BreakingViews suggested that Microsoft Corp. spin off its entertainment division responsible for the Xbox 360. The idea is that the money-losing video game venture would stop dragging on the bottom line.

The BreakingViews suggestion is the classic near-sightedness that the stock market forces on companies. Instead of taking the long-term view that the Xbox could help Microsoft eventually grow beyond business-oriented software, BreakingViews takes the short-term view of profits today. However, BreakingViews fails to grasp that, in a sense, Microsoft's bet on the Xbox business is really no different than Intel Corp.'s investments in startups via Intel Capital.

In addition, by unloading the Xbox business to shareholders, Microsoft will essentially cede the consumer electronics business to rival Apple Inc. and Sony Corp. After all, the Xbox 360 isn't solely about games, it's about selling various forms of entertainment. The console offers gamers the opportunity to circumvent their cable providers to watch TV shows and movies — often in HD formats not necessarily available from some cable providers. Of course, Microsoft charges a fee for each download. If the model sounds familiar, that's because Apple TV offers the same opportunity.

While games may be the Xbox's main attraction, considering the $10 million-plus budget to develop a game, the video downloads in the long run could be a more lucrative business for Microsoft.

After six years, it seems a little premature to cut loose the Xbox business. After all, its not unusual for a venture capitalist to hold an investment that long, and that's the approach Microsoft's taking with the Xbox. —Matthew Wurtzel

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