Sure, poor Goldman Sachs clearly have no chance of understanding MS strategy at all.

Right...

MS do have a somewhat muddled strategy and this is being increasingly noticied in the industry.  They are still hugely successful of course, but their strategy is distinctly fluffy at the moment and they've been caught napping plenty of times in recent years and had to scramble to respond.

MS is a good company, but seriously people need to stop assuming they are some sort of genius operation with every move thought out because they clearly aren't.  There strategy across their various entertainment and mobile devices has been very, very patchy and is littered with failures for every success, and they haven't yet - as GS rightly call them out on - explained or even shown they have a strategy across their corporate/home divsions and solutions.

I take you point on Live, I made just the same point a few posts earlier and I do think GS should look more closely at Live's place in the equation, and I suspect GS is looking a bit too short term vs longer term, but it seems clear to me from reading their entire piece plus various industry (not videogame but corporate industry) sites that GS have a pretty good handle on MS, and it's a view many corporate analysts share.

I would say just sell the mobile bussiness or close it but the xbox bussiness gets in good profit with live alone excluding all the royalties payed, gears, halo and fable which sell fantasticly.

I don't take a stance this strong on the issue but I partially agree with this post.  It seems like a very risky move and I think it would make MS less competitive in the videogame space.

I doubt they're that knowledgeable but I also doubt (in fact pretty much know) that MS are hardly as organized as you imply and that when you state "at all" you clearly have to be wrong.

I'm just calling out what I hope is a rare, fanboy sounding post from you.  To state something like that is clearly wrong, and clearly overstates MS own strategy.

MS in the analyst eye has been on a bit of a downward trend for a number of years and its shares are hardly anything exciting anymore.  They have a lot of muscle and a lot of power, but right now they are clearly unfocused, 360 here, Kinect there, Zune over there, Office here, Windows 7 there, trying to attack Android over here...

They lack clear vision and GS are surely right (and hardly even alone) in calling them out for that.

At the end of the day, whatever we think of them the analysts have an impact on MS and being downgraded isn't anything MS will be happy about.

I like what they've done with the Slim, that's what the 360 should have been at launch, but overall as a total entity I find them to have lost their way somewhat and to have entered into too many disconnected battles across too many disconnected battlefields.

They need a CEO with far more vision and clarity than Ballmer, that's for sure.

At the end of the day, GS thinks that MS corporate would be better off by just unloading the XBOX division, signalling that this diviision could be a downer for the total profitability in the future.  

Okay.  Gotcha.  I do agree myself.  In fact increasingly I feel the real success for MS isn't selling consoles but the growth and stability of the Live community.  That's the real winning element of their Xbox efforts in my view and one they need to protect.

I think Microsoft would be stupid to sell off the xbox division mainly because I think it can be their next Windows well not the xbox but live. All their most successful products exist because of windows such as office. Live could be the same, things like the Zune marketplace are worthless on their own but when you can combine them with a service like Live you can have some decent success.

I  could be completely wrong but I really think Microsoft does (or at least should) think of Live in the same way they do Windows

Nope.  You're spot on I'd say.  Live is the real winner MS have, not the console itself.  These day's I'd say the 360 exists really as the dedicated device for Live, in much the same way the ipod was the dedicated device for iTunes.

Of course, we might both be wrong!

One potential early test will be the new Windows 7 phones with Live integration.  We may see there a clearer view of whether Live really can push additional sales and make the device more appealing.

	Year Ended June 30	2010	2009	2008
	Operations
	Revenue
	Windows & Windows Live Division	$	18,491	$	14,974	$	17,211
	Server and Tools		14,866		14,191		13,195
	Online Services Division		2,199		2,121		2,198
	Microsoft Business Division		18,642		18,910		18,899
	Entertainment and Devices Division		8,058		8,035		8,495
	Unallocated and other		228		206		422
	Consolidated	$	62,484	$	58,437	$	60,420
	Operating Income / (Loss)
	Windows & Windows Live Division	$	12,977	$	9,982	$	12,422
	Server and Tools		5,491		4,803		4,149
	Online Services Division		(2,355)		(1,652)		(578)
	Microsoft Business Division		11,776		11,664		11,859
	Entertainment and Devices Division		679		108		445
	Corporate-Level Activity		(4,470)		(4,542)		(6,026)
	Consolidated	$	24,098	$	20,363	$	22,271

This is how to read the chart:  The Revenue (the top figures) are before expenses, and the Operating Income (the bottom figures) are profits after expenses.  The "Entertainment and Devices Division" is the Xbox division but also includes Zune and Windows Phone along with some others.

In 2008 MS spent $8,495 million on it's Entertainment division and made $445 million from it.

In 2009 MS spent $8,035 million on it's Entertainment division and made only $108 million from it.

In 2010 MS spent $8,058 million on it's Entertainment division and made $679 million from it.

The bang for your buck with the entertainment division is one of the reasons Goldman Sachs said what they did.  They just seem to be allocating to much money to the division for a fraction in return.

Because GoldmanSucks is the heart of the bad apple!