time, the larger Microsoft would be squandering strategic opportunities.

Microsoft Corporation (MSFT)

A more-focused Microsoft

Microsoft Corporation (NASDAQ:MSFT) is a massive, complex company. With its many divisions and products, there are few areas of tech that Microsoft doesn’t compete in. Spinning off divisions, selling assets, or otherwise streamlining the company could allow Microsoft to drill down and focus.

The Xbox doesn’t seem to fit in with the rest of the company. There are some obvious synergies between operating systems (Windows) and software (Office). There are even some synergies between online services (Bing) and the rest of Microsoft’s products. But video games? Nothing more than a child’s toy — or so many might think.

Battlefield living room

Anyone who buys into that line of reasoning is thinking only of the present. If Microsoft wants to focus only on enterprise customers, getting rid of Xbox might make sense. But if Microsoft has any hope of remaining a consumer-orientated company, it will need Xbox.

Consider the steps being taken by its competitors. Apple Inc. (NASDAQ:AAPL)‘s management, for example, has been extremely clear about the opportunities they see in the living room. Before his death in 2011, Steve Jobs told his biographer that he had finally “cracked” the TV problem. Last year, Tim Cook took that a step further, telling NBC’s Brian Williams that TV was an “area of intense interest” for Apple Inc. (NASDAQ:AAPL). Then, in May, Cook told the AllThingsD conference that Apple had a “grand vision” for TV.

Piper Jaffray analyst Gene Munster, who has been predicting an Apple television set for years, believes that Apple will introduce the TV later this year, and could ship the product in the first half of 2014. Morgan Stanley’s Katy Huberty said Apple’s TV could be a huge opportunity for the company, adding as much as $4.50 to Apple’s annual EPS.

Video game consoles aren’t just for video games

Apple’s TV set, in addition to serving up traditional video content, could also act as a game console. Apple Inc. (NASDAQ:AAPL)’s mobile operating system, iOS, is already immensely popular among independent game developers, and bringing iOS to the TV would result in an unofficial Apple console.

Nat Brown, one of the creators of the original Xbox, argued that an Apple TV could “kill” the established game consoles. Gabe Newell, CEO of Valve, said he feared Apple Inc. (NASDAQ:AAPL) more than the existing industry players. Newell’s company plans to roll out its own living room console (the Steam Box) in the near future.

The line between video game consoles, TVs, and computers is becoming increasingly blurred. Owners of the Xbox 360 spend more time with their device watching online videos and listening to music than they do actually playing games.

Perhaps this is why Microsoft Corporation (NASDAQ:MSFT) has given its next console, the Xbox One, such impressive TV capabilities. Given that it can interface with cable boxes and serve up on-demand content with voice commands, Microsoft’s Xbox One is as much of a smart TV as it is a video game console.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!