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Blackfriars': Microsoft's Tuition in Hardware Hard Knocks

Blackfriars': Microsoft's Tuition in Hardware Hard Knocks

by , 3:45 PM EDT, July 6th, 2007

Microsoft is having some difficulties with the Xbox 360 red ring of death. They'll be spending over a billion dollars to deal with an extended warranty program and an estimated 30% failure rate out of the box. Year over year sales are declining, all according to Blackfriars' Marketing on Friday. The marketing consulting firm wondered how much longer Microsoft can toss around a billion here and a billion there.

"This exercise does prove, though, that building great consumer electronics products takes much more than lining up some smart designers and efficient Chinese contract manufacturers," Carl Howe advised. He continued: "Despite Microsoft's claim from its Vista experience that creating software is hard, hardware is harder, and no amount of marketing can really get around that."

Analyzing a chart of Xbox 360 sales, Mr. Howe also pointed out that Q2 2007 is the second quarter in a row in which year over year sales have declined for the Xbox. Meanwhile the Nintendo Wii will soon surpass Xbox sales, and do so profitably.

Especially compelling was this conclusion. "Microsoft is learning some hard lessons about just how challenging it is to create good consumer electronics. At a billion here and a billion there, pretty soon these billions of dollars add up to real money. Shareholders would be right to ask how long they'll have to pay for Microsoft's tuition in the school of hardware knocks.

By way of contrast, regarding Apple and the iPhone, some analysts have suggested that Apple, being new to the mobile phone industry, would not be able to equal the results and experience of the other manufacturers. That assessment seems to have overlooked that Apple is a pure bred hardware company that knows how to both design and supervise the building of quality hardware. Blackfriars' Marketing suggested maybe not so much with Microsoft lately.


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