Ballmer replacement may spin off Xbox: report

By Rizza Sta. Ana

Aug 30, 2013 09:47 AM EDT

A Bloomberg report said some of Microsoft Corp.'s investors would push the incoming CEO to turn the IT company's profits around. The report also said that in order to do so, it is likely for the new CEO to make major decisions, including spinning off its XBox video game division.

Although XBox contributed USD7 billion in sales for Microsoft year per year, the division has yet to drive sales of the IT company's software and core business services. Xbox's profit margin is lowest among the rest of the company's core businesses. Should a spin off would happen, data compiled by Bloomberg showed Xbox would earn revenues on its own at USD17 million based on gaming company Nintendo Co.'s revenue multiple. Revenue multiple is a measure of a company's stock value that compares the ratio of a company's enterprise value over its revenue.

HighMark Capital Management Fund Manager Todd Lowenstein, whose company manages USD19 billion in funds, including Microsoft shares, said that a spin off would be good for Microsoft. "(XBox) seems like it would be the most mature candidate with the best growth potential and the most established to stand on its own," he said.

The hunt for a new Microsoft CEO is still ongoing after CEO Steve Ballmer retired on August 23. Ballmer planned to step down within 12 months from the date of the announcement of his retirement. Ballmer replaced the iconic Bill Gates in 2000 and had struggled to keep Microsoft as a leading player in the technology market. Microsoft under Ballmer's leadership cost the company USD280 billion in market value loss due to failures in smartphone, web search and tablet computing markets. 

© 2024 VCPOST, All rights reserved. Do not reproduce without permission.

Join the Conversation

Real Time Analytics