2.7 million Xbox 360 (MS FY11 Q3 report)

[onQ]

2.7 million Xbox 360 (MS FY11 Q3 report)

Redmond, Wash. – Apr. 28, 2011 – Microsoft Corp. today announced third-quarter revenue of $16.43 billion for the quarter ended Mar. 31, 2011, a 13% increase from the same period of the prior year. Operating income, net income, and diluted earnings per share for the quarter were $5.71 billion, $5.23 billion, and $0.61 per share, which represented increases of 10%, 31%, and 36%, respectively, when compared with the prior year period. Diluted earnings per share included a $0.05 tax benefit primarily related to an agreement with the U.S. Internal Revenue Service to settle a portion of their audit of tax years 2004 to 2006.

“We delivered strong financial results despite a mixed PC environment, which demonstrates the strength and breadth of our businesses," said Peter Klein, chief financial officer at Microsoft. "Consumers are purchasing Office 2010, Xbox and Kinect at tremendous rates, and businesses of all sizes are purchasing Microsoft platforms and applications."

Microsoft Business Division revenue grew 21% year-over-year. Since its release last spring, Office 2010 has become the fastest-selling version of Office in history, and the integrated innovation with SharePoint, Exchange, Lync and Dynamics CRM is driving significant growth for the division.

Server & Tools revenue grew 11% year-over-year, the fourth consecutive quarter of double-digit growth. Strong business adoption of Windows Server 2008 R2, SQL Server 2008 R2, and System Center are driving record revenue and margin expansion.

Windows 7 remains the fastest selling operating system in history with 350 million licenses sold. Revenue for the segment was down 4% in the third quarter, in line with the PC trends, excluding prior year launch impact.

Online Services Division revenue grew 14% year-over-year primarily driven by increases in search revenue. Bing's US search share increased to 13.9% this quarter.


Entertainment & Devices Division grew 60% year-over-year, fueled by Kinect for Xbox 360, the fastest-selling consumer electronics device in history, continued strong Xbox 360 console sales and growth of Xbox Live.

"We delivered strong third quarter revenue from our business customers, driven by outstanding performance from Windows Server, SQL database, SharePoint, Exchange, Lync and increasingly our cloud services," said Kevin Turner, chief operating officer at Microsoft. "Office had another huge quarter, again exceeding everyone's expectations, and the addition of Office 365 will make our cloud productivity solutions even more compelling. We continue to see strong adoption of our cloud-based services among the Fortune 500."
Business Outlook

Microsoft reaffirms operating expense guidance of $26.9 billion to $27.3 billion for the full year ending June 30, 2011. Microsoft also offers preliminary fiscal year 2012 operating expense guidance of 3% to 5% growth from the mid-point of fiscal year 2011 guidance, or $28.0 billion to $28.6 billion.

http://www.microsoft.com/investor/E...s/PressReleaseAndWebcast/FY11/Q3/default.aspx

 

[RobertR1]

Some info from gaf: http://www.neogaf.com/forum/showpost.php?p=27472401&postcount=175

$712 million is the growth for the quarter, not the total xbox revenue. Based on the growth percentage and amount we can figure that the xbox total revenue for the quarter should have been around $1.742 billion or 90% of the division total\

edit- Based on some of the cost numbers they give the 360 platform cost was roughly 1.25-1.3 billion so the 360 made more than 400 million in profit for the quarter.

 

[Squilliam]

Thats some pretty nice profit figures. The questions I have are about how they intend to maintain those levels or if this is just a blip. It always seems like the Xbox 360 is one step short of a precarious situation and one step from outrageous success and it seems to hover between those two points as im never sure whether it's long term success as a profit driver for the EDD will continue.

 

[Rangers]

So Xbox is 90% of the division revenue??

Doesnt that division include lots of other things like Windows Phone 7 too?

If Xbox is truly 90% of the division, I'd say using division profit/loss as a proxy for Xbox profit/loss is a lot more accurate than I had thought.

In any case, Division P&L since X360 launch stands at (Neogaf post)

According to numbers from last quarter's discusion someone running the table had them at -613M for the generation. Take $250M off that so -363M. Profitable this gen by fall.

This has to sting extra if the PSN debacle is really going to cost Sony billions as some claim, considering how far behind 360 PS3 already was in profitability (I lost track a long time ago but guessing still 4 billion + in the hole)

 

[Rangers]

Thats some pretty nice profit figures. The questions I have are about how they intend to maintain those levels or if this is just a blip. It always seems like the Xbox 360 is one step short of a precarious situation and one step from outrageous success and it seems to hover between those two points as im never sure whether it's long term success as a profit driver for the EDD will continue.

Umm, why wouldn't it? The only thing that causes it to lose money is loss leading hardware. Both MS and Sony have been able to maintain hardware prices without a drop for a very long time now and they're still selling great. Neither one feels any need to drop, and the other dropping is the only factor that would cause the opposition to follow suit. Almost profit by collusion (and they deserve it after so many years of losses).

There's also Kinect, which I think was engineered from the start to be highly profitable. As basically just a webcam and nothing else needed, I think it can be pure profit gravy going forward.

But actually to answer my own question, what could start causing price pressure for the first time in ages is Wii2, but that depends, it's yet to be seen.

 

[Squilliam]

Umm, why wouldn't it?

Actually I was thinking about the transition into the next generation and continuing this momentum they have at the moment in terms of overall sales. The Xbox 360 can't last forever and yet we're soon going to be heading into that transition period for the next generation of consoles.

 

[Rangers]

Actually I was thinking about the transition into the next generation and continuing this momentum they have at the moment in terms of overall sales. The Xbox 360 can't last forever and yet we're soon going to be heading into that transition period for the next generation of consoles.

360 is actually selling better and better so I dont see why from Microsoft's position they'd be interested in a new console anytime soon. Especially when this one is now highly profitable.

If 360 starts trending down (dont see it too soon) or Wii2 starts applying pressure (remains to be seen), then they start thinking about it.

 

[aselto]

So Xbox is 90% of the division revenue??

Doesnt that division include lots of other things like Windows Phone 7 too?

If Xbox is truly 90% of the division, I'd say using division profit/loss as a proxy for Xbox profit/loss is a lot more accurate than I had thought.

I don't see the logic, other activities (WP7, earlier Zune or Kin) might bring little to zero revenues, but they obviously require a lot of costs. So Xbox has been subsidizing other branches for quite a while now, as crazy as it sounds.

 

[Scott_Arm]

There's also Kinect, which I think was engineered from the start to be highly profitable. As basically just a webcam and nothing else needed, I think it can be pure profit gravy going forward.

Didn't teardowns reveal that it was a lot more than just a webcam? I'm sure there's an incredible amount of profit on the price anyway.

 

[RancidLunchmeat]

360 is actually selling better and better so I dont see why from Microsoft's position they'd be interested in a new console anytime soon. Especially when this one is now highly profitable.

If 360 starts trending down (dont see it too soon) or Wii2 starts applying pressure (remains to be seen), then they start thinking about it.

If the Wii2 starts to apply pressure or when the 360 starts trending down it's far too late to start thinking about their replacement.

If I had to guess, I'd bet that MS already has worked on multiple replacement plans, probably putting them on hold in favor of an attempt to extend the lifecycle with Kinect. But I'm sure they did some amount of research, design and development on a replacement already and are probably continuing to do so.

MS knows how important launching before Sony was. If the Wii2 can only match PS360 performance, then MS can take a bit more time and just insure they launch before Sony. If the Wii2 really tries to go for the performance crown, then MS and Sony will both be scrambling. Scrambling to either get their replacements out, or scrambling to reduce BOM costs so they can reduce their price point and hope to kill the Wii2 as an overly expensive alternative with not enough value.

But regardless of what happens, I'm sure they've already started thinking about these things. Including basic parameters in terms of technical capabilities as well as manufacturing costs and acceptable price points.

 

[eastmen]

I'm pretty sure they already have developers working on next gen games. They most likely started either late last year or right about now.

Think about it games this generation take 2-3 years to produce . I bet some of their internal teams have already moved over and i wouldn't be surprised if they start reaching out later this year to companys like epic.

I'm sure they already have a rough estimate of what the hardware will be (dx 12 compliant , how many cores they want , how much ram they want )

 

[NathansFortune]

There's also Kinect, which I think was engineered from the start to be highly profitable. As basically just a webcam and nothing else needed, I think it can be pure profit gravy going forward.

Not true. It was designed to be as cheap as possible but not cost too much. The teardowns revealed a lot of proprietary tech and complex sensors which lead to the $150 price. I'm sure that they want to get that down as fast as possible to make Kinect more accessible to the casual market and so they can lower the bundle price to $250.

 

[Laa-Yosh]

Actually the software side is more interesting because MS doesn't have too many internal dev teams. Rare and 343 industries and Lionhead or so?
Epic is a good candidate for a third party launch title, but if they can't go multiplatform they'll ask a huge price for it... Maybe Crytek?

 

[AzBat]

Actually the software side is more interesting because MS doesn't have too many internal dev teams. Rare and 343 industries and Lionhead or so?
Epic is a good candidate for a third party launch title, but if they can't go multiplatform they'll ask a huge price for it... Maybe Crytek?

There's also Good Science Studio headed by Shannon Loftis. They were responsible for Kinect Adventures and it looks like from what I read on her Twitter account they have more Kinect games in the pipeline.

Tommy McClain

 

[Laa-Yosh]

Hmmm, could a next-gen Xbox with a more powerful CPU make better use of Kinect? I'd think so...
Nevertheless, MS has to bring out more games for the system this year, I still don't see a real system seller there, or any hardcore games making good use of it...

 

[eastmen]

Hmmm, could a next-gen Xbox with a more powerful CPU make better use of Kinect? I'd think so...
Nevertheless, MS has to bring out more games for the system this year, I still don't see a real system seller there, or any hardcore games making good use of it...

If xbox next isn't till 2013/14 i'd rather they do a kinect 2 with better sensors and mabye a cpu inside of it

 

[Laa-Yosh]

As far as I know they still aren't using the full capabilities of the existing sensors, and the latency could be far less as well if the Xbox could process the data faster. Also, isn't the USB connection a limiting factor as well?

They'd have to be very careful with the hw upgrade, as the cost will keep them from reaching every market segment sooner or later. An X360 with a Kinect is still around $400 and the sensor itself is $150, which is almost as much as the average price point of all the PS2s sold. They'd actually have to cut the price before they move to the next gen console to sustain their momentum, or they'd follow the Wii in declining sales, but sooner. So adding a separate CPU doesn't sound like a good idea in light of that.

 

[BRiT]

I'm not certain they haven't done unofficial price cuts already or will have some coming up. The past two weeks I've been seeing a lot of Kinect kits being sold for $120-$130 without any rebates. I've also been seeing a lot of 4GB Slim kits being sold for $200 with a $50 Gift Card, mostly on Amazon or NewEgg. I just started seeing the 250GB Slim with Kinect being sold for $400 with a $60 Gift Card, mostly on Amazon. The last time these sort of discounts started showing up, they had price-cuts around the corner.

From what I remember reading, part of the Kinect limitation is the USB implementation on the XBox 360, something about not having full USB 2.0 bandwidth available and being just a tad bit over normal USB 1.0 if it's any faster at all.

 

[bkilian]

If xbox next isn't till 2013/14 i'd rather they do a kinect 2 with better sensors and mabye a cpu inside of it

Oh come on... Just repeating something untrue often enough does not make it true. The Kinect has not one, but _two_ CPUs in it.

 

[eastmen]

Oh come on... Just repeating something untrue often enough does not make it true. The Kinect has not one, but _two_ CPUs in it.

i'd still like to see better sensors / cameras esp . its alot of fun where you see pictures or videos of what crazy stuff you did in the game but they all look terrible.

Also i'm sure xbox next will come with usb 3.0 and i'd like to see them take advantage of the greater bandwidth