The New York Post once again set the industry ablaze, reporting last week that Microsoft is still debating a potential acquisition of Yahoo!, a deal that some analysts believe will help the Xbox business.
In May of last year, Peter Lauria and Zachary Kuowe of the Post reported that “Microsoft has intensified its pursuit of a deal with Yahoo!, asking the company to re-enter formal negotiations.”
With the estimated price tag of the acquisition at $50 billion, such a deal would narrow the gap in overall online ads with Google, as well as provide more content and features for Xbox Live and the Zune Marketplace.
“Aside from cost savings, a deal would also create opportunities to use Yahoo! content on Microsoft devices, such as making music exclusively provided to Yahoo! Music available on Microsoft’s Xbox game console and Zune music player.”
Rick Munarriz of The Motley Fool said that Microsoft needs to “turn a bleeder into a leader.”
“Right now, running its online business at a loss is no big deal for Microsoft,” Munarriz said. “It is carving out fat margins in its software stronghold, enough to more than offset any shortcomings in its online and Xbox subsidiaries.”
However, Munarriz added that “Microsoft needs to wean itself off the software cash cow.”
In an interview at CES, Jeff Bell, corporate vice president of global marketing for interactive entertainment at Microsoft, said that the Xbox business, along with the Entertainment and Devices division, would be profitable by the end of its 2008 fiscal year on June 30.
Next to Windows and Office, Xbox is in position to be one of Microsoft’s most successful consumer products ever, he said.
