Microsoft CEO Satya Nadella Suggests the Future of Xbox Could Be Mobile

Fresh-minted Microsoft CEO Satya Nadella has a lot to say about the company in a mammoth missive released this morning that outlines his vision for Microsoft rolling forward, soup to nuts. I’m going to focus on just a portion of it, specifically the part about halfway through where he addresses the Xbox.

Speculation in recent months, driven by presumptive sideline analysts and echo chamber punditry, to be fair, was that Nadella might try to spin off the Xbox brand at some point. Why? Because, assumed said analysts and pundits, Nadella’s a software guy, not a hardware guy. And so naturally he’d want to divest himself of something he hadn’t had much to do with, at least directly, during his tenure with the company.

That, no surprise to me, is effectively the opposite of what Nadella’s saying in his publicly promoted “fiscal year 2015” email to company employees.

How important is Xbox to Nadella’s Microsoft? Not the company’s core, which he defines elsewhere as a “productivity and platform company for the mobile-first and cloud-first world.” But he follows by stating, “It’s important to make smart choices on other businesses in which we can have fundamental impact and success.”

“The single biggest digital life category, measured in both time and money spent, in a mobile-first world is gaming,” writes Nadella in the letter, adding that Microsoft is “fortunate” to have the Xbox brand, and that the company “will continue to vigorously innovate and delight gamers with Xbox.”

And then he trumpets all the gaming-spawned technologies feeding other aspects of Microsoft’s platform-sphere: core graphics, NUI in Windows, Skype speech recognition, Kinect for Windows camera tech, GPU-related Azure cloud improvements and so forth. “Bottom line,” says Nadella, “We will continue to innovate and grow our fan base with Xbox while also creating additive business value for Microsoft.”

It’s as bold a line in the sand as you’d want from a CEO on strategic direction — as surely aimed at those wrongheaded analysts and nervous pundits as existing Xbox 360 owners and the company’s burgeoning Xbox One base.

Curiously, Nadella then shifts the conversation to mobile, noting we’re in the “infant stages” of a mobile-first world, saying that in the coming years, we’ll see significant category growth in mobile experiences “that span a variety of devices of all screen sizes.” I don’t think that statement’s proximity to Nadella’s confidence-bolstering paragraph about the Xbox is coincidental.

What Nadella must surely realize, though he doesn’t say or even allude to it here, is that Xbox is a pretty clunky-sounding brand name when you start thinking about it in terms of devices that aren’t actual boxes. The Xbox One isn’t just a box, it’s a 1990s-era desktop-computer-style boat. A phone obviously isn’t an Xbox, nor a watch, nor a pair of glasses, nor anything else you’re going to put on your person. People and mobile and things you’d describe as “boxes” don’t mix. So my bet is that whatever happens in the living room space with set-tops, there’s less an abandonment strategy in the offing for Microsoft’s highly visible and profitable gaming wing, so much as a rebranding one.