Microsoft CEO Satya Nadella reaffirmed the company’s commitment to gaming in a memo to employees Thursday despite calls from some investors to spin off its Xbox console business. The company leader says that innovations made for the Xbox One and Xbox 360 carry over to the company’s other products such as Windows and Skype as well as mobile.
“I also want to share some additional thoughts on Xbox and its importance to Microsoft. As a large company, I think it’s critical to define the core, but it’s important to make smart choices on other businesses in which we can have fundamental impact and success. The single biggest digital life category, measured in both time and money spent, in a mobile-first world is gaming. We are fortunate to have Xbox in our family to go after this opportunity with unique and bold innovation. Microsoft will continue to vigorously innovate and delight gamers with Xbox. Xbox is one of the most-revered consumer brands, with a growing online community and service, and a raving fan base. We also benefit from many technologies flowing from our gaming efforts into our productivity efforts – core graphics and NUI in Windows, speech recognition in Skype, camera technology in Kinect for Windows, Azure cloud enhancements for GPU simulation and many more. Bottom line, we will continue to innovate and grow our fan base with Xbox while also creating additive business value for Microsoft.”
Calls for Microsoft to spin off the Xbox division into its own company have come regularly nearly every year since the release of the Xbox 360. For example, a Goldman Sachs investor called for Microsoft to dump the console gaming business in 2010 (via Gamespot) and co-founder Paul Allen suggested that the Xbox business should be split off just last November (via Tom’s Hardware).
Nadella has made several changes to Microsoft since he replaced Steve Ballmer as Microsoft CEO in February. These changes have trickled down to the Xbox division to include Phil Spencer as the new head of the console business with former Nokia CEO Steven Elop in charge of the actual hardware for both consoles and mobile.
Spencer has already turned around much of the animosity that came from the 2013 reveal of the Xbox One by solely focusing on games and improvements to the console such as monthly updates and offering a Kinect-free version of the console that is $100 cheaper. There’s still much to do with the console though due to the 3-4 million unit lead that Sony’s Playstation 4 has built up since both consoles launched last November.
How much the Xbox can help Microsoft’s other divisions is another open question. The feedback on the Windows 8 user interface that was first introduced on the Xbox 360 has largely been negative due to the tablet like interface and how different it is from the traditional Windows interface.
Microsoft’s mobile efforts with Windows phone and Surface tablets have also met with lackluster results. However, the Office apps for iOS have been well-received along with the Xbox SmartGlass companion app for Android and iOS. How Microsoft can extend these mobile efforts should be something analysts and gamers alike keep their eyes on.