Slashdot Mirror
Microsoft Loses $177m on Xbox in Three Months
Albanach writes "The BBC News are reporting in this story that Microsoft's Home Entertainment Division has filed a submission to the Securities and Exchange Commission reporting a loss of $177 million for the three months to 30 September 2002. The loss comes on revenues of $505m for the division that manufactures the Xbox games console. Microsoft are said to be prepared to spend $2 billion funding Xbox live over the next five years, suggesting it will be some time before the home entertainment division break into the black."
according to The Register's article here the losses are minimal, when compared with the operating income MS gets from Windows, Office and their Server products. The numbers are (quoting the register):
:)
Windows: $2.48 billion on $2.89 billion revenue
Office: $1.88 billion on $2.38 billion revenue
Servers: $519 million on $1.52 billion revenue
compare that with a loss of $177 (and microsoft lost on many other things, like CE/Mobility) and you'll see that the picture is not as bad as it looks (heh, for them, anyway)...
Slashdot is aiming for the sensationalism value again, but that's nothing new now, is it?
It's bad from a PR perspective. It's bad considering that Nintendo and Sony are now actually turning a profit on the consoles, a slim one but a profit nonetheless. Sony has managed to fit the entire Emotion Engine + CPU + sundry other parts onto a single chip, which reduces cost significantly. I'm not sure how Nintendo has pulled it off.
Xbox Live is doing better than expected, but the total numbers are pretty intimidating for MS. Last I checked (2 weeks ago), the score is:
- approximately 8 million GameCubes
- approximately 10 million XBoxen
- approximately 52 million PlayStation 2s
By those numbers, it's safe to say Sony has wrapped up this round, if you're looking for a 'winner'. 5X the market share is too compelling for game designers. The games go where the customers are.
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I like the Xbox, even if it is a little limited in scope. There's a completely different philosophy at work at Sony's computer entertainment division that I don't think MS really understands. The Xbox is basically a kickass 3D sandbox. The PS2 is a super-flexible games machine; by this I mean that the PS2 is oriented for all kinds of games, not just 3D. The PMUs for example, can generate procedural textures on the fly. Take the oft-lamented VRAM issue. VRAM holds lots of shiny textures. But what if you are generating textures from (basically) pure math? No texture overhead. (Bryce 3D, to name a weird example, gets away almost entirely without using graphical textures.)
And now we see Sony moving fast to innovate in areas that Microsoft basically can't... namely, they've gone and asked IBM for a radically different kind of chip. MS is in no position to do this, as part of their whole pitch is the fact that it's a PC in a box, with MS's x86 programming tools.
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If Jesus wants me it knows where to find me.
According to the 10-Q filing, the article is wrong. The $177M net loss is for all of home and entertainment, only a subset of which is Xbox. In fact, comparing it to last year, where the losses were at $68 M and there was NO xbox, you can conclude that total losses resulting from xbox activities would not be greater than $109 M, and in fact probably even less than that. There are many other things in the home and entertainment division such as Windows Media Center PC, UltimateTV, MSN TV, and so on, many of which were probably not profitable, and contributed to the overall losses.
As far as American law is concerned, there's an ongoing trade dispute over stumpage fees charged by the Canadian government to Canadian softwood producers. The US government has lost in the courts 18 times, but still fights it, arguing that the lower stumpage fees allow Canadian companies to sell lumber at below actual cost, and hurts American producers.
In British Columbia (A Canadian Province), the stumpage fees go to the government. The government then uses the money to ensure adequate regulation of the companies. Cutblocks get re-planted, streams are protected, roads are deactivated. The problem is that in the US, they have a auction systems for timber. Private landholders auction their lumber from their private land holdings. Not only do they have to do their own re-planting (adding expense) they also require a profit. (Adding more expense)
When you look at the lumber barons who are doing the lobbying in Washington, most are from the southeastern US. They sell inferior quality wood compared to BC softwood. THeir product is also higher cost, mainly because they refused to spend the money to upgrade their mills. So they produce a low grade, high cost product (very labor intensive) that simply cannot compete in the marketplace. The BC mills spent billions upgrading their mills to be highly efficient. Now they are being penalized for their foresight.
Inevitably, whenever a US industry gets into a non-competitive situation where they can't dominate, out come the lawyers and the lobbyists. (steel) The WTO will overturn this tariff. Until then, thousands of workers and business' in British Columbia will suffer.
Did I mention that the average new house in the US is costing $3K-$5K more? They don't tell you that in Businessweek do they?
Fascism should more properly be called corporatism, since it is the merger of state and corporate power.
I object to the American populace losing ~$100M of tax money from Microsoft because Microsoft purposefully and deliberately priced the Xbox so low they knew they would have this loss.
Look at from a longer-term view. Microsoft does not intend to lose money forever. They want the books to be positive at the end of the day. The government allowing Microsoft to deduct losses now is an attempt to help Microsoft to become profitable in the future. Profitable in the future means revenues to the government. It doesn't do the government any good if they kill companies in the start-up phases before they get a chance to produce taxes.
$100M could do a lot towards fixing our schools so there aren't 55 kids in a kindergarden class. It's a start...
Two things to say about this:
1) It wouldn't do anything for the schools, since this is mostly federal taxes. Schools are locally financed (although, the feds have been sticking their nose more and more where they shouldn't lately)
2) I'd rather have Microsoft grow and create jobs for the parents of the children, rather than have the government take MORE of our money. The government has more than enough money to fix the schools. Insist on efficiency, not higher taxes.
Sometimes it's best to just let stupid people be stupid.
No, Sony does not and never has sold at a loss. Please stop perpetuating this myth.
Info here.
To sum it up, most people (at this point) believe that Sony still makes at least $50 per console sold, Nintendo is just about breaking even, and Microsoft is still losing at least $70 per console sold. (this is taking into account drops in production prices, drops in sale prices, etc).
-[Blaine]- "'Oh dear,' says God, 'I hadn't thought of that,' and promptly vanishes in a puff of logic."
I'm sorry, but this is a pet peeve of mine. Every idiot in the world speaks authoritatively about dumping when they have no idea whatsoever what it actually is.
Here's a hint: "Selling a product at a loss" is not dumping. Not even a little bit. If you produced a product and gave it away for free, that still wouldn't be dumping.
Dumping is very simple: It is selling a product in a foreign market for less than you normally sell it for in your domestic market. If you don't believe me ask the World Trade Organization. So unless you believe that MS is selling the Xbox cheaper overseas (hint: they're not), MS is not dumping.
You may now all return to your ignorant, dogmatic lives.