A Goldman Sachs analyst (whose company was saved by taxpayers, for the record – you’re welcome) says that Microsoft should spin off its Xbox division and downgraded Microsoft share recommendations from buy to neutral. In a new report, Goldman Sachs said that "A break-up of the consumer businesses could potentially unlock hidden value, or more discipline on cost could turn the businesses into contributors to profitability and shareholder value."
Goldman Sachs: Microsoft should split off ‘unprofitable’ Xbox dept. Analyst Goldman Sachs has downgraded Microsoft share recommendations from ‘buy’ to ‘neutral’, and suggested that one way to resolve the firm’s apparent difficulties is to split off its consumer entertainment division.
Goldman’s Sarah Friar added that "The Xbox products could be an appealing stand-alone entity, given the historical success of the Xbox and the products’ brand strength, and the business could show unlocked value with forced cost discipline compared to as a piece of Microsoft."
Other analysts strongly disagree with the assessment: "Pulling this off would be like Microsoft learning Geller-ian magic tricks, the equivalent of being able to bend spoons with its brain," said investor Paul Kedrosky.
Finally, analyst Matt Rosoff told ComputerWorld: "I think it’s silly to spin off a profitable business. Xbox would lose more than it would gain by going it alone." Rosoff felt that the company would be better off carving its search business, due to the complexities of competing with Google.