Market Overview

Bill Gates Supports An Xbox Spinoff - But Will It Happen?

Microsoft (NASDAQ: MSFT) founder Bill Gates made waves when he said that he would support company CEO Satya Nadella if he decided to spin off the Xbox division.

But that doesn't mean a spinoff is actually going to happen.

It could present an interesting opportunity for investors to buy into the new company at this early stage (before Microsoft's latest console, Xbox One, has sold millions of units). If the company's TV plans take off, that could provide another boost for the Xbox division.

There is also the possibility that Microsoft may one day release an Xbox-branded tablet or a handheld game system. The latter option might seem like a waste in today's highly competitive market, but it is another area that has yet to be explored by the company.

Related:Will Microsoft Unveil Its iPad Mini-Killer On May 20?

Microsoft's revenue increased 14 percent during the holiday quarter – in part because of the release of Xbox One. That success could make it difficult for the company to justify a spinoff.

"That's always been a more contentious area for investors in terms of what they should do,” FBR Capital Markets analyst Daniel H. Ives told Benzinga. “Strategically, in our opinion, it would make sense for them to spin it off.

“But given Nadella is a home-groomed Redmond guy, and I think he's done a lot of good things in terms of changing things strategically, I would not expect that that's something in the near-term. Maybe longer term that's something that could potentially be in the cards. But in the near term he has enough on his plate to deal with, rather than spinning off Xbox at this juncture."

If the Xbox division became its own firm, the Board could appoint a CEO who is dedicated to the video game sector -- someone that would focus on turning Xbox One into the dominant gaming platform.

However, it must be said that Xbox 360 thrived under the leadership of former Microsoft CEO Steve Ballmer. Between 2005 and 2013, Microsoft sold 80 million units.

Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.

Posted-In: Bill Gates comments Daniel H. Ives FBR Capital MarketsAnalyst Color Rumors Analyst Ratings Tech Best of Benzinga

 

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