Private equity firms weighed buying Microsoft's Xbox at up to $150 billion, reports say

Several private equity firms considered buying Microsoft's Xbox gaming business in recent months, according to reports in Chinese tech media. 36Kr, citing Sina Finance and people familiar with the matter, said a deal could value the business at $100 billion to $150 billion. IT Home said The Information published the report on October 20. [ 1 , 3 ]

The sources said the private equity discussions were only at a preliminary, exploratory stage and did not develop into formal negotiations with Microsoft. 36Kr said the reports show a buyer could still be found if Microsoft struggles to turn around its gaming business. The identities of the private equity firms could not be confirmed. [ 1 ]

A Microsoft spokesperson said in a statement that Xbox is not for sale and declined further comment, cnBeta reported. IT Home said Asha Sharma, head of Microsoft's gaming business, had stated clearly that Xbox will not be sold and that the team would work with Microsoft over the long term to return the business to growth. [ 2 , 3 ]

cnBeta said the private equity interest came after a media report in June that Microsoft had considered spinning Xbox off or restructuring it as a wholly owned subsidiary, which would lower the barrier to a later sale, and had also considered a joint venture with partners. IT Home said that after the June report Xbox went through large layoffs, studio changes and Game Pass strategy changes, and outsiders speculated these were preparation for separating the business. [ 2 , 3 ]

On the business's finances, cnBeta said Xbox revenue fell 7% year on year to $21.8 billion in the fiscal year ended June, and Microsoft had disclosed that its margin fell to 3% by June. Xbox contributes 7% of Microsoft's total revenue, and the unit has about 14,000 employees. cnBeta said Sharma, who took over in February, announced in July a plan to cut 3,200 jobs, about 20% of staff, within a year while investing more in franchises such as Halo and Minecraft. [ 2 ]

cnBeta said few buyers could raise more than $100 billion alone, so a deal would probably need a group of private equity firms. It compared the top of the range with the leveraged buyout of Electronic Arts, valued at $55 billion including debt and carried out by Silver Lake, Saudi Arabia's Public Investment Fund and Jared Kushner's Affinity Partners. IT Home said that excluding Activision Blizzard, Xbox could still be valued at $30 billion to $80 billion. The two outlets differ on the Activision Blizzard purchase: cnBeta says Microsoft paid $75 billion in 2023, while IT Home says nearly $70 billion in 2022. [ 2 , 3 ]