Key Takeaways
- • A group of private equity firms reportedly explored a buyout of Microsoft's Xbox division at a valuation between $100 billion and $150 billion, according to The Information, as reported by PocketGamer.biz.
- • The reported valuation would exceed the $55 billion leveraged buyout of Electronic Arts, one of the largest LBOs on record.
- • The talks were exploratory and did not progress to negotiations with Microsoft; a Microsoft spokesperson stated that "Xbox is not for sale."
- • Xbox revenue fell 7% to $21.8 billion in the fiscal year ending June, and adjusted profit margin dropped to 3% as of June, per figures disclosed by Microsoft.
- • Microsoft is pursuing a turnaround under CEO Asha Sharma, including a plan announced in July to cut 3,200 jobs (roughly 20% of staff) over the next year.
Summary
A group of private equity firms reportedly explored acquiring Microsoft's Xbox gaming division in a transaction that could have valued the business at between $100 billion and $150 billion, according to a report from The Information, as relayed by PocketGamer.biz. The discussions were exploratory and did not lead to negotiations with Microsoft. A Microsoft spokesperson said in a statement that "Xbox is not for sale."
The reported valuation range would exceed the $55 billion leveraged buyout of Electronic Arts, underscoring the scale of the hypothetical transaction. The talks came as Microsoft continues efforts to turn around its gaming business, which includes Activision Blizzard following the 2023 acquisition. The Xbox division employs around 14,000 people and has struggled with declining sales and thin margins.
Xbox revenue fell 7% to $21.8 billion in the fiscal year ending in June, and its adjusted profit margin dropped to 3% as of June, based on figures disclosed by Microsoft. Since taking over the division in February, CEO Asha Sharma has focused on operational improvements and growth. In July, she outlined plans to cut 3,200 jobs, around 20% of staff, over the next year while increasing investment in franchises such as Halo and Minecraft.
Microsoft has previously considered spinning out Xbox or restructuring it as a wholly owned subsidiary, according to earlier reporting, but has so far continued to invest in the division. Earlier this month, the company introduced Xbox Labs, a group exploring new gaming technology, and announced XP, a division focused on expanding franchises through film, television, merchandise and live experiences. Kayleen Walters has been appointed to lead XP, and Maria Angelidou-Smith has been named CEO of Mojang and Minecraft as Microsoft seeks to grow its major franchises and reach new audiences.
The reported valuation range would exceed the $55 billion leveraged buyout of Electronic Arts, underscoring the scale of the hypothetical transaction. The talks came as Microsoft continues efforts to turn around its gaming business, which includes Activision Blizzard following the 2023 acquisition. The Xbox division employs around 14,000 people and has struggled with declining sales and thin margins.
Xbox revenue fell 7% to $21.8 billion in the fiscal year ending in June, and its adjusted profit margin dropped to 3% as of June, based on figures disclosed by Microsoft. Since taking over the division in February, CEO Asha Sharma has focused on operational improvements and growth. In July, she outlined plans to cut 3,200 jobs, around 20% of staff, over the next year while increasing investment in franchises such as Halo and Minecraft.
Microsoft has previously considered spinning out Xbox or restructuring it as a wholly owned subsidiary, according to earlier reporting, but has so far continued to invest in the division. Earlier this month, the company introduced Xbox Labs, a group exploring new gaming technology, and announced XP, a division focused on expanding franchises through film, television, merchandise and live experiences. Kayleen Walters has been appointed to lead XP, and Maria Angelidou-Smith has been named CEO of Mojang and Minecraft as Microsoft seeks to grow its major franchises and reach new audiences.
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