Analyst claims Xbox losing $2 Billion per Year; Suggests it should be dropped

Discussion in 'Console Industry' started by BoardBonobo, Nov 7, 2013.

  1. BoardBonobo

    BoardBonobo My hat is white!
    Veteran

    Joined:
    May 30, 2002
    Messages:
    3,255
    Likes Received:
    153
    Location:
    SurfMonkey's Cluster...
    It's estimated [by an "Analyst"] that the Xbox division is burning through $2 billion a year, a figure that [he claims] is being hidden\offset by the estimated $2 billion they make from Android.

    More call again for MS to ditch the XBox division and also Bing which is estimated to have lost $17 billion since being formed.

    Source and here
     
    #1 BoardBonobo, Nov 7, 2013
    Last edited by a moderator: Nov 8, 2013
  2. McHuj

    Veteran Regular Subscriber

    Joined:
    Jul 1, 2005
    Messages:
    1,432
    Likes Received:
    552
    Location:
    Texas
    That division has been making money so what is making 2.5+ billion dollars to offset the loses? Zune? Keyboards and mice?

    The numbers don't seem to add up.
     
  3. DJ12

    Veteran

    Joined:
    Oct 20, 2006
    Messages:
    3,090
    Likes Received:
    178
    If you read the article the division is making money from android sales thanks to their patent portfolio.
     
  4. London-boy

    London-boy Shifty's daddy
    Legend Subscriber

    Joined:
    Apr 13, 2002
    Messages:
    21,510
    Likes Received:
    5,154
    They have a whole lot of cash to burn - unlike other companies we won't name - so I don't see how this is a huge issue.
     
  5. Grall

    Grall Invisible Member
    Legend

    Joined:
    Apr 14, 2002
    Messages:
    10,801
    Likes Received:
    2,172
    Location:
    La-la land
    Is an issue for greedy investors, who only reason that more money = better = more money for them.
     
  6. BoardBonobo

    BoardBonobo My hat is white!
    Veteran

    Joined:
    May 30, 2002
    Messages:
    3,255
    Likes Received:
    153
    Location:
    SurfMonkey's Cluster...
    It wouldn't be any issue at all if they didn't have investors who are being told that they are losing the equivalent .22c per share due to the operating losses.

    The pressure is on to make it all work or loose it. I guess that puts a lot of pressure on the success of the XB1.

    Personally I think it would be the worst thing to happen if no one picked up the XBox business (Google, Apple?) and we were left with just Sony in the AAA console business.
     
  7. McHuj

    Veteran Regular Subscriber

    Joined:
    Jul 1, 2005
    Messages:
    1,432
    Likes Received:
    552
    Location:
    Texas
    That still doesn't seem to add up, you'd need something else in that division generating revenue to cover that 0.5B difference.
     
  8. BoardBonobo

    BoardBonobo My hat is white!
    Veteran

    Joined:
    May 30, 2002
    Messages:
    3,255
    Likes Received:
    153
    Location:
    SurfMonkey's Cluster...
    It looks as though ~$2billion is the Xbox loss balanced by ~$2billion made from Android trolling. The other $0.5billion is down to Skype etc. I wonder if that includes Surface?
     
  9. McHuj

    Veteran Regular Subscriber

    Joined:
    Jul 1, 2005
    Messages:
    1,432
    Likes Received:
    552
    Location:
    Texas
    Right, but if I'm reading the financial statements correctly, EDD wasn't losing money so something had to offset the total of 2.5B losses from Xbox, Skype, and WP and 2B from Android isn't enough to keep the division in the black. So either the numbers are not valid or something is making over .5B in that division to keep it positive.

    Surface wan't included, I think it is now in the new devices division post re-org.
     
  10. dobwal

    Legend Veteran

    Joined:
    Oct 26, 2005
    Messages:
    5,016
    Likes Received:
    1,023
    The article didn't mention Surface which is sure to have been a money loser for MS. MS took a $900 million charge on Surface RT inventory adjustments alone. (Nevermind Surface isn't recorded in EDD)

    Furthermore, MS states that it collects fees on about 80% of Android devices sold in the US. I doubt that figure is as high worldwide since China is a large source for Android devices sales and I doubt MS has agreements with 80% of the domestic vendors that mostly sell devices in China. I've seen $8 per device stated as the average fee collected by MS, but again I doubt thats a global figure since I doubt China or India based phones have profit margins as large as you might see in Western countries.

    At 2 billion in fees at $8 dollars a device, MS would be collecting fees on about 250 million devices. I have a hard time believing that scenario. If true, then MS is basically misleading shareholders with their EDD statements because MS rarely mentions Android royalties when describing revenues and profits within the division.

    In fact MS seems to wrap any phone based revenue under the Windows Phone brand and MS has made very large payments to Nokia for the last couple of years. Also, Im not sure how MS recorded the 7.2 billion it paid for the Nokia phone business but normally you would expect that cost to be incurred by EDD.
     
    #10 dobwal, Nov 7, 2013
    Last edited by a moderator: Nov 7, 2013
  11. ArcticCircle

    Newcomer

    Joined:
    Dec 14, 2012
    Messages:
    197
    Likes Received:
    42
    Location:
    Finland
    Console biz is very low margin stuff for MS, even at the best times. And big losses over the past few years are far from best times (like PS2 or Wii success). MS should get out asap but I get the feeling they want to ride Xbone generation out unless sales are abysmal. And I don't think they are going to be that bad, especially with good console exclusives like Titanfall.
     
  12. eVolvE

    Newcomer

    Joined:
    Aug 31, 2013
    Messages:
    21
    Likes Received:
    0
    I'm in no way a financial specialist or analyst, but I kind of doubt that they are currently generating losses. They pumped in a whole lot of money for R&D and the huge RROD debacle with X360 but I can't imagine that their operational income from console sales, xbox live, etc. is currently negative. Their gross revenue over the past 10 years is most definitely negative due to the huge investments mentioned above, but their annual revenue has to be positive currently, given that they earn money for each console and game sold and I also think that they generated a lot more money from Xbox Live subscriptions than it costs them to run these services. I might be wrong though, but other analysts suggested as much.

    But I guess, at the moment it is kind of easy to believe this analyst, since everybody is currently believing every possible negative news about MS's Xbox.
     
  13. AlphaWolf

    AlphaWolf Specious Misanthrope
    Legend

    Joined:
    May 28, 2003
    Messages:
    8,475
    Likes Received:
    325
    Location:
    Treading Water
    Sherlund is an idiot.
     
  14. Scott_Arm

    Legend

    Joined:
    Jun 16, 2004
    Messages:
    13,273
    Likes Received:
    3,723
    Is that a recurring loss or is that just a loss because of R&D sunk into Xbox One, which hasn't been released yet. You're always going to go in the hole before launch of a big product like that.
     
  15. London-boy

    London-boy Shifty's daddy
    Legend Subscriber

    Joined:
    Apr 13, 2002
    Messages:
    21,510
    Likes Received:
    5,154
    The share price has gone up 35% since the beginning of the year, or 20% just in the last 3 months so the investors are very, very happy.
     
  16. dobwal

    Legend Veteran

    Joined:
    Oct 26, 2005
    Messages:
    5,016
    Likes Received:
    1,023
    Doesn't matter. People want MS to unload the Xbox division because they feel it will increase the value of MS shares. But MS share value isn't locked behind the losses associated with the EDD division, its locked behind the thought that MS revenue and profit generation is mostly dependent on its PC business in a post PC world and is becoming less and less significant as time goes on.

    Dropping the Xbox wouldn't alleviate that notion and only makes MS more dependent on its PC business for revenue generation. EDD is actually becoming more significant part of MS's business, so I see no point of dropping the most significant product in that division.

    WinMo was never a huge revenue or profit generator, but MS's investment into it's mobile phone division is ultimately the reason why MS gets to tax Android, which is becoming a more significant source of profit for MS every year. At least if the Xbox division never becomes a major player for MS, the level of investment and patent production MS gets out of the Xbox will allow MS to patent troll the console and gaming market for years to come. LOL.
     
  17. BoardBonobo

    BoardBonobo My hat is white!
    Veteran

    Joined:
    May 30, 2002
    Messages:
    3,255
    Likes Received:
    153
    Location:
    SurfMonkey's Cluster...
    But that' off the back of Balmer leaving and the perceived positive benefits that the re-org will bring.

    It seems to be a recurring theme with investors though and I wonder how much it would take for it to snowball into a general insurrection.
     
  18. Dominik D

    Regular

    Joined:
    Mar 23, 2007
    Messages:
    782
    Likes Received:
    22
    Location:
    Wroclaw, Poland
    Surface and Skype are the most likely candidates for loses. Xbox isn't, unless XBL was pulled out of the P&L.
     
  19. blakjedi

    Veteran

    Joined:
    Nov 20, 2004
    Messages:
    2,975
    Likes Received:
    79
    Location:
    20001
    This.

    Those numbers are wrong. EDD has been in the black for at least two years...
     
  20. liolio

    liolio Aquoiboniste
    Legend

    Joined:
    Jun 28, 2005
    Messages:
    5,723
    Likes Received:
    193
    Location:
    Stateless
    The plan nowadays with investors is more about saving as much cash as possible and have "growth" through buy outs. If the guy is right well, first the share holders should be rightfully pissed off and sinking money in a low profit business is not a worthy investment.

    If true I would think that MSFT would have made a better move by launching a "plain" WindowsRT device, (instead of this dual OS thingy) with a business model akin to SteamOS: ~open platform, etc.
    If RT doesn't take off it will lose them more money than Xbox is likely to ever do and if it does it will also make them more money than Xbox ever will. => Pointless talk as it is all but speculation on speculations of guys (though the guy seems to make pretty good points).
     
    #20 liolio, Nov 7, 2013
    Last edited by a moderator: Nov 7, 2013
Loading...

Share This Page

  • About Us

    Beyond3D has been around for over a decade and prides itself on being the best place on the web for in-depth, technically-driven discussion and analysis of 3D graphics hardware. If you love pixels and transistors, you've come to the right place!

    Beyond3D is proudly published by GPU Tools Ltd.
Loading...