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Xbox Division Losing Big Money, Sales Down

by , 1:30 PM EDT, July 26th, 2007

Microsoft's Entertainment and Devices division posted a year end US$1.89B loss which included a US$1B charge to repair defective Xboxes. Microsoft shipped 700,000 Xboxes, down from 1.8 million during the same period last year, according to Gamesindustry.biz.

Microsoft said that reduced manufacturing costs will offset some of that loss. They also said that its entertainment division will turn a profit this year.

In addition, Microsoft's revenues for Xbox and PC games fell by 28 percent to $265M. On the whole, Microsoft's total revenues for the year were US$51.2B.

In addition, Microsoft announced that it will lower the price of its HD DVD player, sold separately from the Xbox, from US$199 to $179 and will offer five free HD movies with players purchased between August 1 and September 30.

Lowering the price of HD DVD players is consistent with Toshiba's strategy to combat Blu-ray by being the cheapest player. What's notable is that both companies, Microsoft and Toshiba, are losing money with their Xbox and HD DVD offerings respectively.

This is in contrast to Apple which announced on Wednesday that it is making money in all three of its major business sectors, Macs, music, and iPhone.

  

Observer Comments

Show: Subjects Only | Full Comments
View Name:Guest
Subject: Why compare to Apple? Compare to Sony PS3 is better
Close Name:Biff Posts: 1479 Joined: 08 Apr 2004
Subject:

Wow. Just wow. Perhaps an article about how GM is losing money which is in contrast to Apple? Or how Ford is finally making money which is more similar to Apple? Good lord.

Maybe TMO should open a req for a replacement who can actually write intelligent content for this site. I miss the way TMO used to be before it was all this mindless filler crap.

Close Name:geoduck Posts: 1665 Joined: 30 Dec 2003
Subject:

Quote
Biff wrote:
Maybe TMO should open a req for a replacement who can actually write intelligent content for this site. I miss the way TMO used to be before it was all this mindless filler crap.

That's a bit harsh.
M$ is the big player in the computer field. Even Macs use MS software. That a M$ division lost almost $2bn is newsworthy. No it doesn't directly impact Macs and Apple. A lot of significant news doesn't, but I still want to hear about it.

If you want TMO to be a Mac News Only site, fine. That would mean it gets updated just a couple of times per day, or less. The result would be a much less interesting and well rounded site. TMO is where I go to find out about Mac news, and other industry news that might impact me and my users. Mac centric, yes, but not to the point of xenophobia.

Some articles on TMO don't interest me, like todays story about Scenario Poker for the iPhone. You know what? I don't read them. But that doesn't make them 'mindless filler crap'. In this case I don't own an Xbox, or any other player. But I know people who do and who come to me as the local 'computer guy' to ask what they should get. This story gives me useful information to answer their question.

View Name:Guest
Subject: Intelligent...
Close Name:gslusher Posts: 2001 Joined: 13 Nov 2002
Subject:

Quote
Guest wrote:
What game console and entertainment division does apple have? And do they supply Blu-ray?

useless comparison.

Add in Sony instead and then you've got a useful comparison..


Does Microsoft make computers? Phones?

The point is that, much of the time, when MS has tried to branch out into areas outside of Windows, Office, and other software, it has not done very well. (Their keyboards, mice, and games controllers are pretty good.) The dominance of Windows traces back, I think, to the fact that most (neaerly all, actually) early PCs were bought by businesses and government agencies. They were far too expensive for most people to own. (My Apple //c was about $2,000 in 1984.) Innovation was not highly prized versus standardization and initial cost.

In consumer electronics, however, Microsoft has had to compete with companies whose metier is innovation, like Nintendo and even Sony. Microsoft couldn't even design its own music player--the Zune is basically a rebranded Toshiba player with wireless capability.

Contrast that with Apple's innovations that led to major changes in the industry and society.

- The Macintosh. Youngsters may not realize the impact the original Mac had, despite its high price.

- The PowerBook. Again, youngsters may not remember that Apple was a dominant force in laptops early on. I bought a PowerBook 100 in 1992. It was smaller and lighter than any other portable computer at the time, partly because it used an external floppy drive and had no optical drive. The PowerBook Duos were smaller, yet.

- The iMac. Apple had devolved into YACC--yet another computer company, with an oddball OS and computers that, for the most part, looked like every other computer (with a few exceptions). The iMac changed the computer industry and turned Apple around.

- OS X. Remember that OS X came out about the same time (2001) as Windows XP. Contrast the continual improvements to OS X with the more-or-less static situation of XP.

- The iPod. Yes, it has a CPU, but people don't think of it as a "computer." There were other music players, but the iPod caused the explosion in the market. It was easy to use and, probably more important, easy to manage, thanks to iTunes. The iPod has probably had a greater impact on society than any other piece of consumer electronics since the invention of the cell phone. (See below. <G>) How many cars come with built-in interfaces for other consumer electronics devices?

- iLife. No other computer system has such an easy-to-use, integrated suite of multimedia software.

- Apple retail stores, which have (if I recall correctly) the highest revenue per square foot of any retail outlets in the US.

- Intel Macs. While this may not seem a great innovation--Windows PCs have been using the same CPUs for quite a while, the ability to use both OS X and Windows natively on the same computer is.

- The iPhone.

(I won't include the Apple TV--yet. Its day will come, when there is significant HD content available. It's still innovative, however.)

These are all products that Apple has done well.

What has Microsoft done in the past five years? It finally came out with Vista, which seems to be doing OK, though probably not as well as XP or Windows 2000 did in the same time frame. Its other ventures--the Spot Watch, Zune, Xbox, etc., have pretty much been failures. (The Media PC may be an exception, but that is software.) To see the effect, look at stock prices. The numbers are estimates from Yahoo charts.

One year:

AAPL +115%
MSFT +22% (about tracking the DJI)

Two years:

AAPL +220%
MSFT +22% (less than the DJI)

Five years:

AAPL +1500+%
MSFT +40+% (significantly less than the DJI)

In other words, you would have done better to invest in an index fund than in Microsoft, while Apple investors have made bundles of money.

View Name:Guest
Subject: 1k per
Close Name:hughster Posts: 15 Joined: 17 Mar 2005
Subject: Like your stock price figures

So they take stock splits into account?

Close Name:gslusher Posts: 2001 Joined: 13 Nov 2002
Subject: Re: Like your stock price figures

Quote
hughster wrote:
So they take stock splits into account?


Yes. The prices are adjusted for the split in early 2005. I think that they adjust the prices in the chart for the period before the split. Go to Yahoo.com and check their stock charts. Get AAPL and look at the 1 year, 2 year, and 5 year graphs. You can compare them to DELL, MSFT, and the averages, as well. The default comparison chart is logarithmic, which is more compact, but harder to read and interpret (and leads to misleading statements, as we've seen in the past), but you can choose a linear scale.

Close Name:Tiger Posts: 906 Joined: 17 Jun 2003
Subject: Xbox is losing money?

Wii!

View Name:Guest
Subject: A bad comparison, still newsworthy.
Close Name:geoduck Posts: 1665 Joined: 30 Dec 2003
Subject:

Quote
Tiger wrote:
Wii!

View Name:Guest
Subject:
Close Name:studentx Posts: 38 Joined: 16 Aug 2004
Subject: Nice trick...

They write off the repairs this year at a huge loss which covers current warranties too, so they can call next year profitable, although over all the whole Xbox operation is still running in the RED!

Like Balmer says, expect to wait a few years before seeing any return on any MS investments, which is what he'll be saying again in a few more years.

MS is on the decline and Windows is the only thing slowing that decline.

View Name:Guest
Subject:
Close Name:jbelkin Posts: 19 Joined: 23 Jul 2003
Subject: MS Death Spiral

They have spent about $23 BILLION including the writeoff on the Xbox division with sales of around $6 BILLION - in essence even if they turn a profit next year (unlikely as Xbox name is poison to most consumers (Ford Explorer) - that leaves $17 BILLION in the hole the stockholders have essentually spent.

How many startups can you fund with $17 billion?

What have they got for $17 BILLION? 10 million Xbox 360 users (never mind 4 million have defective machines) ... they'd would have actually lost less money just taping $300 to an empty box.

Close Name:gslusher Posts: 2001 Joined: 13 Nov 2002
Subject: Re: MS Death Spiral

Quote
jbelkin wrote:
What have they got for $17 BILLION? 10 million Xbox 360 users (never mind 4 million have defective machines) ... they'd would have actually lost less money just taping $300 to an empty box.


That's a quote worth stealing!

Close Name:daemon Posts: 305 Joined: 17 May 2007
Subject: Re: 1k per

Quote
Anonymous wrote:
Even ignoring the billion dollar charge they lost 890 million, and sold only 700 thousand. So they lost more than $1000 for each box sold. That's pretty impressive.


11.6 million xbox 360's have been shipped. Each xbox 360 is sold at a loss of $100 just for parts.

The problem with the xbox 360 is heat. It runs too hot. Initial reports of the xbox 360 were that it was going to be water cooled, but unfortunately when it came to production, the unit was not water cooled, only air cooled. This is why the units are having so many problems. The $1.15 billion spent on extending the warranties of the xbox 360 would have been better spent before they were sold on a water cooled version of the xbox 360.

http://www.xbox-scene.com/xbox1data/sep/EEVpZZAklllHlcrxQY.php

Close Name:daemon Posts: 305 Joined: 17 May 2007
Subject:

Quote
gslusher wrote:
Quote
Guest wrote:
What game console and entertainment division does apple have? And do they supply Blu-ray?

useless comparison.

Add in Sony instead and then you've got a useful comparison..


Does Microsoft make computers? Phones?

The point is that, much of the time, when MS has tried to branch out into areas outside of Windows, Office, and other software, it has not done very well. (Their keyboards, mice, and games controllers are pretty good.) The dominance of Windows traces back, I think, to the fact that most (neaerly all, actually) early PCs were bought by businesses and government agencies. They were far too expensive for most people to own. (My Apple //c was about $2,000 in 1984.) Innovation was not highly prized versus standardization and initial cost.

In consumer electronics, however, Microsoft has had to compete with companies whose metier is innovation, like Nintendo and even Sony. Microsoft couldn't even design its own music player--the Zune is basically a rebranded Toshiba player with wireless capability.

Contrast that with Apple's innovations that led to major changes in the industry and society.

- The Macintosh. Youngsters may not realize the impact the original Mac had, despite its high price.

- The PowerBook. Again, youngsters may not remember that Apple was a dominant force in laptops early on. I bought a PowerBook 100 in 1992. It was smaller and lighter than any other portable computer at the time, partly because it used an external floppy drive and had no optical drive. The PowerBook Duos were smaller, yet.

- The iMac. Apple had devolved into YACC--yet another computer company, with an oddball OS and computers that, for the most part, looked like every other computer (with a few exceptions). The iMac changed the computer industry and turned Apple around.

- OS X. Remember that OS X came out about the same time (2001) as Windows XP. Contrast the continual improvements to OS X with the more-or-less static situation of XP.

- The iPod. Yes, it has a CPU, but people don't think of it as a "computer." There were other music players, but the iPod caused the explosion in the market. It was easy to use and, probably more important, easy to manage, thanks to iTunes. The iPod has probably had a greater impact on society than any other piece of consumer electronics since the invention of the cell phone. (See below. <G>) How many cars come with built-in interfaces for other consumer electronics devices?

- iLife. No other computer system has such an easy-to-use, integrated suite of multimedia software.

- Apple retail stores, which have (if I recall correctly) the highest revenue per square foot of any retail outlets in the US.

- Intel Macs. While this may not seem a great innovation--Windows PCs have been using the same CPUs for quite a while, the ability to use both OS X and Windows natively on the same computer is.

- The iPhone.

(I won't include the Apple TV--yet. Its day will come, when there is significant HD content available. It's still innovative, however.)

These are all products that Apple has done well.

What has Microsoft done in the past five years? It finally came out with Vista, which seems to be doing OK, though probably not as well as XP or Windows 2000 did in the same time frame. Its other ventures--the Spot Watch, Zune, Xbox, etc., have pretty much been failures. (The Media PC may be an exception, but that is software.) To see the effect, look at stock prices. The numbers are estimates from Yahoo charts.

One year:

AAPL +115%
MSFT +22% (about tracking the DJI)

Two years:

AAPL +220%
MSFT +22% (less than the DJI)

Five years:

AAPL +1500+%
MSFT +40+% (significantly less than the DJI)

In other words, you would have done better to invest in an index fund than in Microsoft, while Apple investors have made bundles of money.


Does anyone know if Microsoft sold off the 9 million common stock shares they converted from 74,250 shares of preferred in 2000 and the 9.2 million common stock shares they converted from 75,750 shares of preferred in 2001? If Microsoft never sold off those shares, they're sitting on 54.4 million shares of Apple.

View Name:Guest
Subject: Point is MS is losing big money Apple is not
Close Name:Intruder -   TMO Mac Specialist Posts: 2836 Joined: 07 Jul 2004
Subject:

Quote
daemon wrote:

Does anyone know if Microsoft sold off the 9 million common stock shares they converted from 74,250 shares of preferred in 2000 and the 9.2 million common stock shares they converted from 75,750 shares of preferred in 2001? If Microsoft never sold off those shares, they're sitting on 54.4 million shares of Apple.


Well, if you can believe Wikipedia, they sold that stock off. No citation, though.

View Name:Guest
Subject: come on dude ..relax
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