Key Takeaways
- • The Information reported that several private equity firms have explored a potential joint acquisition of Microsoft's gaming business, valued between $100 billion and $150 billion, well above the $55 billion leveraged buyout of Electronic Arts including debt.
- • Discussions were reportedly preliminary and have not developed into formal negotiations with Microsoft, and a company spokesperson stated that Xbox is not for sale.
- • Xbox revenue fell 7% to $21.8 billion in the fiscal year ended June, roughly 7% of Microsoft's total revenue, and its internal accountable margin dropped to 3%.
- • Reported structural alternatives include a spin-off, a wholly owned subsidiary structure, or a joint venture, each with very different implications for Microsoft's ownership and control.
Summary
A new report from The Information, which previously and accurately reported on recent layoffs at Microsoft's gaming division, says several private equity firms have explored a possible joint acquisition of Microsoft's Xbox business. The report values the division at between $100 billion and $150 billion, a level that would exceed the $55 billion leveraged buyout of Electronic Arts, including debt. The Information's reporting, as summarized by Wccftech, characterizes the talks as preliminary and not yet developed into formal negotiations with Microsoft. A company spokesperson responded unequivocally that Xbox is not for sale.
The report also indicates that an outright sale is not the only structure under consideration. Microsoft has reportedly weighed spinning off Xbox, reorganizing it as a wholly owned subsidiary, or forming a joint venture with partners. Each option would carry materially different levels of ownership and control retained by Microsoft.
The discussions follow weak financial performance. Xbox revenue declined 7% to $21.8 billion in the fiscal year ended June, approximately 7% of Microsoft's total revenue, and its internal accountable margin fell to 3% over the same period. The division includes Activision Blizzard, acquired by Microsoft in 2023 for roughly $75 billion, and employs around 14,000 people. Following Asha Sharma's replacement of Phil Spencer as Chief Executive Officer, Sharma has moved to restructure operations under a mandate from Microsoft CEO Satya Nadella to return the division to growth. In July, she began eliminating 3,200 jobs while increasing investment in major franchises.
Analysts and the report note that a transaction of this scale would be difficult for any single firm to finance, making a consortium the more plausible route should Microsoft pursue a sale. Sharma's turnaround also faces market headwinds, including stagnant gaming sales and rising console hardware costs. Fortune reported that Xbox internally projects its Holiday 2028 console could cost between $1,200 and $1,800; speculation that The Elder Scrolls VI could be a launch exclusive is unconfirmed. Microsoft's public position remains that Xbox is not for sale, and the report provides a more concrete basis for speculation without establishing that a sale is under active consideration.
The report also indicates that an outright sale is not the only structure under consideration. Microsoft has reportedly weighed spinning off Xbox, reorganizing it as a wholly owned subsidiary, or forming a joint venture with partners. Each option would carry materially different levels of ownership and control retained by Microsoft.
The discussions follow weak financial performance. Xbox revenue declined 7% to $21.8 billion in the fiscal year ended June, approximately 7% of Microsoft's total revenue, and its internal accountable margin fell to 3% over the same period. The division includes Activision Blizzard, acquired by Microsoft in 2023 for roughly $75 billion, and employs around 14,000 people. Following Asha Sharma's replacement of Phil Spencer as Chief Executive Officer, Sharma has moved to restructure operations under a mandate from Microsoft CEO Satya Nadella to return the division to growth. In July, she began eliminating 3,200 jobs while increasing investment in major franchises.
Analysts and the report note that a transaction of this scale would be difficult for any single firm to finance, making a consortium the more plausible route should Microsoft pursue a sale. Sharma's turnaround also faces market headwinds, including stagnant gaming sales and rising console hardware costs. Fortune reported that Xbox internally projects its Holiday 2028 console could cost between $1,200 and $1,800; speculation that The Elder Scrolls VI could be a launch exclusive is unconfirmed. Microsoft's public position remains that Xbox is not for sale, and the report provides a more concrete basis for speculation without establishing that a sale is under active consideration.
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