Some have suggested that Microsoft sell off its Xbox franchise as a way to cut losses and eliminate a distraction from more important things, but the video game console is an important part of the company's overall plan going forward.
Xbox is one of four devices named by CEO Steve Ballmer as part of his One Microsoft vision (the others are PCs, tablets, and phones) and is important for tying entertainment (Ballmer calls it "serious fun") into Microsoft's overall vision.
"Interactivity takes engagement and makes things serious; it really requires differentiated hardware, apps and services," he says in a July memo outlining Microsoft's mission.
But one estimate puts Xbox losses at $2 billion, and an analysis of the hardware costs indicate Microsoft sells the gaming device on a razor thin margin. Profitability is hard to gauge given that Xbox results are lumped in on the balance sheet with Android phone royalties, Skype, and Windows Phone.
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