Apple Inc. (AAPL), And Why Microsoft Corporation (MSFT) Selling Xbox Would Be a Mistake

Nintendo (OTCBB:NTDOY)’s gradual decline

Bloomberg, using the value of Nintendo Co., Ltd (ADR)(OTCMKTS:NTDOY) as a guide, estimates that Microsoft’s Xbox division as a stand-alone company would be worth as much as $17 billion. That might sound like a lot, but Nintendo today is but a shadow of its former self.

In 2007, Nintendo was worth more than $80 billion. Since then, the company has lost more than 80% of its value. Nintendo’s steady erosion has come, in part, from its non-conglomerate status. Unlike Microsoft, Nintendo is purely a gaming company, and must therefore profit from its hardware sales. For many years, Microsoft subsidized the Xbox — a luxury that Nintendo doesn’t have. Moreover, Nintendo lacks expertise in industries other than game creation.

Nintendo’s latest console, the Wii U, is radically underpowered compared to the Xbox One, and its interface and online connectivity have been widely criticized. To date, Wii U sales have been an absolute disaster, with the seven-year-old Wii outselling its successor. Ahead of the Xbox One’s release, Nintendo has cut the price of the Wii U, but even at $300, Nintendo will have a difficult time convincing gamers to buy its latest device.

Selling Xbox would be a mistake

It would be a mistake for Microsoft Corporation (NASDAQ:MSFT) to part ways with Xbox. The console already gives Microsoft a strong foothold in the living room, an area that’s setting up to be a significant tech battlefield. If Microsoft still wants to be a consumer company, it’s going to need a living room console to fend off Apple Inc. (NASDAQ:AAPL)’s upcoming TV. At the same time, as a stand-alone company, an independent Xbox could wither away. Nintendo’s steady decline in recent years, a trend that continues to this day, has been due to the company’s limited focus.

If Microsoft Corporation (NASDAQ:MSFT) decides to spin off the Xbox division, shareholders should not be pleased.

The article Microsoft and Xbox Need Each Other originally appeared on Fool.com.

Sam Mattera has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and Microsoft. 

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