[righthand]

I disagree, it wasn’t Phil that dug a hole but Asha who pushed Phil out with no plan. Why is Asha finally revealing her plan years later if she was such a good fit? She came in trying to automate away peoples jobs with AI for the last year or so and that is obviously failing. It wasn’t Phil that invested the entire company’s well being on stochastic parrots.

She has done everything but focus on delivering games (product).

[scott_w]

Just looking at Sharma’s history, she rejoined MS in 2024. Xbox was struggling long before that, so I don’t see how anyone can blame Sharma for the past 10 years…

[WorldMaker]

Xbox has been profitable almost continuously since a few years into the Xbox 360. It's fascinating how "profitable but low margins" equates to "struggling" to so many.

[abtinf]

It’s potentially a gross misallocation of capital.

Right now, the 5 and 10 year US treasury rates are 4.2% and 4.47%. The 30 year is 4.99%.

A business with a return on invested capital less than that is in fact operating at a loss. Unless there is reason to believe the situation will change in the near-to-mid future, such a business would literally be better off liquidating everything and just investing in treasuries.

You would need access to internal data to figure out their ROIC, but a 3% margin is not promising.

[WorldMaker]

Who needs goods and services when you can just buy infinity US treasuries?~

[jnwatson]

This is exactly how the Fed influences the business cycle.

[munificent]

> It's fascinating how "profitable but low margins" equates to "struggling" to so many.

A high revenue but low margin business is a lost opportunity to invest that same revenue in a different area with better margins.

[WorldMaker]

If you shut down the things that bring in $5 billion revenue, you no longer have $5 billion revenue, you have a gamble that some other industry can ramp up to that quickly. $5 billion has never been "quick money". (Inflation would have to get a whole lot worse for that to happen and that point the company has too many other problems.) That's "Opportunity Cost" among other bits of what used to be past corporate wisdom that companies have seemed to have forgotten.

[scott_w]

People are pointing to treasury bonds that would give a similar rate of return with no risk at all.

[WorldMaker]

Yeah, and I'm pointing out the opportunity cost of that is just silly. It's not a practical exercise in any way. Suppose there was some way for Microsoft to stop exactly on a dime, magically collect all $5bn in gross revenue for a year and managed to put that all into US treasury bonds without tanking the interest rate/market value of those by entirely eliminating their products and goods that generate that $5bn revenue. Microsoft does what next? Wait 30 years for the bonds to mature and collect $5bn + ~4% compounded? 30 years that they could use $5bn/year gross revenue to all sorts of advantages, but they only have $5bn/year if they sell similar products and goods?

The time value of money suggests money invested today is more powerful than money returned tomorrow, even if you magically get the highest possible rate of return.

The opportunity costs say that if you jump ship on an entire industry don't expect to have the same revenue next year.

I love this weird short term thinking with long term mistakes that treasury bonds are the right benchmark for something like Microsoft's margins and net revenue. It's really fun to watch all the armchair capitalists come out to play that seem to follow quarterly reports like hawks but seem to act like they never took an actual economics course.

[saghm]

Right? It seems intuitive that markets can eventually saturate, and that there's a floor for how low you can get costs, so growth can't be infinite. Maybe you could make an argument that you want to grow in scale with inflation so that your profit doesn't eventually become meaningless, but you don't need to "reset" your multi-billion dollar revenue business to achieve that; you can get that by just bumping prices in line with inflation every few years.

[WarmWash]

>It's fascinating how "profitable but low margins" equates to "struggling" to so many.

If one bank pays 4.25% on your savings and the other pays 3.25%, which one are you going to chose to put your money in all else being equal? Why is the 3.25% one not a good choice despite you still making money?

People inherently understand business, they use the same principles in their daily life, but they just get confused on making the connections.

[WorldMaker]

A bank offering 3.25% isn't "struggling" either. Real struggling for a bank looks like bank runs and depression.

But you are talking the "consumer perspective". Right now the median interest on consumer savings accounts is less than 1%. [1] Someone getting 3.25% from their bank isn't "struggling" compared to their luckier neighbor that found a 4.25%. They are probably closer to the top 10% or top 1% and have a larger savings deposit and/or high credit/sustainably low debt. Most Americans can just envy that, not qualify for it.

There are opportunity costs in moving your money from a stable bank that you have an existing relationship and shopping it around to get that perfect 4.25% highest margin that you can find. Transfers are usually free for consumers, but a bank may give you a lower APR on your credit cards and a cheaper checking account if you keep your accounts all in the same place with that bank. Trying to move all of that at once for a similar deal at the 4.25% bank can risk hard credit checks and account closure notices that consequently drop your credit rating, including possibly enough to make the bank at 4.25% question your stability and change their mind on the deal.

I think consumers actually today have a better idea of the risks of these kinds of "small improvement" things than large companies. Wall Street is a much worse "Credit Rating Bureau" than the three (truly terrible) consumer Bureaus. Businesses have grown so large they no longer understand Opportunity Cost at any real level. If you shut down the things that bring in $5 billion revenue, you no longer have $5 billion revenue, you have a gamble that some other industry can ramp up to that quickly. $5 billion has never been "quick money". (Inflation would have to get a whole lot worse for that to happen and that point the company has too many other problems.)

[1] https://wallethub.com/edu/savings-account-statistics/143529

[WarmWash]

So you would chose the 3.25% bank or the 4.25% bank? Because it's a fictional illustrative example of "people always prefer more money", not a case study on banking lol

Microsoft's ownership wants to put their money into the 4.25% bank, not the 3.25% one. Don't lose your mind overthinking it.

[Sebguer]

you think you have some amazing analogy but it's utterly nonsensical. where is microsoft putting this money that is going to earn it more? are they low on cash on hand? why are they not investing every dollar they have on these magical free returns that just need more cash?

[denkmoon]

64c lost for every dollar invested. What a massive waste. What a loss for both shareholders and the gaming community. Take it out back and shoot it.

[tomtheelder]

Xbox makes an enormous amount of money from a few long running properties (the letter in question mentions Mojang and King), but basically every big move and acquisition they have made for the past 10 years has been catastrophic.

[WhereIsTheTruth]

Ratio of consoles sold Xbox vs PS5 was 1:3 before that, after that it fell in the 1:10 territories (december 2025)

Using Phil as a scapegoat and Sharma as the savior is disingenuous.. and is honestly pretty consistent with how i view Microslop: opportunists, tasteless, and visionless executives, shareholders and fanboys

The fall of Xbox started before the launch of thier current gen:

- HW: they announced 2 SKUs, with polar opposite performance profiles

- SW: their system sellers got delayed to couple years

The reset needs to happen at the highest executive order, not at the lowest, workers implement whatever project was greenlit

People chose PS5/Switch over Xbox (it now sells 3x less than Switch 1, wich is a previous gen console), people see through the lies of the media

[scott_w]

I need to be clear that I’m not presenting Sharma as a saviour. Honestly, I don’t know if her decisions are correct or if Xbox can even be saved at this point.

You said it yourself, Xbox was being outsold 3:1 by PS5 which is still shocking numbers given the investment, and the fact that PS5 was having trouble selling units at the same rate as they’d been selling PS4s.

[butlike]

You can blame her for the last 10 years because she's CEO _now_. That's what you do. You blame the head of the organization for the organization's problems.

[ChadNauseam]

That doesn't make much sense to me. How can you blame someone for a problem they didn't cause?

[narnarpapadaddy]

Because it’s their job to fix it. If they don’t, the axe falls again.

Humans often think in terms of deontological ethics. Corporations operate in terms of consequentialist ethics, and the only consequence that matters is that the numbers go up.

[scott_w]

You’re mixing “blame” and “accountability.” Sharma isn’t to blame for the problems but she’s now accountable for fixing them.

[butlike]

I still think "blame" works here since we're assigning responsibility to her. The fault or wrong was caused by someone else, perhaps, but she is now responsible for that fault.

> Blame: assign responsibility for a fault or wrong.

[narnarpapadaddy]

No, I’m not. I’m explicitly differentiating between those two perspectives and which corporations care about. “Blame” doesn’t exist in most corporate vocabularies.

[butlike]

Because they decided to be the figurehead and take on that responsibility. It's like a king who takes on their predecessor's war when they assume power. No one looks to the previous king when the current one has all the agency.

[nhinck2]

a) Asha didnt push Phil out.

b) She's been in the role for 4ish months, not years.

[righthand]

I can guarantee you Asha has been making this move for years.

[johnnyanmac]

I don't think a long time executive leaves, and the expected successor (Sarah Bond) refuses to suceed because of some intimate backstabbing behind the scnes. Especially not by an executive who was previously running the AI division during an AI gold rush.

Occam's razor: Spencer and Bond jumped off a sinking ship, Asha wasn't doing enough in AI. Push her to be the fall gal for the sinking ship and put in whoever will milk AI more in her place. Win-win. Asha will be gone in a few years with her job done and a cushy parachute, and Xbox will be a shadow of its former self. But that's not a failure; that's the goal.

[dagmx]

Based on what? This just feels like baseless conjecture given she hasn’t been at Microsoft for that long.

[ascendantlogic]

"I can guarantee you" without any backing evidence is the very definition of "Source: trust me bro". I think at this point this is just trolling.

[dagmx]

How would Asha pull him out? How do you think she even had that kind of authority or seniority?

[righthand]

By making big arguments to C-suite that were invested in the company’s direction. Same thing that happens in meetings where some dumbass says something like “we could build a cookie banner ourselves or pay Y company $12k/yr to run our cookie banner”. C-suite is full of these types of people that just make baseless arguments. Most management is not knowledgeable in their domain.

[dagmx]

Okay so your entire argument hinges on her having the ear of Satya , and out arguing Phil?

But even then you wouldn’t be able to deny that Xbox was floundering under Phil.

And for all of this you’d still be left with conjecture?

[markus_zhang]

Even if she did push him out, Phil only has himself to blame. After all he is the manager of Xbox. Xbox definitely did not do well.