Microsoft Q2 2010 Earnings
- Thread starter RobertR1
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Silent_Buddha
Legend
Operating income could also be up due to lower losses from Zune and other products (keyboards, mice, etc...) in that division.
Also, no longer, any losses from PC games publishing.
All combinging for a rather impressive increase in operating income. Still wish we could isolate console related revenue and income from the rest of the Entertainment and Devices Division.
I'm going to guess that Zune is probably still operating at a loss, so the isolated console numbers might be even better.
Surprised that Arcade is "relatively" less attractive to consumers versus the prior year. I'm going to guess that the value add propsition on the Elite is now close enough to impulse buy territory that many people don't feel a HDD less X360 is worth it.
Regards,
SB
Also, no longer, any losses from PC games publishing.
All combinging for a rather impressive increase in operating income. Still wish we could isolate console related revenue and income from the rest of the Entertainment and Devices Division.
I'm going to guess that Zune is probably still operating at a loss, so the isolated console numbers might be even better.
Surprised that Arcade is "relatively" less attractive to consumers versus the prior year. I'm going to guess that the value add propsition on the Elite is now close enough to impulse buy territory that many people don't feel a HDD less X360 is worth it.
Regards,
SB
The way it's worded, I take it could mean the product mix shifted to Elite from Pro, which of course it did given the elimination of the pro. Nothing interesting in that case.
I dont doubt the MW2 bundle did well though. It's ridiculous MS still has a 399 SKU and gets by with it. That's higher priced than any current PS3 SKU.
Err...
If I had to "wild guess" i'd say Arcade break even, other SKU's profit. Then add on MS unique wi-fi adapter and HDD profits. As a whole, very profitable.
Microsoft said at some point that they'd like the hardware to break even over an entire generation, to do that you've got to have some periods of profitable hardware. Not that I think they will achieve this goal after RROD mind you.
I think they're in good position to introduce Natal and a price drop. I hope they're not planning on Natal alone igniting demand..
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Anybody still want to argue with me that 360 hardware must be very profitable right now?
Uh sure, me?
$375M is very good for the quarter, but it's not motherload enough that I would see how you would automatically jump to 'The Arcade must be at least break-even.' On an aggregate basis, I think most of us are comfortable with the idea of profitable hardware for MS, but it's the idea that they no longer have a loss-leading element that folk are disagreeing about.
In any event, I'm sure they address just that sort of question in the conference call. (I'm listening now - might as well since it's been a while)
Well, I listened to the call. The gist in case you don't know is that Windows 7 is doing quite well!
Anyway it actually didn't come up as a direct question, but the XBox business cost structure did come up voluntarily as a point in the dialogue. Minutes 30:10 through 30:14 (yes four seconds) is when MS highlights that "we're working through the profitability on the console costs," which in my humble opinion I take to meant that the hardware is actually still lossy in the aggregate - but I will be the first to say that it is a vague and sloppy phrasing that could mean any number of things. Still, that's my take away: essentially that they are still working towards steady hardware profitability. I could be wrong! And there's always the chance for future clarification on MS' part, but it may be another three months before that time comes.
Anyway it actually didn't come up as a direct question, but the XBox business cost structure did come up voluntarily as a point in the dialogue. Minutes 30:10 through 30:14 (yes four seconds) is when MS highlights that "we're working through the profitability on the console costs," which in my humble opinion I take to meant that the hardware is actually still lossy in the aggregate - but I will be the first to say that it is a vague and sloppy phrasing that could mean any number of things. Still, that's my take away: essentially that they are still working towards steady hardware profitability. I could be wrong! And there's always the chance for future clarification on MS' part, but it may be another three months before that time comes.
I just dont see how the hardware can be lossy.
If PS3 is supposedly 10% above cost, with the difference of Blu Ray, then it strains credibility to think X360 with a DVD drive isn't profitable at a $260 ASP (possibly higher with the MW2 SKU). X360 is also a year farther down the cost curve.
And as always, I look at video cards and the like, and again, a profitable lets say, HD4890 at 179, makes it difficult to think 360 can lose money.
It's just my educated guess+common sense.
If it is lossy, then you can pretty much never expect MS to break even on the hardware over the generation, either, so I dont see why they stated that as a goal. Because if it's lossy now, It has never been and never will be profitable, basically.
If PS3 is supposedly 10% above cost, with the difference of Blu Ray, then it strains credibility to think X360 with a DVD drive isn't profitable at a $260 ASP (possibly higher with the MW2 SKU). X360 is also a year farther down the cost curve.
And as always, I look at video cards and the like, and again, a profitable lets say, HD4890 at 179, makes it difficult to think 360 can lose money.
It's just my educated guess+common sense.
If it is lossy, then you can pretty much never expect MS to break even on the hardware over the generation, either, so I dont see why they stated that as a goal. Because if it's lossy now, It has never been and never will be profitable, basically.
corduroygt
Banned
11M*$12 = 132M of that profit is from Live subscriptions. Add all the royalties from millions of copies of software sold, and i'd guess Arcade is being sold at a loss. However, the profit from the elite might be offsetting the Arcade loss, so overall they may be breaking even on pure hardware.
There's no such thing as this though - 360 could be ten years further down the cost curve and it would make no difference; what makes the difference is the component costs and other assorted BOM. The DVD drive I agree with you, but Xenos is not on a smaller process node for having launched earlier, and neither is the XeCPU. If anything, Sony actually has an edge to 45nm on both of these.
This is speaking to your cost curve point and that point alone - again I'm just quoting (verbatim) what was said on the call; like I said it's not a clear cut statement on MS' part, but it does seem to imply continued loss-leading.
I took that 4 second line to mean they're working on parts based on a smaller process. And Rangers, I think it will be hard to argue the hardware isn't profitable but "very" profitable I doubt. All the replacement/refurb/warranty boxes being shipped have to come from somewhere.
Very surprised at the jump in Live subscriptions. How does that compare with the hardware sales this year?
Very surprised at the jump in Live subscriptions. How does that compare with the hardware sales this year?
Silent_Buddha
Legend
Not quite that would be less than 132M of the 2,902M in revenue.
Or do you claim to know how much of that 12 USD is for MS and how much is earmarked for retailer margins?
And that would still only get us its revenue contributions. As we do not know what portion of that is contributed to operating costs. As such the only number where that is even remotely relevant is as it relates to the revenue of the division.
Regards,
SB
corduroygt
Banned
I actually included the operating cost of Live in there, see 50/12 = 4.16 cents. I figure 16 cents operating cost and $4 profit. Running servers for a P2P network costs VERY little. Also you can buy Live straight from your xbox without going out. Also I used the average price of $50/year because some people get it cheap for $30 per year and some buy it monthly or quarterly, which works out to be more expensive.
I guess in revenues 2010 should be better, along with natal, halo and an overall good line up I expect them to sell more. For profits is another matter, it will depend a lot on their pricing politic but I would bet on lower operating income due to:
less profit made on hardware
huge advertizing expanses
less profit made on hardware
huge advertizing expanses
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