When investors forget about the big picture

It’s been an interesting couple of weeks for Microsoft, most notably thanks to the announcement of their new CEO, Satya Nadella.

Amid all the chatter, I stumbled upon this article from The Washington Post titled “Investors want Microsoft’s new CEO to kill Xbox, Bing and Surface”. Apparently, some “influential” Microsoft shareholders have been putting pressure on the CEO to focus on enterprise software by killing off some of their consumer-oriented offerings.

This made me think about what investors of these large companies are in it for, and how everyone wants things to be done their way without really considering the bigger picture.

When you’re one of those investors that just looks at everything from a profit perspective, demands like these seem to make sense to you. After all, these consumer divisions lose a lot of money before they ever see a dime of profit.

Out of the three products listed (Xbox, Bing, Surface), I think the Xbox is the only one making any money right now, and that’s after they lost billions of dollars trying to build their brand for the first few years.

But from a long-term strategy perspective, it would be stupid to kill off Xbox. It’s practically one of the only brands in the Microsoft family that isn’t viewed negatively by the general public and it only recently started turning a profit despite doing (almost) all the right things during the 360 generation.

And while I don’t personally care for Bing or Surface, I think they’re important enough to keep around simply to provide consumers a choice outside of the Google monopoly.

These are products that only came to be possible thanks to the enormous amount of losses that Microsoft is capable of sustaining during the beginning phases of the development of their brands. They will only see the benefits of these products in the long-term game, which is unfortunate given that not a lot of investors are interested in the bigger picture these days.

Without companies that take financial risks on new products, who will disrupt future monopolized markets? You almost always have to take a loss before you see anything come of it. As they always say: The bigger the risk, the bigger the reward.

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2 thoughts on “When investors forget about the big picture

  1. I completely agree that Microsoft selling off Xbox would be a really bad move. As you said, it’s one of their only departments that actually makes money right now.

    I guess there is a love/hate relationship between investors and I. As an investor myself. Of course I want to have great ROIs. But at what cost? I assume many do not actually care about the companies like the old investing days.

    You probably heard about what Tim Cook, Apple CEO did at the shareholder meeting this past week. [http://www.businessinsider.com/tim-cook-versus-a-conservative-think-tank-2014-2].

    But essentially, he told those investors to sell their AAPL stock and go elsewhere if they didn’t believe in doing the right thing. Even if it meant not producing the highest ROI.

    • Well, the Xbox division is not their only profitable division, but it certainly is one of their only profitable consumer divisions.

      But I agree that (in all likelihood) the days of actually caring about the company itself are in the past. Unless those shareholders are also employees, there’s little reason to care much about anything but profits because at the end of the day most people are in the market to make a quick buck.

      Good on Tim Cook for standing his ground on what he believes in. I’m not surprised that these kinds of pissing matches happen because they were going on for much of 2012 at BlackBerry (then RIM). Everyone thinks they know what’s best for the company, but the answer is not often the obvious or easy one.

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