Should Microsoft sell Bing and Xbox?

By Kip Kniskern | Posted November 8, 2013 28 comments

Lots of noise this week about what Microsoft should do with the direction of the company, including some persistent calls for the company to get out from under some of its money losing propositions, including Bing and Xbox.

Today, a report (or, in the words of Microsoft’s Communication Director Frank X. Shaw, a “foray into fiction”) from Bloomberg.com describes what it says are considerations by potential CEO candidate Stephen Elop to emphasize Office as a revenue driver for the company (Elop was in charge of Office before he left to become CEO of Nokia), and to “sharpen the company’s focus”:

Besides emphasizing Office, Elop would be prepared to sell or shut down major businesses to sharpen the company’s focus, the people said. He would consider ending Microsoft’s costly effort to take on Google with its Bing search engine, and would also consider selling healthy businesses such as the Xbox game console if he determined they weren’t critical to the company’s strategy, the people said.

In another report this week, this time by Nomura analyst Rick Sherlund, who thinks that Ford CEO Alan Mulally is “likely” to get the Microsoft CEO job, should also dump Bing and Xbox, according to a report from Business Insider:

So what’s the plan for Mulally when he takes over Microsoft? In Sherlund’s mind, it’s time to dump two major anchors — Bing and Xbox. Combined, he thinks Bing and Xbox are losing $3-$4 billion a year, which is a $0.30-$0.40 drag on EPS.

He thinks Microsoft should give away or sell Bing, and spin out or sell Xbox.

Of course there’s lots of evidence that Microsoft will do no such thing, and outgoing CEO Steve Ballmer has been adamant in saying that the “One Microsoft” reorganization effort he put in place earlier this year will remain a focus for the company. That includes especially Bing, as it powers search efforts all across the company, including the built in search capabilities introduced in Windows 8.1.

Still, if Microsoft and what appears to be a soon to be increasingly activist Board of Directors felt strongly enough to oust longtime CEO Steve Ballmer, why would it make sense to carry on all of his policies without question? If whatever new CEO is hired is required to carry out “One Microsoft”, why bother getting rid of Ballmer in the first place?

Microsoft has made a major play to include Bing across all facets of the company, treating the search product as a platform rather than a standalone product, and there are some indications that it could be about to pay off. Last week at the Bing Ads Next conference held on Microsoft’s campus, the company unveiled “Bing Hero Ads”, advertiser landing pages promoted within Bing Smart Search on Windows 8.1 that deliver an immersive experience within Windows for specific brand searches:

 

 

 

 

 

 

 

 

 

 

We think it’s unlikely that Microsoft would be willing to scrap plans to build Bing into all of its “devices and services”, but what if an arrangement could be reached with Yahoo! (who may be the only company willing and able to run Bing other than Microsoft) were to be reached? Marissa Mayer is known to be unhappy with the current Search Alliance, although it appears that she’s stuck with it, but what if Yahoo! ran Bing, and allowed Microsoft the same access to Bing as a platform? Just wild thinking, I know, but maybe there’s some fire in all that “get rid of Bing” smoke.

As for Xbox, Microsoft has plans to ride the brand into the living room, although it certainly hasn’t done much to advance that cause lately. The Xbox One is a $500 behemoth of a box that requires a $10/mo Xbox Live account AND a $99/yr Xbox Music account to get full functionality out of it at a time when Google, the cable companies, and even Steam are hard on its heels offering cheaper, and some would say better alternatives. Is Microsoft getting enough value out of Xbox to keep the brand around?

What do you think? Is all this “get rid of Bing and Xbox” talk just blowing smoke? Is it all just a “foray into fiction”, as Frank Shaw says? Or could a new CEO fire sale of underperforming parts of the company make sense?

Posted November 8th, 2013 at 11:09 am
  • uberlaff

    MS needs Xbox and Xbox needs a new strategy… the old single $500 console that lives for 10 years strategy won’t work in a world of Apple, Google, and Amazon ecosystems.

    Nintendo is the canary in this coal mine.

    Xbox should really consider making an App & Media console for $99 that gives users access to everything the Xbox One offers except hardcore games. Keep the One around for gamers and prosumers but they need an entry into the ecosystem and Xbox 360 doesn’t seem to fit that bill. They’re going to miss the mass market.

    I believe if you are going to compete in a devices and services world than you need to be competing in all types of media and all types of devices. One missing piece can bring down the whole wall.

    • James

      Xbox isn’t primarily competing against Apple, Google and Amazon… they’re primarily competing against Sony. The TV services are competing against the others. Xbox already has a new strategy which is making it the sole device for all your living room entertainment needs…, and bringing entertainment services to the rest of your devices. Let’s see how they play out. The reason the console lasts for so long is because consumers don’t like buying devices for their living room as frequently as they do other devices. The fact that one of the XB1 taglines is “Built for the future.” is intriguing because it says it adapts and changes overtime… so that’ll be interesting to see what happens.

  • uberlaff

    MS needs Xbox and Xbox needs a new strategy… the old single $500 console that lives for 10 years strategy won’t work in a world of Apple, Google, and Amazon ecosystems.

    Nintendo is the canary in this coal mine.

    Xbox should really consider making an App & Media console for $99 that gives users access to everything the Xbox One offers except hardcore games. Keep the One around for gamers and prosumers but they need an entry into the ecosystem and Xbox 360 doesn’t seem to fit that bill. They’re going to miss the mass market.

    I believe if you are going to compete in a devices and services world than you need to be competing in all types of media and all types of devices. One missing piece can bring down the whole wall.

    • James

      Xbox isn’t primarily competing against Apple, Google and Amazon… they’re primarily competing against Sony. The TV services are competing against the others. Xbox already has a new strategy which is making it the sole device for all your living room entertainment needs…, and bringing entertainment services to the rest of your devices. Let’s see how they play out. The reason the console lasts for so long is because consumers don’t like buying devices for their living room as frequently as they do other devices. The fact that one of the XB1 taglines is “Built for the future.” is intriguing because it says it adapts and changes overtime… so that’ll be interesting to see what happens.

  • NicolaMantovani

    xbox live is now a 120$ subscription? don’t really think so.

    xbox music is now a corner stone of xbox? neither this one is correct.

  • NicolaMantovani

    xbox live is now a 120$ subscription? don’t really think so.

    xbox music is now a corner stone of xbox? neither this one is correct.

  • James

    Simple answer…. no and no…. Xbox is too big of a brand for Microsoft to let go, Bing is Google’s primary search competitor – this year saw major gains for Bing and marketshare loss for Google after people finally realize the true evil of Google. Bing is also now an integral part of all their products which was the main point in the new branding “more than just a box”…. they simply just need to bring the same quality service internationally.

  • James

    Simple answer…. no and no…. Xbox is too big of a brand for Microsoft to let go, Bing is Google’s primary search competitor – this year saw major gains for Bing and marketshare loss for Google after people finally realize the true evil of Google. Bing is also now an integral part of all their products which was the main point in the new branding “more than just a box”…. they simply just need to bring the same quality service internationally.

  • Boris Mihaylov

    If Microsoft sell off or shutdown Bing and Xbox, it will really disappear off the map in the couple of years.
    If consumers (the home user) doesn’t have entertainment services like music, video, gaming, etc. they will start switching to completing platforms like Apple and Google. If this happens, slowly Enterprise will switch as well to those platforms. If you think about it, the main selling point for Microsoft software for business is that users are familiar with their software (Windows and Office). If users don’t use it at home, companies would have to invest in training their employees on MS software (and this in addition to the cost of the software itself), which at some point would stop making sense.
    If Bing is sold off, Windows 8 would have to be re-designed (more money loss), the same applies for Windows Phone and Xbox.
    And no one in my opinion would by Xbox for the simple reason that if they do, they would have to license Windows, Hypervisor, and MS’s development tools to make it run – I don’t thing any company would be willing to do this – it would be too much cost.
    Finally, on the personal note, if MS does this, I’m dropping all my MS software and hardware and switching to Apple. I like having a unified experience and have been waiting on MS to do that for a long time – it’s finally starting to happen and it would be a shame for them to reverse course.

  • Boris Mihaylov

    If Microsoft sell off or shutdown Bing and Xbox, it will really disappear off the map in the couple of years.
    If consumers (the home user) doesn’t have entertainment services like music, video, gaming, etc. they will start switching to completing platforms like Apple and Google. If this happens, slowly Enterprise will switch as well to those platforms. If you think about it, the main selling point for Microsoft software for business is that users are familiar with their software (Windows and Office). If users don’t use it at home, companies would have to invest in training their employees on MS software (and this in addition to the cost of the software itself), which at some point would stop making sense.
    If Bing is sold off, Windows 8 would have to be re-designed (more money loss), the same applies for Windows Phone and Xbox.
    And no one in my opinion would by Xbox for the simple reason that if they do, they would have to license Windows, Hypervisor, and MS’s development tools to make it run – I don’t thing any company would be willing to do this – it would be too much cost.
    Finally, on the personal note, if MS does this, I’m dropping all my MS software and hardware and switching to Apple. I like having a unified experience and have been waiting on MS to do that for a long time – it’s finally starting to happen and it would be a shame for them to reverse course.

  • Fred A.

    This is all just talk. Every one of these wannabe CEO’s have their opinion about how the next CEO should run MS, or what they would do if they ran MS…
    In my opinion, I think MS will figure it out like they always have.
    I think they should keep “Xbox One and Bing, period.

  • Fred A.

    This is all just talk. Every one of these wannabe CEO’s have their opinion about how the next CEO should run MS, or what they would do if they ran MS…
    In my opinion, I think MS will figure it out like they always have.
    I think they should keep “Xbox One and Bing, period.

  • http://sjsmos.me/ Stephen J. Sundberg

    Microsoft needs to sell Windows and Windows Phone! Bing and Xbox are the only things they are getting right!

    • Microsoftjunkie

      Yea, says the one with an irrelevant comment.

  • http://sjsmos.me/ Stephen J. Sundberg

    Microsoft needs to sell Windows and Windows Phone! Bing and Xbox are the only things they are getting right!

    • Microsoftjunkie

      Yea, says the one with an irrelevant comment.

  • Mario Albertico

    Elop is in a position where, were he be interested in becoming Microsoft’s CEO, he can’t really come forward and comment on how valid these reports are. That should say something about the intentions of whoever anonymously came to Bloomberg on this report.

    That’s not to say Elop is incapable of viewing Xbox and Bing as disposable…

  • Mario Albertico

    Elop is in a position where, were he be interested in becoming Microsoft’s CEO, he can’t really come forward and comment on how valid these reports are. That should say something about the intentions of whoever anonymously came to Bloomberg on this report.

    That’s not to say Elop is incapable of viewing Xbox and Bing as disposable…

  • DKJr

    If MS dump Bing and Xbox, well, they’ll have committed probably the biggest suicide of all time. Does Xbox strategy need changing or refocus, yes. Is Bing becoming more ans more relevant and key USP for Win 8 & MS as a whole, yes. The biggest mistake MS has made so far is not leveraging its Xbox Games on mobile. Imagine Lumias with the Camera prowess and how that has helped build consumer mind share. Bing & Xbox are critical to MS future success, they just need to hone these potential winners with consumers and use them to drive future strategy and fast!

  • DKJr

    If MS dump Bing and Xbox, well, they’ll have committed probably the biggest suicide of all time. Does Xbox strategy need changing or refocus, yes. Is Bing becoming more ans more relevant and key USP for Win 8 & MS as a whole, yes. The biggest mistake MS has made so far is not leveraging its Xbox Games on mobile. Imagine Lumias with the Camera prowess and how that has helped build consumer mind share. Bing & Xbox are critical to MS future success, they just need to hone these potential winners with consumers and use them to drive future strategy and fast!

  • DKJr

    If MS dump Bing and Xbox, well, they’ll have committed probably the biggest suicide of all time. Does Xbox strategy need changing or refocus, yes. Is Bing becoming more and more relevant and key USP for Win 8 & MS as a whole, yes. The biggest mistake MS has made so far is not leveraging its Xbox Games on mobile. Imagine Lumias with the Camera prowess and how that has helped build consumer mind share. Bing & Xbox are critical to MS future success, they just need to hone these potential winners with consumers and use them to drive future strategy and fast!

  • DKJr

    If MS dump Bing and Xbox, well, they’ll have committed probably the biggest suicide of all time. Does Xbox strategy need changing or refocus, yes. Is Bing becoming more and more relevant and key USP for Win 8 & MS as a whole, yes. The biggest mistake MS has made so far is not leveraging its Xbox Games on mobile. Imagine Lumias with the Camera prowess and how that has helped build consumer mind share. Bing & Xbox are critical to MS future success, they just need to hone these potential winners with consumers and use them to drive future strategy and fast!

  • Rikikrik

    Where is Xbox lite (Xbox without the game features)??? That would really catapult Microsoft into the living rooms. Furthermore there is no way you can sell Bing and Xbox while not destroying every product and service Microsoft has built this decade. Think of what Bing means for the future development of products and services. You would be making Microsoft and the future development of products and services purely dependant on a third party (or Google). Or Microsoft would have to develop another solution if Bing is sold off???? Crazy and how foolish can one be??? The Xbox is too dependant on Windows software, how do you sell Windows software??? Licensing windows software???. No way, since it is too tied in to other windows products and services like tablets, PC’s, WP, Kinect and phablets. The buyer could never compete with Sony or any other company on this level without total integration to other Microsoft products. Xbox would be worthless without total integration with other products and services. Too intertwined, too interconnected, too integrated to be able to be sold. Furthermore Microsoft is just getting warmed up selling adds via Bing. In Q3 add revenue surged by 48%. If Microsoft can be half as profitable selling adds as Google, this would be mean a surge in profits and revenue. This just shows that Analyst’s do not know what they are talking about.

  • Rikikrik

    Where is Xbox lite (Xbox without the game features)??? That would really catapult Microsoft into the living rooms. Furthermore there is no way you can sell Bing and Xbox while not destroying every product and service Microsoft has built this decade. Think of what Bing means for the future development of products and services. You would be making Microsoft and the future development of products and services purely dependant on a third party (or Google). Or Microsoft would have to develop another solution if Bing is sold off???? Crazy and how foolish can one be??? The Xbox is too dependant on Windows software, how do you sell Windows software??? Licensing windows software???. No way, since it is too tied in to other windows products and services like tablets, PC’s, WP, Kinect and phablets. The buyer could never compete with Sony or any other company on this level without total integration to other Microsoft products. Xbox would be worthless without total integration with other products and services. Too intertwined, too interconnected, too integrated to be able to be sold. Furthermore Microsoft is just getting warmed up selling adds via Bing. In Q3 add revenue surged by 48%. If Microsoft can be half as profitable selling adds as Google, this would be mean a surge in profits and revenue. This just shows that Analyst’s do not know what they are talking about.

  • http://www.techmansworld.com/ Michael Hazell

    I do not think Microsoft should sell anything. Bing is now starting to gain a lot of traction and its integration with Windows 8.1 is getting deeper and deeper. I don’t have much to comment on the Xbox, but it is up there with Sony as the kings of the home console market.

  • http://www.techmansworld.com/ Michael Hazell

    I do not think Microsoft should sell anything. Bing is now starting to gain a lot of traction and its integration with Windows 8.1 is getting deeper and deeper. I don’t have much to comment on the Xbox, but it is up there with Sony as the kings of the home console market.

  • Oun Upatising

    Elop runs Nokia to the ground.
    Sells the company.
    Elop join Microsoft.
    Proceed to sell off its parts
    Run it to the ground.
    ????
    Profit.

  • Oun Upatising

    Elop runs Nokia to the ground.
    Sells the company.
    Elop join Microsoft.
    Proceed to sell off its parts
    Run it to the ground.
    ????
    Profit.