Microsoft co-founder Bill Gates, who’s currently acting as technical advisor to CEO Satya Nadella, said in an interview this morning that it makes no sense to spin off Bing but that he would support Nadella if the new CEO wanted to spin off Xbox.
In reply to a question about whether there’s an opportunity to create shareholder value by splitting Microsoft into different companies, specifically regarding Bing and Xbox, Gates replied: “Certainly, the Bing technology has been the key to us learning how to do large scale data centers. And Bing lets us see what’s going on on the Internet. … I see that as a pretty fundamental technology for the company.”
Gates made his remarks in an interview, alongside Berkshire Hathaway Chairman and CEO Warren Buffett, with FOX Business Network’s Liz Claman.
Microsoft has done some spinoffs historically, Gates said, citing Expedia and Slate, both of which started off at Microsoft.
“We’re thinking about: Are there pieces that are separable,” Gates said. “But our basic research, including the stuff that goes into Bing, I can’t see that making sense to break it off.”
Claman then asked if it made sense to break off Xbox.
Gates said Microsoft is working to bring PC and Xbox gaming closer together, saying: “The power of the PC chip, the graphics chip which means you can do great games there, so I’m sure Satya and the team will look at that and you know it’s up to them. … We’re going to have an overall gaming strategy. So it’s not as obvious as you might think.”
When Claman asked if Gates would support Nadella if Nadella wanted to spin off Xbox, Gates replied: “Absolutely.”
Asked when Microsoft’s Surface tablets would be profitable, Gates said the high-end version of Surface (the Surface Pro), which has better margins, is gaining share.
But “the hardware business — you’re never going to have the kind of profitability you have in the pure software business,” he said. “Understanding where our COGS (cost of goods sold) are going — both for the hardware and these big data centers we’re building — analysts and investors are going to have to watch that a lot more carefully than they did when we were just a pure licensing company.”