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Microsoft Should Not Sell Xbox

Stocks in this article: MSFT

NEW YORK ( TheStreet) -- Let me get this straight.

Microsoft's (MSFT) CEO candidates consist of the head of a car company, the leader of a failed mobile communications firm and a handful of internal retreads.

And whoever gets the gig might, as his (notice how there are no "hers" in the mix) first order of business, sell the Xbox franchise, according to one analyst. You might know what I think about Wall Street analysts -- not much -- but let's humor one another with this.

The sell Xbox proposition comes down to two all-too-typical fragments of rationale:

  • The forthcoming Xbox One sells at a premium to the recently launched, and seemingly smash success, Sony (SNE) Playstation 4.
  • There's a pretty good chance the Xbox business, as a whole, doesn't make Microsoft much money. In fact, the company might be losing money on it so lets leap to the textbook conclusion to shed it.

This is why you can't listen to classically trained Wall Streeters. Or, to be fair, maybe this dude doesn't think selling the Xbox unit is a good idea. Maybe it's just what he thinks will happen. Either way, if there's any merit to this whatsoever, be afraid.

(Savor the intimacy of the twilight video rant!)

By integrating the Xbox platform with everything else Microsoft is failing at, the company might have a chance to do something other than fall off of the face of the Earth after Apple (AAPL) completes the trifecta of ...

  1. Completely killing off the Windows-based PC industry;
  2. Ending any remaining whiff of Microsoft's mobile aspirations; and
  3. Trashing Microsoft's software business with consumers as well as enterprise customers.

All of this aside, I don't see the MSFT CEO search ending well. In these situations, I simply exist in a different reality than the rest of the world.

For instance, the always-excellent Harvard Business Review contends:

Most boards invest heavily in executive assessments, exposing chief-executive candidates to C-suite responsibilities and checking their P&L performance -- while simultaneously scanning outside prospects. Yet less attention is given to one of the most important determining factors of all: Whether directors who have actually served as CEOs are driving the process. It takes one, in our view, to really know one. If the succession and search are not driven by those who have already run another firm, the company is, in our experience, less likely to end up with a CEO who can run this one.

I hope this isn't what Harvard is teaching "kids" coming up the ranks in the school's business and finance programs.

This line of thinking does little more than preserve the status quo. Members of good old boy CEO networks will, more than likely, support preservation of the status quo at Microsoft. They'll expect their new hire to come in and be a "good" manager -- cut expenses, reorganize business units, sell a few things, buy back more shares, etc. Just the opposite of what a company in desperate need of a true visionary so urgently requires.

-- Written by Rocco Pendola in Santa Monica, Calif.

Rocco Pendola is a columnist and TheStreet's Director of Social Media. Pendola makes frequent appearances on national television networks such as CNN and CNBC as well as TheStreet TV. Whenever possible, Pendola uses hockey, Springsteen or Southern California references in his work. He lives in Santa Monica.

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