Friday, November 22, 2013

Tech stocks: Microsoft’s future with Xbox

For video game players, the arrival of Xbox One is a big day. But what does Xbox mean for the business of Microsoft?

With a replacement for outgoing CEO Steve Ballmer looming, there has been a lot of chatter about whether Microsoft should spin off its Xbox business.

The Associated Press has a detailed breakdown of the pros and cons of keeping Xbox, which some suggest distracts the company from its computing business. While Xbox has been profitable over the last several years, Microsoft is expected to lose at least $1 billion next year.

Shares of Microsoft are up slightly, but could spike if they choose to spin off Xbox. "If you're trying to bring in new management here and have a course correction, I think this is one of the places you've got to take a look at and reassess," Nomura analyst Rick Sherlund tells the AP.

Video game consoles are expected to rake in lots of money for manufacturers. Gartner forecasts video game market revenue will hit $111 billion by 2015, with roughly half of that coming from new consoles from Sony and Microsoft.

However, Sony enters the space with a huge price advantage. The PS4 sells for $399, while Xbox One carries a $499 price tag.

Meanwhile, Pandora shares are up nearly 1% after reporting a loss of $1.7 million in the third quarter. According to Bloomberg, the company is spending more money on development and marketing as new competitors enter the streaming music business.

Follow Brett Molina on Twitter: @bam923.

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