Xbox is too big to sell whole — but companies may buy pieces of it

Microsoft's gaming division is in the middle of a dramatic restructuring under new Xbox CEO Asha Sharma, and the question everyone is asking is whether it ends in a sale. The short answer, according to analysts, is that no single company could afford to buy Xbox outright — but that doesn't mean parts of it won't end up on the market.

The scale of the problem is stark. Xbox closed its financial year with just a 3% profit margin, down year-over-year. Sharma herself acknowledged in the blog post announcing the layoffs that Xbox is "operating at margins that are 3-10x lower than comparable platform and publishing businesses." Over the past five years, Microsoft poured more than $20 billion into Xbox's content, platform, and hardware operations — and annual revenue still fell by nearly half a billion dollars. The restructuring has already cost 1,600 jobs this week, with another 1,600 cuts expected before the end of the financial year. Four studios have left Xbox entirely. Obsidian Entertainment — the Avowed and The Outer Worlds developer — lost a quarter of its staff and had Avowed 2 canceled; it's now been redirected to a new Fallout game. id Software was heavily cut. Staff at Bethesda Game Studios are reportedly worried about The Elder Scrolls 6 after cuts there too.

The Verge reports that buying Xbox in its entirety would likely cost hundreds of billions of dollars — dwarfing even the $69 billion Microsoft paid for Activision Blizzard — making a full acquisition essentially impossible for any single buyer. Instead, analysts expect a piecemeal breakup. Microsoft has already sold Ninja Theory (Hellblade) and Undead Labs (State of Decay) to undisclosed buyers. Double Fine and Compulsion Games have gone independent, taking their franchises with them. Arkane Lyon, currently developing Marvel's Blade, is also up for sale, though the details remain unclear. Yoshio Osaki, president and CEO of IDG Intelligence, told The Verge that "individual studios, IPs, and teams are sold or spun off piecemeal" is the most plausible scenario going forward.

What happens next is still murky. Microsoft hasn't ruled out restructuring Xbox as a wholly-owned subsidiary or even a joint venture with outside partners, according to a report from The Information. Sharma has reportedly pushed to accelerate development on new Elder Scrolls, Fallout, and Halo games as part of the reset — suggesting Microsoft still wants Xbox to function as a going concern, not just an asset to be liquidated. But with margins this thin and cuts this deep, the surviving Xbox staff are left waiting to find out whether the next round of cuts will reach them too.