Microsoft Set To Leave The Console Hardware Market, Says Analyst DFC

I honestly think they are missing the bigger picture here.

Posted By | On 20th, Jun. 2016 Under News

Xbox One S

For a while there, we were convinced that Microsoft were preparing to leave the console market, once they started with their push for Windows 10 gaming- and given that Microsoft announced at E3 that literally all of their first party games and Xbox exclusives will be coming to Windows 10 as well, you would imagine us to be of this opinion even more now than ever.

However, other things have happened that have made us surer than ever of Microsoft’s commitment to gaming- they have announced two new Xbox consoles in the pipeline, and they have greatly expanded their investment into first party developed and published games for the Xbox. If Microsoft are planning on dropping the Xbox, they sure aren’t acting like it right now.

However, it does not seem as though Analyst DFC (Via MCV) is convinced regardless. In a recent note to investors, they listed what they feel are a series of problems with Microsoft’s Xbox strategy, all of which are indicative, in their opinion, of Microsoft eventually dropping the Xbox and moving out of the console hardware business entirely.

“The most immediate problem is Microsoft effectively killed the Xbox One Slim right out of the gate,” they said in an investor update. “If there were many Xbox 360, Wii U and even PlayStation 4 consumers interested in an Xbox One this holiday season they have now been told to wait until Scorpio arrives in 2017. Microsoft can only hope that the buzz around Project Scorpio goes away soon but with the cat out of the bag that is unlikely.

“There are all kinds of other problems with Microsoft’s mixed messaging. The pricing on the original Xbox One is great, and the Slim is wonderful, but all the important new games will be on PC, so why invest in a console? Just upgrade your PC. And if you do want a console why buy now when Scorpio will be here later. All of this is a net dampener on new hardware sales now and really opens the door wide open for Sony and even Nintendo for the NX.”

Their assessment gets even more scathing as they look at Scorpio more in depth, noting that there is a probability of Microsoft not even having an Xbox division by the time the promised Scorpio launch window approaches.

“The biggest issue is whether Microsoft will even have a game division by the time Project Scorpio launched,” they said. “It is no small irony that the E3 events went on at the EXACT same time as Microsoft CEO Satya Nadella was announcing the $26 billion acquisition of LinkedIn.

“The overall question now seems to be not if Microsoft will exit the game business, but when and how. Of course, that leads to many other questions such as how is exiting the game business handled? Is Xbox spun off? Does Microsoft find a buyer? Or does the company just shut Xbox down? DFC feels the latter option will most likely not occur but it is clear something must be done.

“Unfortunately the value of the Xbox brand is in serious flux with much of its advantage tied to the Microsoft Windows 10 operating system.”

Personally, I simply do not buy this theory- as I mentioned above, Microsoft seem to be more committed to gaming right now than they have been for years. I think this assessment is missing the point of Microsoft de-emphasizing hardware to focus more on services and revenue from software sales, primarily digital sales. Within this context, while I can certainly see Microsoft not caring about hardware as much, they’ll still definitely have flagship hardware on the market in some form- no different than their strategy for the Surface tablets, in a sense.

We’ll know soon enough, I wager- but for now, I am more confident in the future of Xbox than I have been for a while now.

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