I did not assume anything. Show me the final numbers. Did they make more and more money (became more and more profitable) in its ending months ?
You are assuming something, you basically said that because [company] went bankrupt, they didnt make money.
If what thechef is saying is true (That they sold the 3DO for a profit from the get go, just like nintendo) Yes they have profits.
I cannot show you final numbers, because i do not have access to the companies records that are this old.
The console itself however, was made\released by Sanyo, Panasonic and Goldstar (today known as LG). The console was manufactured by the 3DO Company.
After getting killed in terms of sales by the other consoles, and the PSone being the final nail in the cofin at 1995, they sold their next-gen console, and started making games instead. The sales spiked. They didnt really have a chance to get more sales either. Do you
A: Stop making the console and take whatever youve earned
B: Try to gain marked share by lowering prices by a lot and take a loss with the potential of earning more money?
So we know they did actually have plans to make a second console, so chances are, they did not loose much money. The fact that the company now is bankrupt is irrelevant as to wether or not 3do was sold at a profit, we can say for a fact, it didnt bankrupt because of the 3do. (You did however, imply that did it).
You have no chance of knowing if it was profitable or not. If it followed nintendo's model, it probably was. Any guy that has studied finance knows that if the probabilty (aka risk) of earning money in the future on a project is impossibly small (beating the hype train behind Sony's PS1, was an impossible task, without loosing money), you sell out. Positive NPV or not, you sell out.
Just like, let look at Nintendo, if they closed down the shop after selling 10 million Wii consoles. They earn money on every console sold, we know that cost per console is smaller and smaller, if the RD costs were small enough so they actually turned a profit .
The project, if we discount with a whatever discount rate we want to use, adjusted with risk, the project may still have a postivie NPV, but the risk will be considered to high.
Or, as in the 3do's case, it probably suffered from a term called underinvestment, along with the way to high risk projects.
Nope... just as a business. As long as you make money and have positive cash flow, you're good and can figure out the next move as you go
No serious business works like that. Having a positive cash flow means nothing by itself, unless you discount it and look at the NPV (net present value). On paper it may look like your earning money, but in reality your loosing money :
Example:
Lets say you have the following cashflow (each +\- is a years cashflow):
-100 +20 +20 +20 +20 +20 +20
Obviously, looking only at the cashflow, it will look as if after 5 years, the investment starts paying of. By the end of year 7, you have +20 cashflow. However, let say that you can get 10% risk free interest, somewhere else, then you have to discount it.
-100 + 20\1.1 + 20\1.1^2 +20\1.1^3 + 20\1.1^4 +20\1.1^5 +20\1.1^2
The net present value of this is actually -24.18, because after you discount the cashflow its actually only bringing in 75,82, and not 120 as it would seem.
Thus, in reality you have actually lost money on this investement.
Further, projects that give positive NPV's may still not get investet in, due to something we call underinvestment, which i dont feel like explaining right now.
