When Steve Ballmer announced he’d be stepping down from his position of Microsoft CEO, the first question everyone started to ask was simple: who’d replace him? Reports today are swirling that former Nokia CEO Stephen Elop might get the job, and if so, he may make some bold moves that could drastically alter the company’s course: he might sell off the Xbox division and pull the plug on Bing entirely.
A post on Bloomberg today cites “people with knowledge of his thinking” who say that Elop considers those two divisions—one a hard-fought success, the other something closer to an unmitigated failure—to be distractions for the company. Instead, Microsoft ought to focus on finding ways to sell Office to more customers on different platforms, rather than using it as a carrot to sell more copies of Windows, and, by extension, Windows machines.
It’s an interesting idea, and I’ve long wondered why Microsoft would even bother with Bing at all. Its recent forays into making computers—specifically its Surface line of devices—has been similarly puzzling if for no other reason than it threatens to take up some of the market share relied upon by PC manufacturers. While on a personal level I’d love a Surface Pro 2 to call my own, I also don’t totally understand why Microsoft would bother.
In fact, in recent years, it’s been hard to figure out just what, exactly, Microsoft has been trying to do with its business. The first signs that things were changing came when it announced its intention to create the original Xbox over a decade ago. Microsoft’s intentions to enter the hardware market—when it had been strictly about making software, and mostly infrastructure programs like Windows and productivity software like Office—was a huge change of gears. The first iteration of the console was kind of a success, but the company managed to finally take a leadership position in the game industry with the follow-up, the hugely popular Xbox 360.
But entering the console market cost a lot of money, and considering the ever-shifting tastes and opinions of gamers, it’s hard to keep the bucks flowing consistently. With every new generation of game hardware, consoles are sold at a loss, with the money made up in game sales, accessories, and add-ons like Xbox LIVE service. Over time, as the console’s install-base grows, the cost of manufacturing drops, and the profits start to go up. The company has recently said that its newest console, the Xbox One, will either break even or make a profit—but right now it’s gambling by sticking a $500 price tag on the machine.
Microsoft had to lose a lot of money before it started making money in the game industry. And presumably, it’s still losing money by pursuing the Google freight train with its far less popular Bing service. I don’t see much of a tragedy in killing Bing. Xbox is a bit trickier—and considering that Microsoft is acquiring Elop’s former business, Nokia, to make Windows-based devices, it makes one wonder what use there’d be for Microsoft-made Surface gadgets.
This may all be moot if someone else gets the job, of course. The same Bloomberg post says that Ford Motor Company CEO Alan Mulally is another frontrunner for the new job. And frankly, it’s still possible that Microsoft will find its new CEO already working in the company, making all of this an exercise in speculation.
If Microsoft were to sell off the Xbox division, who would buy it? Could Sony grab it and make a SUPER X-STATION-BOX? Or maybe Nintendo would grab hold and bolster its hardware fortunes. Or perhaps a company not yet in the game, dying for a head start. Interesting times…