14 DAY TRIAL // A report prepared by analysts at the investment bank Goldman Sachs are suggesting that technology giant Microsoft might benefit from spinning out its entire Entertainment and Devices division, which includes all the business elements linked to the Xbox 360 home gaming console.
Goldman Sachs believes that the Entertainment and Devices division can exist on its own after achieving profitability at some point in 2008, with profits reaching 679 million dollars for the most recent fiscal year report, with the Xbox 360 leading the way.
The division also handles the Zune music player and the Windows 7 Phone operations, which are set to be more closely integrated with the gaming platform Xbox Live.
The report from Goldman Sachs, which has been quoted by TechFlash, states, “For example, the Xbox products could be an appealing stand-alone entity, given the historical success of the Xbox and the products’ brand strength, and the business could show unlocked value with forced cost discipline compared to as a piece of Microsoft”.
It goes on to add, “To date the company’s comments suggest that management still sees significant value in combining the consumer and enterprise efforts, but we view a foot in both camps as preventing a successful focus on one strategy, a la Oracle in the enterprise or Apple for consumers.”
Goldman Sachs was lowered the overall rating from Microsoft from “buy” to “neutral”, saying that the company is facing threats from the rise of tablet PC and cloud based computing that outweight the positive outlook for the Xbox 360 linked to the November launch of the Kinect motion tracking system.
Microsoft says that the Kinect will be advertised as being as important as wholly new gaming console and that it will extend the life time of the platform by at least five years.
To achieve this Microsoft needs to have the motion tracking peripheral sell well on launch, so expect a big marketing push to come.