Re: Kind of OT: Goldman Sachs Analyst Suggests To MS, "Spin off its Xbox business."
- From: Doug Jacobs <djacobs@xxxxxxxxx>
- Date: Tue, 05 Oct 2010 16:33:25 -0500
Tom <noway@xxxxxxxxxxx> wrote:
Microsoft was down 1.9% to $23.91 after Goldman Sachs downgraded the stock
from "buy" to "neutral." The stock is down more than 21% this year.
Yeah, because having billions of dollars in cash in the bank, and a very
fast selling software product is a sure sign of a company that's a bad
investment. Honestly, I can't think of many other companies - tech or not
- that wouldn't KILL for the numbers Microsoft has. Yet because some dimwit
at a bank doesn't get it, the rating is lowered causing the stock price to
go down which in turn takes the whole market with it.
Honestly the stock exchange is nothing but a self fulfilling prophecy. All
it takes is for an investment bank to drop your rating, and the rest of the
market follows along.
proposal: Spin off its Xbox business.
The only reason she's suggesting this is because the losses from the Xbox
department are a drain on Microsoft's twin cash cows - Windows and
Office. I know that the 360 has earned enough money cover its own
development and initial start-up costs, but has it earned enough to
erradicate the red ink from the initial Xbox? Spinning off the Xbox as
its own company would result in Microsoft's finances looking better on
paper because they've effectively taken the gaping maw that is game
console development, and hidden it on another page.
What's stupid here is that spinning off the Xbox (or other so-called
unprofitable business units) wouldn't really change anything - Microsoft
would still be using its massive revenues from its desktop software
products to fund the Xbox. The only difference is that now the money
spent for the Xbox becomes an "investment" as opposed to an "expense".
And her note suggested that Microsoft should expand its investment in cloud
This, by far, was the only sensible suggestion she made.
So far, she wrote, Microsoft has not answered threats from smart phones and
tablet computers, "which threaten to encroach on its highly profitable
"answered threats from..."
Smart phones - they have a version of WinCE for phones - and it's
been around a lot longer than the term "smart phone" has.
Tablet computers - um... Tablet computers have been around for over a
decade - and they all ran Windows up until just a few years ago when you
started seeing Linux on a few models, not to mention the iPad.
And people wonder how we got into the current financial mess. Well,
here's one big problem - the people responsible for the big investments
don't know squat about the companies or industries they're actually
It's not broken. It's...advanced.
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