Microsoft splits off from 'Halo' maker

SEATTLE - Microsoft Corp. has spun off Bungie Studios, creator of the blockbuster "Halo" video game trilogy, but said Friday it will maintain close ties with the company and a minority stake in it.

Privately held Bungie LLC will continue to develop games exclusively for Microsoft's Xbox 360 and Windows PC platforms "for the foreseeable future," said Harold Ryan, Bungie's president and studio head, in an interview.

The two companies said they will continue to work together to support the "Halo" franchise, and will expand their partnership to include new games. Executives declined to comment on the size of the stake Microsoft will retain, or on other financial terms of the deal.

Microsoft acquired Chicago-based Bungie and its "Halo" concept in 2000, ensuring that the Xbox would be the only game console to run the multiplayer first-person shooter game. Bungie moved from Chicago to Kirkland, a few miles from Microsoft's Redmond headquarters, and the first installment of the trilogy went on sale in November 2001.

"Working with Microsoft was great for us, it allowed us to grow as a team and make the ambitious, blockbuster games we all wanted to work on," said Jason Jones, Bungie founder and partner, in a statement Friday. "But Bungie is like a shark. We have to keep moving to survive. We have to continually test ourselves, or we might as well be dolphins. Or manatees."

Gamers have already plunked down more than $300 million for "Halo 3" since it was released less than two weeks ago, and Microsoft has said the game's launch also goosed sales of the Xbox 360 console.

The final "Halo" version costs between $60 and $130, depending on special features and commemorative packaging.

"While we are supporting Bungie's desire to return to its independent roots, we will continue to invest in our 'Halo' entertainment property with Bungie and other partners," said Shane Kim, corporate vice president of Microsoft Game Studios.

In an interview Friday, Kim added that Microsoft had no plans to spin off other game studios owned by the software maker.

Rumors swirled early in the week that a contract between Microsoft and Bungie had expired during development of "Halo 3." On Friday, Ryan said no such contract existed.

"For the last several years, everyone at Bungie has been an at-will employee," he said.

Microsoft has told Wall Street it expects the division responsible for the Xbox to be profitable in the current fiscal year. Kim said that thanks to the strong "Halo 3" launch, "We're well on our way to achieving that objective."

Matt Rosoff, an analyst for the independent research group Directions on Microsoft, agreed that the move isn't likely to hurt Microsoft's plan to report a profit in fiscal 2008.

"The sales figures have been excellent so far. I'm sure that this quarter and next quarter they'll sell enough copies to drive that division into profitability for the whole year," Rosoff said in an interview. But, he added, "I don't think Microsoft wanted to do this."

Bungie's approximately 113 employees will remain in Kirkland.

Shares of Microsoft added 25 cents to $29.96 in midday trading.