14 DAY TRIAL // Rick Sherlund, a Nomura Equity Research analyst, said in a new report that Microsoft should actually try to sell the Bing and Xbox businesses, as the company would do better without them.
Sherlund explains that by getting rid of Bing, Microsoft would reduce its operating expenses, claiming that Facebook would most likely be a potential buyer.
“There may be a shift in the wind upcoming for Microsoft, with shareholders potentially demanding a greater say in the direction of the company and how it might be run to drive a better return to shareholders,” he was quoted as saying by GeekWire.
As far as the Xbox business is concerned, the Redmond-based company could very well sell the division to Samsung, the consumer electronics firm that would be very interested in taking over Xbox completely.
Microsoft recently unveiled the new Xbox One console, emphasizing that Xbox is now playing a key role in the long-term strategy of the company.
“Xbox is one of the areas of success for Microsoft and is cool to consumers, but it is perhaps time to assess whether this can ever be material to the overall company and might be more leveragable to a consumer-oriented company such as Samsung,” Sherlund noted.
“Shareholders might want to know if they could possibly be better off if Xbox were spun out as a separate company or sold.”
Selling Bing is highly unlikely at this point, especially because Microsoft has invested billions in a campaign against long-time rival Google that puts the focus on search engines.
And still, Sherlund believes that Microsoft would actually generate increased revenue without Bing, while dramatically cutting investments in this platform.
“If Microsoft could sell or even give Bing to Facebook or Yahoo and eliminate its operating costs and get a Traffic Acquisition Cost (TAC) back to monetize the traffic that Windows/Internet Explorer or Xbox in the living room can drive to Bing, this might generate perhaps $1.0bn of profit and positive FCF rather than be a drag of a similar magnitude. If this were returned to shareholders, this could add nearly 1% incremental to the dividend yield, in our estimation,” the analyst concluded.
Microsoft is yet to issue a comment on this new report, but expect the tech giant to step in front of the media and reiterate its commitment to make both Xbox and Bing much better products than the ones offered by competition.