With the appointment of Satya Nadella as Microsoft’s new CEO, some investors have renewed calls from late last year that the company scrap the under-performing Surface tablet, search engine Bing, and even the Xbox gaming console.
According to the Washington Post, two major investors are behind the calls, and they are hoping to find a comrade in Nadella. The new CEO said during his announcement speech that “our job is to ensure that Microsoft thrives in a mobile and cloud-first world”, and serving as Microsoft’s President of Server & Tools before being appointed CEO, he might just make that push.
“Nadella has spent the last seven months running Microsoft’s $20 billion server and tools division, so he could be ideally suited to manage that transition,” the Washington Post writes. He transformed Microsoft’s database, Windows Server and developer tools to its Azure cloud – which saw revenue climb from $16.6 billion in 2011 to $20.3 billion in June 2013.
It might be plausible that Nadella could shutter the Xbox in the future, but even with renewed calls, it seems highly unlikely.
“You’re asking for Nadella to walk into a board meeting and look Ballmer and Gates in the eye and say, ‘The decisions you’ve made over the past two decades are a mistake’. That’s going to take some serious strength of character,” Robert Bontempo, a management professor at Columbia Business School.
Although it was released in 2005, by October 2013 the Xbox360 had sold over 80 million units, and its successor, the Xbox One, is doing equally well. In November, Microsoft confirmed that it had sold one million Xbox One consoles within its first 24 hours of availability, and approximately 2 million units in its first 18 days. By December 2013, it was the fastest selling console in the United States based on NPD Group figures.
In their Q2 2014 Earnings Report on January 23, 2014, Microsoft announced they had shipped 3.9 million Xbox One units worldwide – that is 5% of total sales from the Xbox360 in on 3 months, and the One still needs to launch in other territories such as Scandinavia, South Africa and other European markets.
“If Nadella does choose to turn more decisively toward business customers, he may find a useful ally in a man named Mason Morfit. Morfit is a 37-year-old activist investor whose employer, the private hedge fund ValueAct, acquired a 0.8 percent stake in Microsoft in August, putting Morfit on Microsoft’s board,” the Washington Post said.
According to them, Morfit was reportedly vocal about Ballmer stepping down as CEO, and ValueAct has been a critic of Microsoft’s strategy – urging them in the past to offload some of its investments in consumer technology.
“Microsoft has historically had a supportive board. But with the addition of Morfit, this is going to be an extremely toxic environment … There’s going to be a lot of tension,” Bontempo concluded.
Charlie Fripp – Consumer Tech editor