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Microsoft CEO Nadella sticks by Xbox, citing bigger opportunities

Microsoft CEO Nadella sticks by Xbox, citing bigger opportunities

July 22, 2014 | By Christian Nutt

Gamasutra listened in on Microsoft's investor call following its fourth quarter and full-year 2014 results for insight into its games business, and found that CEO Satya Nadella plans to continue to back Xbox because of the prominence of games in today's software ecosystem.

Though he was at the time mainly referring at the time to Microsoft's tablet and phone business, Nadella said, "we're not in hardware for hardware's sake." Later he also said, "We will invest in our core console gaming and Xbox Live with a view towards the broader PC and mobile opportunity."

Nadella has been up-front about his plans to stand by Xbox for months now, puzzling some analysts who see the segment as at-odds with the company's core competencies in productivity and operating system software and cloud services.

Why? One reason is that games are the biggest app segment on phones by revenue, a fact Nadella acknowledged when he said "gaming is the largest digital life category in a mobile-first, cloud-first world." Though he admitted, as he has in the past, the the game business does not align with Microsoft's new strategy of focusing on its core businesses, he reiterated Microsoft's commitment to it.

This info helped clarify why the company recently closed its Xbox Entertainment Studios and doubled-down on games; it's not just a bet to win over consumers who are either fleeing to Sony or taking a wait-and-see approach on Xbox One. It's an acknowledgement that games are now a huge part of the global software business, which is Microsoft's business.

More on the sales of Xbox hardware

However, the Xbox One is still stumbling. Echoing her statements from last quarter, during which she said the company would draw down existing inventories of its console hardware, CFO Amy Hood said the company is making "progress" on that inventory, meaning it's still shipping already-produced boxes into the retail channel.

"With the progress we are making on channel inventory, the new markets for Xbox One and our exciting game lineup we feel well positioned heading into the holiday season," Hood said.

The company made moderate gains in console shipments and revenues in its fiscal year 2014, which ended June 30, and during which the Xbox One launched.

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