Xbox Division Down $4 Billion

Forbes, in a long article about Microsoft's monetary situation, drops the news that the Xbox division is $4 Billion in the hole over the last four years. From commentary on C|Net: "That's a lot of money, even for Microsoft, which Forbes also says has a war chest of $40 billion in cash. Just before Thanksgiving, Microsoft will launch its next-generation console, the Xbox 360. The early word is that the 360 will also start its life as a loss leader, though Redmond insists the new box will soon be a moneymaker. Either way, it's got a long way to go to get back to even, and though Microsoft is a rich company, it surely doesn't want the Xbox 360 known as an albatross around its dividend-paying neck."

Comments

Microsoft vs. Nintendo

[popo]

Now might be a good time to point out the frequently bashed Nintendo, smallest of the 3 console makers -- is profitable.

Personally (I own both a GameCube and an Xbox) I always thought there was no contest in graphics quality between the GC and the Xbox. The antialiasing on the GC *destroys* the Xbox.

Hardware geeks constantly tell me that Xbox has fantastic antialiasing capabilities, but my answer is always: Show me.

Take SSX on the the GC vs. the Xbox: the Xbox version is full of jaggies. The GC version is smooooth.

Anyway ... I ramble.

The point: GC was a fantastic console, wound up 3rd in overall sales -- but from a financial perspective was a clear winner.

Re:Microsoft vs. Nintendo

[popo]

Ok... before we set about the task of removing your Xbox from your ass, let's address your very-alarmed, very-panicky comment.

What was "stupid"?

A comparison of profitability: One is profitable (Nintendo Gamecube). One is not (Xbox)

A comparison of capability: One has the best anti-aliasing I've seen (Nintendo Gamecube). One has poor anti-aliasing (Xbox)

Step back for a second. Go outside. Have a smoke. Settle down.

I wasn't painting broad strokes about the strategic initiatives and ultimate market domination by either company. You're the one connecting dots here. I wasn't even making an "analysis" as you say. Simply pointing out 1 fact, and 1 observation from a consumer (that's me) perspective.

Chill Joe, Chill.

Home and Entertainment Division losses

[genedefect]

Let us all not forget that the losses for the Home and Entertainment Division as a whole were $4 Billion USD. Not just Xbox. If anything, Xbox only accounted for about $1.5 Billion of those losses and was also responsible for the profit in Q404. Remember, The Home and Entertainment Division also encompesses the loss leading eHome team, DirectX group, Movie Maker, Windows Media Player, Windows Media Connect, Media Center Extender, IPTV, on and on. Out of all of those, Xbox is pretty much the only one generating any significant revenue and has a chance for any significant profit within the next 2 years.

Re:Sell the Hardware at a Loss

[Dan Ost]

I am just speculating here, but I would be willing to bet that the XBox division would be a lot closer to being in the black if the XBox didn't tank in Japan.

There's a tautology for you: "If they had sold more of it,
they would have made more money selling it"

Seriously, they never expected to make serious money with
the original XBox. The whole idea was to lose as little
money as possible while getting the mindshare to allow the
XBox successor (which turns out to be the 360) to make
serious money. The real question here is whether a
4-billion loss is a reasonable loss for what they've
accomplished, and we won't know that until we see how
successful the 360 is.