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The Xbox 360 has turned into a hot console after Microsoft took a huge loss with the original Xbox to break into the console gaming market. It currently sits in second place in console sales between the Nintendo Wii and Sony PS3 and has helped drive innovation in online gaming for the consoles. However, investors look at the bottom line and after disappointing sales with the Zune, shrinking Windows Mobile market share, and the high costs of consoles they have a request for Microsoft. Get out of the consumer electronics market.
"It's hard to make the case this has been a good use of shareholder capital," says Todd S. Lowenstein, who runs HighMark Capital's value fund. "I don't fault them for trying this stuff, but investors are getting impatient." Some investors would rather see Microsoft concentrate on its PC and corporate software where operating profit margins reach as high as 72% versus just 10% in its Entertainment & Devices unit.
The Xbox 360 recently reached the point where Microsoft makes money off of each console sold but the entertainment division has still lost an estimated $8 billion since 1999. How much of that is because of the Xbox versus other entertainment initiatives is not known though.
Microsoft is banking on Project Natal (and possibly the introduction of a Xbox 360 'Slim' model) to kick start sales of the Xbox 360 much the same way that Sony enjoyed a sales surge after the introduction of the PS3 Slim in conjunction with a price drop. It could result in Microsoft being able to delay introducing a new console for a couple of more years. Natal also possibly has a future of being integrated into other devices and new technologies. However, investors look at the bottom line and would prefer to see Microsoft focus on their extremely profitable core business instead of brancing out to other areas.
So would Microsoft drop their Entertainment and Devices division which includes Xbox brand? Absolutely not any time soon. However, the complaints from the investors over Microsoft's struggles in the consumer electronics market is worth keeping an eye on especially with Project Natal and Windows Mobile 7 coming out right around the corner.
Source and http://www.examiner.com/examiner/x-28759-Atlanta-Video-Game-News-Examiner~y2010m6d9-Investors-to-Microsoft-Drop-the-Xbox
