Official Microsoft Q4/Year-end Financials Thread

[Carl B]

Important quarterly report coming in just a couple of minutes; this is the place for discussion. Try to keep things console-centric, but some deviation to other business segments will be tolerated, as will any Windows gaming discussion.

 

[AlphaWolf]

MSFT is up a few dollars this week in anticipation. Let's see if they were right.

 

[Inquisitive_Idiot]

So are they expecting a profit from the entertainment division?

 

[AlphaWolf]

So are they expecting a profit from the entertainment division?

Unless they managed to lose $611m in Q4, that division will be profitable for the fiscal year.

 

[Carl B]

Ok the results are in - here's the text segment that deals with the Entertainment and Devices Division, pending a more traditional layout:

Entertainment and Devices Division Three Months Twelve Months (In millions, Ended June 30, Percentage Ended June 30, Percentage except percentages) 2008 2007 Change 2008 2007 Change Revenue $1,575 $1,153 37% $8,140 $6,069 34% Operating income (loss) $(188)$(1,223) 85% $426 $(1,969) * * Not meaningful


Entertainment and Devices Division ("EDD") products include the Xbox 360 platform (which includes the Microsoft Xbox video game console system, Xbox 360 video games, Xbox Live, and Xbox 360 accessories), the Zune digital music and entertainment platform, PC software games, online games and services, Mediaroom (our Internet protocol television software), the Surface computing platform, mobile and embedded device platforms, and other devices. EDD leads the development efforts for our line of consumer software and hardware products including application software for Macintosh computers and Microsoft PC hardware products, and is responsible for all retail sales and marketing for Microsoft Office and the Windows operating systems. In April 2008, we acquired Danger, Inc. ("Danger") a software-as-a-service company that provides mobile operators with an integrated end-to-end solution to deliver mobile data and Internet services to their subscribers.

Fourth Quarter

EDD revenue increased primarily due to increased Xbox 360 platform sales. Xbox 360 platform and PC games revenue increased $234 million or 35%, primarily as a result of increased Xbox 360 console sales, Xbox 360 video game sales, and Xbox Live revenue. We shipped 1.3 million Xbox 360 consoles during the fourth quarter of fiscal year 2008, compared with 0.7 million Xbox 360 consoles in the fourth quarter of fiscal year 2007.

EDD operating loss decreased primarily due to decreased cost of revenue and increased revenue, partially offset by increased research and development expenses and sales and marketing expenses. Cost of revenue decreased $826 million or 49%, reflecting the $1.1 billion charge in the fourth quarter of fiscal year 2007 related to the expansion of our Xbox 360 warranty coverage, partially offset by increased Xbox 360 product costs related to increased unit console sales. Research and development expenses increased $141 million or 38%, primarily reflecting increased headcount-related expenses, increased product development costs, and costs relating to Danger, including a $24 million in-process research and development expense. Sales and marketing expense increased $63 million or 22%, reflecting an increase in marketing and advertising campaigns and an increase in headcount-related expenses associated with product marketing and the retail account sales force. Headcount-related costs increased 24%, driven by an increase in headcount during the year.

Full Fiscal Year

EDD revenue increased primarily due to increased Xbox 360 platform sales. Xbox 360 platform and PC game revenue increased $1.7 billion or 41% as a result of increased Xbox 360 console sales, video game sales led by Halo 3, Xbox Live revenue, and Xbox 360 accessory sales. We shipped 8.7 million Xbox 360 consoles during fiscal year 2008, compared with 6.6 million consoles during fiscal year 2007.

EDD operating income increased primarily due to increased revenue and decreased cost of revenue, partially offset by increased research and development expenses and sales and marketing expenses. Cost of revenue decreased $683 million or 13%, reflecting the $1.1 billion Xbox 360 warranty charge in fiscal year 2007 described above, partially offset by increased Xbox 360 product costs related to increased unit console sales. Research and development expenses increased $242 million or 18%, primarily reflecting increased headcount-related expenses and costs relating to Danger, including a $24 million in-process research and development expense. Sales and marketing expenses increased $93 million or 8%, primarily reflecting increased headcount-related expenses and increased bad debt expense. Headcount-related costs increased 21%, driven by an increase in headcount during the year.

I'm just reading it now myself, so no comments from me until later.

EDIT: Looks like a $188 million loss for the quarter vs a $1.22 billion quarterly loss last year (the quarter/year of the warranty charge), and a $426 million yearly profit against the loss of $1.96 billion last year.

 

[AlNom]

hm.... So if we don't count the R&D, they are effectively losing ~$40M for the 360? (But otherwise making money on raw hardware and game sales)

 

[liolio]

Forget about it it's june... Damned financial reports...

 

[AlphaWolf]

As sort of an aside net profit for MS is up quite a bit $4.3 billion, vs $3.04 B a year ago.

 

[Carl B]

I think its a little dangerous to try and carve out the 360 from the rest of it; they reported an R&D increase, and we know that some of that is related to Danger. They also reported a headcount increase. But what those levels were for 360, and what part of the increase is associated with that business, is a little opaque.

I'd say we just consider it as an asterisk; otherwise then we're setting up the precedent to go and try and take out any non-360 profit drivers from the division in order to reach a more accurate figure, notwithstanding that some of the costs that increased (headcount, R&D) probably did have some basis in 360 to begin with.

For better or worse, these numbers are an amalgamation of: ...the Xbox 360 platform (which includes the Microsoft Xbox video game console system, Xbox 360 video games, Xbox Live, and Xbox 360 accessories), the Zune digital music and entertainment platform, PC software games, online games and services, Mediaroom (our Internet protocol television software), the Surface computing platform, mobile and embedded device platforms, and other devices...our line of consumer software and hardware products including application software for Macintosh computers and Microsoft PC hardware products...is responsible for all retail sales and marketing for Microsoft Office and the Windows operating systems...we acquired Danger, Inc. ("Danger") a software-as-a-service company that provides mobile operators with an integrated end-to-end solution to deliver mobile data and Internet services to their subscribers...

We just have to take it as a larger whole, just as we'll never be 100% clear on how the profit/loss pie gets divided between Sony's PS3, PS2, and PSP (and now SOE).

 

[Carl B]

this is from marsh 2007 to marsh 2008 and this fiscal year 2008 right?
I ask I just went with some Sony figures in antoher thread

This report is two things: the quarter ended June 30th, and the fiscal year ended June 30th. The numbers are separated out at times depending on which timescale they are referencing.

 

[AlNom]

Fair enough, Carl. Thanks.

 

[DrJay24]

EDIT: Looks like a $188 million loss for the quarter vs a $1.22 billion quarterly loss l

Was that the RROD repair write-off quarter?

 

[Carl B]

Was that the RROD repair write-off quarter?

Didn't I say just that in the line you quoted?

But anyway, yes it was.

 

[DrJay24]

Didn't I say just that in the line you quoted?

But anyway, yes it was.

Yes, yes you did