Oct. 5 (Bloomberg) -- Microsoft Corp.'s Bungie Studios, creator of the best-selling ``Halo'' video games, will become an independent company to build on the success of the alien-shooting title.

Microsoft, the world's biggest software maker, will maintain a stake in the company, which also developed the ``Marathon'' trilogy and the first two ``Myth'' games. Bungie will stay focused on games for Microsoft's Xbox system, according to a statement today. Terms of the agreement weren't disclosed.

Bungie, acquired in 2000, sought more independence from Microsoft as its ``Halo'' games drew millions of players to the Xbox system. The game's latest installment brought in sales of $300 million in the week after its Sept. 25 debut, making it the fastest-selling video game ever.

``The success of the `Halo' franchise gave us the kind of leverage where we could keep hedging further away from Microsoft,'' Frank O'Connor, the lead writer at Bungie Studios, said in an interview from Kirkland, Washington. ``Microsoft realized the best thing for our creativity and for Microsoft's profitability was to let us spread our wings.''

Microsoft, based in Redmond, Washington, will continue to support Bungie's development of ``Halo'' games. The company is banking on future editions to help make its Xbox unit profitable and close a gap with Nintendo's best-selling Wii system.

Bungie, founded in 1991, has been in spinoff talks with Microsoft for about a year, O'Connor said.

`Best Interest'

``It was in our best interest to support Bungie's desire to return to its independent roots,'' Shane Kim, corporate vice president of Microsoft game studios, said in an interview. ``There's really no change except Bungie's employees work for Bungie instead of Microsoft, and that's important to them.''

Microsoft shares rose 13 cents to $29.84 at 4 p.m. New York time in Nasdaq Stock Market trading. The stock is little changed this year.

The success of ``Halo 3'' in its first week propelled sales of the Xbox 360 machine to double their weekly average, Microsoft said.

``It was a nit in the back of employees' minds that they just wanted to be independent,'' said Harold Ryan, Bungie's studio head. ``The idea of being independent was something they were all romantically attached to.''

Chasing the Wii

Microsoft has pledged to make the Xbox division profitable this fiscal year, which ends next June. The business has lost $7 billion since the game machine first went on sale in 2001. Microsoft cut the price of the console by $50 to $349.99 to compete with the Wii, which sells for $249.

Nintendo's Wii sold about 400,000 units in August, compared with 277,000 for the Xbox 360, according to Port Washington, New York-based NPD Group Inc. Since its debut in November 2006, the Wii has sold 4 million units in the U.S. The Xbox, which came out a full year earlier than the Nintendo system, has sold 6.3 million.

The spinoff will benefit both Microsoft and Bungie financially, O'Connor said.

``I doubt you'll see a happier divestiture from both sides,'' O'Connor said.

To contact the reporter on this story: Rochelle Garner in San Francisco at rgarner4@bloomberg.net

Last Updated: October 5, 2007 16:09 EDT