Breaking Up Microsoft Corporation (MSFT) Would Be a Mistake

Xbox is a beachhead into the home

Microsoft’s founder Bill Gates has been talking about the smart home revolution for well over a decade. In 2002, he described the coming smart house — a home filled with digital gadgets each working together.

Last year, Microsoft published a white paper talking about a “HomeOS” — an operating system for the home, involving all appliances and electronic devices, controlled by a single, central PC.

Could that PC be the Xbox? Could Microsoft’s entire gaming effort have been a front to break into the home?

For most of its history, Xbox has lost Microsoft Corporation (NASDAQ:MSFT) money — billions in fact. But like Bing, there are longer-term strategic opportunities here.

Microsoft’s latest Xbox is arguably more of an all-in-one entertainment device than video game console. As its name (Xbox One) implies, it can serve as the single, central piece of a user’s home entertainment center.

In time, could Microsoft expand Xbox to be the centerpiece of a smart home division? Given that Microsoft has been interested in the smart home for years, and that Xbox has slowly evolved into something much more substantial than a gaming console, I believe this is the direction the company is moving in.

Warren Buffett doesn’t invest in tech

For the most part, Warren Buffett doesn’t invest in tech companies. As he explained in 2012, he simply doesn’t know how to properly value them, or gauge how their businesses will develop over time.

Tech is still a rapidly evolving industry. While a focused business may be easier to judge, dedication to one area of tech brings existential risks.

Imagine if Microsoft had simply stayed with Windows and Office. Arguably, the company would be facing a crisis right now, as Windows seems poised to fade away. But, by investing into other projects, such as Bing and Xbox, the company can continue to remain a major player over the long-term.

Microsoft’s quasi-conglomerate status then, isn’t a detriment but an asset. Highly-focused companies can come and go with the shifting tech landscape; Microsoft Corporation (NASDAQ:MSFT)’s business should persist. It may not offer amazing growth, but it should continue to be a safe, reliable dividend payer for many more years.

The article Breaking Up Microsoft Would Be a Mistake originally appeared on Fool.com and is written by Salvatore “Sam” Mattera.

Joe Kurtz has no position in any stocks mentioned. The Motley Fool recommends Google. The Motley Fool owns shares of Google and Microsoft. Salvatore “Sam” is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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