8:18 AM on 07.21.2007
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Nex
According to this article at Game|Life, Microsoft's Xbox division has posted a $1.89 billion loss for the fiscal year, a 47% increase over the previous year's losses. Attributed mainly to the donkey-chokingly huge wad of cash MS has set aside to cover their ass in the Red Ring O' Death debacle, the tremendous loss places Microsoft well ahead of both Sony and Nintendo in the race to make accountants the world over cry blood.
In what appears to be a bid to prevent stockholders leaping from tall buildings and further congesting Seattle's poorly designed roadways, Microsoft has assured us all that their Entertainment and Devices Division (the people responsible for the Xbox) will be profitable in the new fiscal year, before mumbling something about buying and selling every one of us.
I hate to be pessimistic about all of this, but both Microsoft and Sony are hemorrhaging money at a rate that would make the corpse of Karl Marx rise from the grave and set out on an Altered-Beast-ian quest for revenge. Even a company as notorious for its money vaults and rolling papers emblazoned with the face of Benjamin Franklin as Microsoft is, cannot keep this sort of financial freefall up for long, and you have to imagine the suits in Redmond are praying that Halo 3 is going to be the metaphorical white wolf they've been hoping for ever since that last one tore their shirts off and metamorphosed their pants into a snug-fitting loincloth.
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Contest:
That, plus the image, coronate you as King of the Lawl.
It shows PS3 vs 360 sales with the launch dates aligned. They're selling the same number of consoles. If you add in the PS2 figures, you see that both of the next-gen consoles are selling as well as the PS2 did, relative to launch dates.
I don't think either Sony or Microsoft are going to flinch in the face of continuing losses. Neither will write off their existing investment. Microsoft has decided it needs to be in the console war to get into the living room market. Sony *needs* to get Blue Ray players on the market, they're thinking about the next 10-15 years worth of consumer electronics and movie sales.
Nintendo is going to make the most pure money from consoles in this generation. Microsoft wants everyone's digital entertainment to run off of systems they control so they can get a piece of the action. Sony has a long-term strategy planned around Blue Ray, and the PS3 makes a very reasonable player. All three makers are executing just fine for their own objectives.
Now, the lines on that graph are almost certainly going to have to change soon. The market is bigger than just the old PS2 market, but it probably isn't going to be big enough to let both MS and Sony sell anything like 50 million in 10 years. Even if they both end up splitting that market a console with an installed base of 20-25 million will attract publishers of AAA titles. The most likely effect is that we'll see fewer cheaply produced games for either platform. The PS2's huge library includes a lot of just plain bad games. With a smaller market, those marginal titles won't be greenlit for production. The small developers will go to the online arcade sales on each platform so we'll also see more good inexpensive games, which will be good for consumers on all platforms.
Let's look at the numbers again next year. So far it looks like all 3 consoles will be viable. Sony is in the most precarious position, but with Blue Ray and a library that is really starting to pick up I don't think Sony execs are sweating yet.
I predict, for the next year, steady Wii sales, 360 sales leveling off until hardware reliability concerns are addressed (either by marketing or by engineering) and Sony will see PS3 sales pick up a bit as their library grows and the online service launches (Home *could* be really sweet).
For the record I own a PS2 and several hundred hours worth of games left to play, so I'm not interested in a next-gen console until next year. I'm still leaning towards the PS3; but the 360's library is tempting.
i love you guys. 'ms scoffs, buys jupiter' hahaha.
imo, any money that any company throws at the video game industry is a good thing. bill gates is one rich bitch, and it's a good thing he decided to push ms into the videogame business =) pretentious bastard as he is...
i for one think ms is going to turn a profit...
if you look at that loss, they tied the hardware repair costs to this quarter so it wouldn't slam them next quarter...
they're making money off each 360 unit sold now, they've got halo 3 coming, and ass-load of exclusives...
imo now is microsoft's time to shine, this holiday should be huge for them =)
Or the most clever Destructoid writer. I forget which.
Are people that stupid? If you're MS, you certainly should HOPE they are.
MS is not worried about today, this is a future investment. Please educate yourself before forming an opinion.
If you lose 250 million a year for three years, and then profit 150 million a year for 5 years you are even and then every year after that the profit is actual profit.
Simple fucking math, goddamn public schools.
They are the same thing.
Everyone is gonna get well soon.....
I AM an investor. I DO follow corporations. and PLEASE show me another company that has taken a TWO BILLION dollar loss in 1 year while trumpeting near term profitability. Please. I dare you.
"they all do this" my ass.
So far MS has lost over 7 billion on xbox. Even if they make ONE BILLION per year in profit, it will take 7 years to break even. Thats a break even date of 2015 on an industry they entered in 2001. NO corporation does that EXCEPT MS. Not to mention the likelihood of them EVER making 1 billion in profit per year is slim to none. Even Sony and Nintendo don't clear a billion in profits and they've had some stellar years in the past.
If you can do math AT ALL then the MS losses on xbox are obviously enormous absolutely NOT the norm for ANY corporation. If you are a fanboy, you'll claim that this is totally normal and every company stuffs multi BILLION dollar losses in its financials EVERY YEAR. Hahah, public schools, try going to ANY school, it might help.
Now, all that being said, MS can afford absolutely retarded losses, so who knows WTF will happen. But don't kid yourselves, MS is absolutely the only corporation who could even THINK about this type of strategy.
It is a nearly 2 billion dollar loss in a quarter, not a year.
@Subnet6 and BurritoClock
You're both wrong. MS isn't posting losses now to recoup them later, they're posting losses in one division and recouping them in other divisions. This is the way it has always gone with the Xbox division. If anything, the decision to go ahead with the universal 360 repairs is an effort to get such a cringe-inducing move out of the way while the going's good elsewhere in the company and such a loss can be soaked up without shareholders rioting. This year is a major turning point for the Xbox division and they wanted to get their dirty laundry aired out so that, from this point on, the division can turn a profit.
Cheers, Microsoft... Here's hoping you release project Falcon really fucking soon.
From the linked article.
"Microsoft's Xbox division posted a $1.89 billion operating loss for the fiscal YEAR."
The 1.15B in losses was posted in the final fiscal quarter, but total annual losses are what are being quoted in the article. Sorry for any confusion on my part.
@coughaboy,
No, I'm not wrong. I'm referring to the xbox division, since that what the topic was about. No, the xbox division is not the same as all of microsoft. But the xbox division has to post its own numbers and financials as an individual division otherwise, it's poor performance would be invisible in the light of the other profitable MS divisions. Yes, its losses get assumed by the whole and the whole is very profitable but that is irrelevant. Do you think investors and executives simply look at the final number that MS posts? thats insane. If there is a division bleeding money EVERY YEAR to the tune of BILLIONS, then it drags down the profitability of the whole company. Surely this makes sense even to you.
Sure, it does make sense that shareholders wouldn't like it if a division were unnecessarily hemorrhaging cash, but everyone knows that this isn't a short-term game. Microsoft is taking a long shot with the Xbox division, and its shareholders know that if they can stand making a little less than they would have otherwise, the rewards could be immense. I could imagine shareholders grumbling and groaning if it looked like the 360 were a failed venture, but with Microsoft's own reports indicating that the 360 will be profitable next year, it's hard imagine those shareholders ready to bail out.
Microsofts own reports don't mean much when they don't even make their own sales goals AFTER they lower them 20 percent.
And what I'm saying is, it's ONLY going to be profitable next year (if it is indeed profitable at all) because they hid next years (and the year afters) losses in this last fiscal year. Investors aren't stupid and they don't usually drink the kool-aide. It's easy to say "this isn't a short term play" bla bla bla but thats all kool aide, it's talking without thinking.
They've been saying that for 7 YEARS. They are not losing money short term. They are losing it LONG term. Like I said, even if the xbox division turns profitable overnight and make a BILLION per year profit starting TODAY, they won't break even until 2015. Thats almost 15 years JUST TO BREAK EVEN. I don't know many investors who like those odds, especially when a 1.15 BILLION dollar loss can come out of nowhere. Who is to say there won't be another $1 Billion surprise loss in the next 7 years, pushing the break even point out even further. There is no two ways about it, this is an incredibly risky investment no matter how you stack it. What if Sony gets there shit together? What if this crazy Wii bubble doesn't burst? A LOT can happen in 7 years, while you're investing in your "long term" break even in 15 years strategy. Did you see the stories showing MS sales were down? Put the kool-aide down and check this out.
http://www.informationweek.com/hardware/showArticle.jhtml?articleID=201200157&cid=RSSfeed_TechWeb
Tell me this is looking good for long term.
And no, I"m not a 360 hater. I love the 360, but as an investment, it has been an abomination. Thank the lord it has good games, because at least the thing is fun to play while it's working.
Do they? Who said so? I think you take this for granted.
"as a gamer, why do I care how much they are willing to spend ?"
Because companies don't like to take losses. That means they will endeavor to cut costs. Cutting costs leads to unreliable hardware, and here we are.
Do they? Who said so? I think you take this for granted. [/i]
I was a little vague. Microsoft thinks they need to be in the living room. They're spending way more effort on home theater and digital media than a strictly operating-systems-and-business-software company would. They've spent money and incurred real losses just to get cable boxes running Windows in some flavor. They put a lot of effort into makign deals with cable companies. It never really went anywhere, but they tried. Microsoft has demonstrated their commitment to making the jump from the desk to the couch, in an ideal world there's a lot of money to be made there. In the real world, Apple is getting an awful lot of those dollars.
If you don't beleive me, look for yourself, some games are all ready being released as Vista only, and after service pack 3 there will be no more support for XP.
M$ will just keep pumping money into the market until they force everyone else to back off, then lay down the monopoly hard. I am all for companies fighting for my dollar, but fuck M$, they have nothing but bad intentions.
Investors are quarter to quarter, because that's how things work.
Yes, take the huge loss all at once and any stock price hit as some investors pull out not feeling comfortable. It's done.
Next quarter, after the hit, if numbers look "up" then more investors buy MS stock.
That's how it works in general, as you probably already know.
If you are an investor in MS and don't like where they are going with their ent division I suggest you pull out your cash and put it elsewhere. A stock being flat for a long time = dead money. Either you "invest" for the long term, or you are a day trader, looking for short term profits. Choices, choices.
MS can put as much money into things as they want but they can't force consumers to buy. In some areas (PC OS's) it's working, but look at how Apple hit the nail on the head with the iPod line. Where is the Zune? An also-ran.
And that is what I HATE about MS: they wait for someone to do something, and if it looks like it's gaining traction, MS says "OK, we need to compete with that...go forth and conquer!"
How about they set the trend themselves and use their own vision to drive the market. Oh, wait, that would be Nintendo (in the gaming world).
The hard part is as a consumer we have to be careful and not buy into technology that is not being accepted, but I guess if companies will continue to pour cash into them because they don't see the light of day then we could care less.
Dumb and reactionary ones are. I have several "long term plays" in my portfolio and I still watch them regularly, reading reports on corporate health, who is running things, what the competition is up to. Stocks go up and down all the time. Buyers get in or get out all the time, not just quarterly. Thats just when the more drastic changes sometimes happen, but stock price momentum is built year round. And there are many categories of investors in between day traders and long term investors, and most good investors are fall into both categories and more. To say you are one or the other is inaccurate and shows a lack of understanding. To say "take the hit and its done" is even sillier. Or that investors may somehow ignore massive losses in a previous quarter if numbers start to "look up" in another quarter? Annual gains and losses are of huge importance when evaluating a stock, not just quarterly. Year on year performance is important as well which is essentially looking at 2-3 years all at once. To ignore these factors, PARTICULARLY in a long term investment would be very dangerous. Some stocks I plan to hold a day or a week, others 6 months and others 2 years. I have some mutual funds that I plan to have for 5 years or more, but few STOCKS do I PLAN to have for 10 years plus. I got out of MS a while ago (talk about a rollercoaster) and have never owned Sony, but I'm still in Nintendo and I'm up 60% in under a year.
Sorry, you were right, I didn't catch the write off for the qtr was 1.15b.
I think MS has an investment they can no longer afford to walk away from anymore. My gut says they will begin to turn a profit soon, look at the schick razor business model, give away the razors and rape em on the razor blades. They lose money on each console, but are paid licensing fees for everything related. Including a cut from everything sold on XBLM. They will reach critical mass and begin to turn a profit. The question is, was it worth it?
"The question is, was it worth it?"
Well, as a gamer (not as an investor), I certainly think it has been, but in this case it's not my money. :)
I just hate to see us (as gamers) getting shoddy hardware because MS is so desperate to cut costs (for investors) in order to stop the bleeding as soon as possible.
As for the razors and blades, keep in mind, the cost of the razor is recouped on 2 packs of blades, or about 6 months. Microsoft is stretching this business model to the breaking point and we are seeing the fruits in the RROD issues.
"As for the razors and blades, keep in mind, the cost of the razor is recouped on 2 packs of blades, or about 6 months."
Touche'