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ValueAct Still Pursuing A Microsoft Board Seat, Wants To Sell Off The Xbox Division

Steve Ballmer just announced his retirement, and the CEO of Microsoft has decided to call it a day within the next 12 months. The head of Redmond had been under fire from several circles, former employees, media and investors.

Back in April ValueAct spent $2 billion in order to take over 1 percent stake in Microsoft. And now gossip is flowing that the investment firm may be pushing for some big changes within the Redmond campus.

A top Microsoft analyst reveals that ValueAct is still pursuing a seat in the company’s board of directors.

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DEEBO1040d ago

well that sucks.even though i like sony more then MS.i hate see console makers go,hopefully this never happens.maybe this was the plan from the beginning.build the xbox brand up then sale it.

Bigpappy1040d ago

You don't even need to read the article to know that what you are implying is not the case. Just read the title and the summary.

JokesOnYou1040d ago (Edited 1040d ago )

Yeah 1% and they want them to sell the division...sounds like some nutjobs trying to make some quick cash. Not going to happen, expecially since Xbox brand unlike Zune and other investments that have failed.

MWong1040d ago (Edited 1040d ago )

Well if enough boardmembers get behind ValueAct and they get a seat on the board of directors it doesn't matter what percentage of stake they have in M$. They just have to convience the a majority of the board that the XBox division isn't profitable. The lack of a solid vision and leadership of the division would make that easy to argue.

I doubt they will get on the board though, but if they do I wonder who might buy XBox.

Anon19741040d ago (Edited 1040d ago )

The question isn't is the Xbox profitable. The question the board has to ask themselves is is the Xbox profitable enough. Could that money be better spent? That's what ValueAct does. They come in and work with the boards of company's to get them the most bang for their buck. They simply don't think that for Microsoft they're getting their money's worth out of any of their devices, Xbox included, compared to the returns they see from other divisions. They aren't alone in thinking this either, as other board members and analysts have been saying this long before ValueAct became involved.

Edit below: And he's dismissing the fact that ValueAct isn't in this alone. They'd just be adding their voice to those who've been calling for this for some time now but have been blocked by Ballmer.

HiddenMission1040d ago

@JokesOnYou

I guess the jokes really on you considering that nut job you speak of is an investment company that spent 2 billion dollars let me repeat that 2 billion dollars for 1% and will be getting a seat on the board of directors.

Over the years many investors have not been happy with the profit/loss margin that the XBOX brand earns/loses. They have been calling for Balmer to be removed for several years and XBOX to be sold off.

With the new director from the investment firm and Balmer retiring there is a very good chance that XBOX end up becoming a separate company...which means no more massive spending for exclusives. Essentially the XBOX brand would be in the same boat as Sony and Nintendo so the fields from a capital point of view would be more level than ever.

Bigpappy1040d ago

Seems like too many of you are getting ahead of yourselves here.

@ HiddenMission: The article clearly states the ValueAct is STILL PURSUING a seat on the Board. They are not on the board yet. And if they do get on, they with have one vote, but will obvious have more say. But they are not on the board.

@ darkride: Most of what you are saying makes sense to me. But ValueAct has no say in whether Ballmer stays or goes.

You guys are acting like Patcher here. You are looking at a few fact and trying to fill in the blanks. But there is no way to predict Who will replace Ballmer and how much influence ValueAct will have over the running of M$. So you should all make it clear that you really do not know how this will affect Xbox, except for the fact that Ballmer was a huge supporter.

You guy also ignore an even bigger supporter of Xbox (Bill Gates). He still owns more shares and has more influence over M$ than anyone else.

MWong1040d ago (Edited 1040d ago )

@ darkride66
Well said, +1 bubble

@Bigpappy
I don't think anybody is getting ahead of themselves. I think people are just stating possiblities. Especially, based off your initial comment to the OP. Bill Gates doesn't run M$, the board of directors run the company. The majority vote will decide the fate of the XBox, if it ever came to a vote.

Honestly, while I would hate to see the XBox go. However, I do think some of their money could be better allocated. $100 million for the controller design to make it look like an improved 360 controller. Not to mention the amount of money they have spent on R&D for the E3 XBone model. To just change it and spend more R&D money. Not to mention, paying for exclusives.

Bigpappy1040d ago (Edited 1040d ago )

@ MWong: When you reply to my comment please make sure that what you accuse me of saying is what I did say. I never said Bill Gates run Microsoft.

Now you also state that the board of directors run M$. If that is true, why did they not have Xbox as a separate company while Ballmer was CEO? No the do not run M$. It is run buy the CEO and the chairman. The board gets to pick who runs the company, but they do NOT run it.

The next CEO gets to decide the fate of Xbox business.

Diver1040d ago (Edited 1040d ago )

Well jokesonyou you don't realize that 1% makes them a top investor. Also they ain't alone on this.

If errr, when the Xbox has a bad start this gen it could force investors looking at bad office and windows sales to push the issue through.

Overall Xbox has yet to turn a profit. They're still down from the first box days.

Startin with attacking opengl to ram directx down our throats Microsoft is the worst thing ever to happen to gaming.

Christopher1040d ago

@JOY: Actually, this isn't the first time that board of directors people (or shareholders) have discussed selling off the Xbox division. The reason? It's one of the least profitable divisions in the company but has one of the highest expense rates outside of software divisions.

JokesOnYou1039d ago (Edited 1039d ago )

All I see here is SPECULATION with nothing even close solid to go on, no different then speculation sony would split the ps division. No coincidence people giving a firm who has 1% stake and currently no board seat in a huge corporation so much weight are the usual suspects. Nothing to see here but wishful thinking really.

Here's some black and white facts for all the speculation:

"Microsoft Profits Up, Xbox Division Up 55%"

"The bold bets we made on cloud services are paying off as people increasingly choose Microsoft services including Office 365, Windows Azure, Xbox LIVE, and Skype," said Microsoft CEO Steve Ballmer. "While there is still work to do, we are optimistic that the bets we’ve made on Windows devices position us well for the long-term."
http://www.vgchartz.com/art...

-I SPECULATE that based on these latest financial FACTS micro will now commence their world domination plan to take over the planet, or maybe just continue to support the Xbox brand. Who knows? lol

JohnnyBadfinger1039d ago

It's bad enough having Microsoft in charge of Xbox if it were sold I'd put my money on activision or EA even Ubisoft as the main publishers they could make heaps from having their own console.

morganfell1039d ago

There is a reason they want to divest themselves of the division. Here are thre pieces of info from Gaf:

http://i.imgur.com/UwdTasL....

http://i.imgur.com/ZUJHD.pn...

And the third piece is from a post where the individual stated that it should be considered how the Xbox division will be viewed early next year post initial launch. If Sony appears to be widening a lead it could drive some radical changes.

HardTileD_1039d ago SpamShow
+ Show (10) more repliesLast reply 1039d ago
Anon19741040d ago (Edited 1040d ago )

It's no secret that other board members and investors have long had the knives out for the Xbox. Looking at it from a business perspective, even though the Xbox makes money now the return on money invested is paltry compared to what we see coming out of Microsoft's other divisions. You can understand why they might want to see it go when the capital could be spent boosting a much more profitable software division. But Ballmer was always the reason that this talk never went anywhere. He was a huge Xbox supporter. And now he's gone.

With ValueAct now adding its considerable influence to a board that was already unsure of the Xbox but held in check by Ballmer that leaves the division on shaky ground if the Xbox One fails to deliver, and with Windows 8 not exactly taking off and PC sales continuing to slump, Microsoft despite making obscene amounts of money could suddenly start to feel the pressure.

There's already been a number of analysts sounding the alarms regarding an uncertain future for the company. That's not saying they're in danger of going bankrupt or any such nonsense, but who knows what the company will look like even 5 years out.

So the question is, if Valueact and other board members get their way with the XBox, what then? Will it be spun off into it's own company, relatively intact or simply sold? And if sold, to who? When the analysts started talking again about the Xbox division being sold recently, Samsung was the name most often thrown about.

I wouldn't write off the influence that ValueAct has over the company. It's already being speculated that they're the once who've forced Ballmer out, and they don't even have their board seat yet. And they'd just be adding their voices to the others that think the Xbox divisions money could be better spent on a more profitable division, but have been held in check by Ballmer over the years.

vigilante_man1040d ago

Samsung make great hardware. We could see amazing hardware from both Sony and Samsung.

We need competition, where ever it comes from. This summer has taught us that.

TheTwelve1040d ago

You're speaking too much sense too early on these pages, bro! As much as Xbox supporters say this is a Sony-site, you will see them come out to disagree with you on this!

Ripsta7th1040d ago (Edited 1040d ago )

Xbox brand isnt dying anytime soon
@TheTwelve -you should be grateful he isnt right because if samsung takes over xbox its game over for sony Lol

Anon19741040d ago (Edited 1040d ago )

No one says the XBox is dying. That's not what this is about. The problem that shareholders and others on the board had was how much the Xbox division was profiting compared to capital invested with other divisions.

To simplify what we're talking about there, If you have two different revenue streams going into two different divisions and one revenue stream is making you 20% return and the other 5% return, it just makes sense that you may consider switching both streams into the division making bigger returns. With Microsoft, there are a number of divisions which would produce more returns for that invested capital, which analysts and board members have been pointing out for years but were blocked by Ballmer.

ValueAct "sourcing investments in companies they believe to be fundamentally undervalued, and then working with management and the company's board to implement strategies that generate superior returns on invested capital." It's all about more bang for your buck, and any business would be foolish if it didn't reassess it's invested capital versus returns from time to time. If it were just ValueAct saying this, you could probably just ignore them, but this has been simmering well before ValueAct made their move.

It has nothing to do with the Xbox brand "dying" or even being in danger. The question is, could Microsoft be spending that money better elsewhere, and many have long thought they could but have been stopped by Ballmer who just presided over the worst quarter the company has seen in recent history. And now he's stepping down.

Edit: On a side note, I'm surprised no one has chimed in yet and said "But..but Sony!" Usually, you can't discuss a company's financials without someone trying to shift the conversation to Sony's ongoing troubles.

TheTwelve1040d ago

@Ripsta7th

--- It was supposedly "gameover" for Sony when Microsoft entered. I recall recommendations that people sell Sony stock when Halo 3 came out...

...and now we find ourselves here, today.

I'm not worried about Sony. They know how to battle.

12

Deadpoolio1040d ago

I'm sorry I stopped reading after Valueact and considerable influence...When you have a 1% stake in a company you have NOTHING...Most companies don't even let 1% shareholders attend the meetings let alone would they ever even consider listening to anything that came out of a 1% stakeholder's mouth

creatchee1040d ago (Edited 1040d ago )

@TheTwelve

"--- It was supposedly "gameover" for Sony when Microsoft entered. I recall recommendations that people sell Sony stock when Halo 3 came out...

...and now we find ourselves here, today."

Halo 3 came out in September 2007. Sony's market cap was $54 billion in December 2007.

Today, Sony's market cap is $20.43 billion.

Selling Sony stock would have been an extremely good move if you did so before Halo 3 came out. Just saying.

TheSauce1039d ago

Samsung would probably love to buy xbox. They've always said that one of their goals is to have a step-up in the western market. Xbox is pretty much North America so buying them would be a huge bone for Samsung.

+ Show (5) more repliesLast reply 1039d ago
kewlkat0071040d ago

" $2 billion in order to take over 1 percent stake"

Dayummm

Mystogan1040d ago

Microsoft selling their Xbox Division will never Happen. Its a multibillion dollar business, These guys are pretty dumb if they really think that.

PlayStation_41040d ago

Samsung may be a nice console hardware manufacturer

Eddie201011039d ago

Selling the Xbox division to another company would be the best thing to happen to the gaming industry. Still would have the competition without the take over the world attitude that Microsoft has.

hqgamez1039d ago

Sorry to break it, but its probably the truth. MS spends most of the money trying to market the game console everywhere and purchase exclusives and dlc because they want to hurt the others reps.
if you think back towards the gta iv dlc for 50 million, that is a bunch of money, deals like COD dlc 30 days is private because that is probably some 100million plus deal, fifa 14 on every X1 EU (EA must been paid!!)
they hope they can build a name by buying off stuff to bring the fans which is the wrong way. even tho they brought some in. it's not working. They believed they own this generation and introduced the Xbox One with policies that users will follow and become a cash king. This is probably where they hoped to dominate and flow cash. Now you see how that went.

+ Show (4) more repliesLast reply 1039d ago
markbob1040d ago

Im sure MS will do exactly what Sony did and tell the "activist investor" to take a hike

lastofgen1040d ago

I agree.
I'm glad sony told the other guy off and I hope ms does the same with these new valueact people.

Prophet-Gamer1039d ago

MS isn't the same company as Sony and the implications of the two are different. MS makes a ton of money off of their Enterprise division with Windows, Xbox represents a tiny part of their revenues. If you look at it that way, selling off Xbox or spinning it off would be good for the company.

On the Sony side, PlayStation is one of the few profitable things inside Sony, they haven't made money in years. Iirc Loeb wanted to do was split the entertainment side from the hardware side which would have made him tons of money but pretty much destroyed Sony. Selling off Xbox wouldn't make so much as a dent in MS, in fact it may help them free up money to invest in their OS side. Splitting Playstation from Sony would have pretty much ended a good portion of Sony.

Thatguy-3101040d ago (Edited 1040d ago )

"We've always had different competitors, we were in the space before Microsoft and we may be in the space after Microsoft,"
Like Sony said that they see competition come and go.
http://www.computerandvideo...

Belking1040d ago (Edited 1040d ago )

I'm sure they said similar things about Samsung and Apple too...lol

n4rc1040d ago

1% doesnt hold much sway.. just because they have backing on one issue doesnt mean xbox is going anywhere

Anon19741040d ago (Edited 1040d ago )

It's more than just ValueAct though. Analysts, other board members and investors alike have long been mulling the value of the division to the overall company. The only reason that talk never went anywhere was because of Ballmer, and now he's stepping out. ValueAct would already be adding their voice to the voices already calling for this. And if the Xbox One doesn't meet expectations, you can be damn sure these voices are going to be heard with no Ballmer to protect the division.

It's already speculated that the reason Ballmer is stepping down was due to ValueAct looking to force him out otherwise. I wouldn't write off the impact they could potentially have on the company, especially when they aren't alone on the board in thinking that something better could be done with the money currently being invested into the Xbox.

Edit below: Are any of you even listening? This has nothing to do with Xbox not being successful. You all forget, they're being measured against the rest of Microsoft's divisions which are making obscene amounts of profit while they aren't. That's what this is all about. Microsoft getting the most bang for their buck.

thetruthx11040d ago

@darkride66 you sound silly Xbox ain't going nowhere except a bigger user base in near future

kewlkat0071040d ago

All the Xbox brand has seen is growth from one gen to the next..No longer in the red year-on-year.

What board member would not be happy..

tokugawa1040d ago (Edited 1040d ago )

edit forget it

gamer20131039d ago

Here's someone that wants to see MS leave the gaming industry.

Prophet-Gamer1039d ago

The amount of people disagreeing with you is insane. seems a lot of people put their fingers in their ears and refuse to listen. Apparently, some of the people on this site know better than top business analysts and billionaire investors.

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jukins1040d ago

whenever some investor with a lot of shares wants to sell off a division its always for the quick payout instead of trying to have money constantly trickling in over a long period. its sad thats how things work.