Nadella defends value of Xbox, gaming to Microsoft

Microsoft’s CEO suggested that financial analysts – some of whom had called in years past for Microsoft to sell its Xbox unit – were looking at the business the wrong way.

In its pitch to Wall Street, Microsoft is sticking up for its video gaming business.

At a briefing for financial analysts on the sidelines of the company’s Build developer show, chief executive Satya Nadella prominently highlighted the company’s efforts to get more value out of its gaming franchise.

And, politely, he suggested that financial analysts – some of whom had called in years past for Microsoft to package and sell its Xbox unit – were looking at the business the wrong way.

“Most of you view gaming as ‘Microsoft has .. .an Xbox business,’” Nadella told the crowd of mostly investment bank analysts who track Microsoft’s finances. “I think you understand the console economics. But it’s a much broader thing for us.”

Nadella, in his fourth year at the helm of the Redmond company, has narrowed Microsoft’s focus to the areas where it can bring something different to the market. He’s also tried to build greater connections between the company’s wide range of products.

Nadella threw up a PowerPoint slide to illustrate his point, using the Xbox business as an example.

The company’s Xbox Live service, initially a subscription program for console gamers to compete with each other online, has been broadened to a social network that connects Xbox and personal computer gamers. The company has also moved to enable gamers playing on the two platforms to square off against each other.

And with the acquisition of Seattle startup Beam, Microsoft is aiming to loop in the growing realm of streaming video games and other content.

Nadella says he’s trying to “connect the dots around gaming.”

That approach, he says, brings Microsoft more cash per customer than the old world of simply selling someone an Xbox console.

Overall, Microsoft’s gaming business brought in $6.6 billion in revenue in the nine months through March, down 2 percent from a year earlier.

Phil Spencer, Microsoft’s corporate vice president who leads the company’s Xbox unit, told analysts here that working in gaming helps keep the company’s engineers at the forefront of new technologies.

That’s paid dividends in rendering computer graphics in three dimensions,…

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