Microsoft may invest more in Xbox

[bbot]

Microsoft may double investment in Xbox rather than cut losses and exit.

http://biz.yahoo.com/rc/021204/tech_microsoft_xbox_1.html

 

[marconelly!]

But also, they say they will be more cautious...

'Chastened' Microsoft cuts investments
Financial Times; London (UK); Nov 26, 2002; Abrahams, Paul;

Copyright Financial Times Information Limited Nov 26, 2002

Microsoft is to cut down on acquisitions and investments following big losses on holdings in cable and broadband companies, Bill Gates, its chairman, said.

In an interview with the Financial Times he acknowledged that the company would have done better to invest its money in US Treasury bonds during the late 1990s rather than take stakes in these groups.

He said: "We are chastened. There are some investments that you will see us do, but probably fewer altogether and with a lot more care and in connection with strategic relationships."

Mr Gates' company faces growing pressure to return to shareholders the $40bn of cash and marketable securities it has on its balance sheet. Last quarter, the group generated $6bn in cash flow; Mr Gates said that amount was unusual and would not be repeated.

At the company's annual meeting earlier this month, a few shareholders called for a dividend. Microsoft has never issued a dividend but Mr Gates said the board regularly looked at the question and the company had been aggressively buying back its own stock and wanted to continue investing in its businesses.

"We want to keep our R&D spending strong even during industry cycles. A strong balance sheet - it doesn't necessarily have to be quite as strong as ours - is a very important element in that."

The group is investing $5.2bn a year on R&D as well as spending aggressively to develop its four loss-making businesses: MSN, the internet service provider and portal; home and entertainment, which includes the Xbox games console; Mobile/CE, which provides software for cell phones and personal digital assistants; and business solutions, which provides software for small and medium-sized businesses.

Business solutions consists of two acquisitions in the past two years - Great Plains, which cost $1.1bn, and Navision of Denmark, which cost about $1.6bn.

Mr Gates admitted the return on outside investments "had not been that great". He said there had been a few spectacular successes, such as Comcast. However, the investments in Telewest, a UK cable group, and NTL, a British broadband company, had been failures. R&D spending warning, Page 8 Interview, Page 19 Transcript, www.ft.com/gates Copyright Financial Times Limited 2002. All Rights Reserved.

 

[BenSkywalker]

But also, they say they will be more cautious...

That's a relative term. They don't even consider the Rare acquisition worthy of mention in the above blurb. Dropping $250Million for Rare isn't really even a bump for MS's finances

 

[bbot]

"...and wanted to continue investing in its businesses. "


and,


"...as well as spending aggressively to develop its four loss-making businesses: MSN, the internet service provider and portal; home and entertainment, which includes the Xbox games console..."

 

[DeathKnight]

rather than cut losses and exit.

ROFL That's humorous.

 

[aaaaa00]

The article referring to cuts in investments means cuts in INVESTMENTS, ie buying stocks in other companies, bonds, etc.

Microsoft made many investments in the telecom and cable companies during the dot-com boom, and like many others, took some losses with the bubble burst last year.

This has nothing to do with R&D, or long term projects like xbox, etc.

 

[Vince]

When asked if the software giant had an "exit strategy" for the year-old Xbox video game machine, Chief Financial Officer John Connors said in a Webcast: "The fallback position is probably to double down and make it successful."

Mmmm, I can't wait to have my tax rebate sent to me in Xboxen.