Microsoft Q1 Earnings

Too bad no revenue entry per division!

 

Is this above or below projections?

 

Aparently Sony announced a 59% reduction in profits?

 

Theres a couple other reports I saw here

http://news.vgchartz.com/news.php?id=2385

http://www.gamasutra.com/php-bin/news_index.php?story=20801

Things are coming together pretty nicely for 360. EDD turned 178 million profit. It appears ironically increasing Mac software sales are helping that division, but it still couldn't be profitable without much improvement from Xbox.

Also:

So 360 hardware costs look good.

EDD outlook looks good.

As the Vgchartz article details lifetime 360 shipments stand at 22.5m @Sept end. Xbox 1 shipped 24.7m lifetime. The Dec Q is the big one of course, shipments will be 4-6m that Q, so 360 will be sitting at 27-28m shipped and overtake the original Xbox that Q.

Not only that but you have to feel there's plenty of life and price cuts left in 360. Being it's not built on the money losing hardware model of Xbox 1 MS will support it and sell it in years 6, 7 etc, it should have a long tail like PS2. Currently they're shipping ~10m per year, with possibly 2-4 good years with no successor on the market left. All things considered 50m seems very reachable for 360 lifetime. 60 m might be a nice stretch goal, or even higher, but things get hazy the longer out we look.

All in all it's a bang up report for 360, healthy shipments, hints of decreased hardware costs, and profitability in the division now and going forward.

It makes me think the recent 360 price cuts leave the hardware still profitable or roughly break even, and even another emergency 50 cut could have/could be enacted if needed if they were willing to swallow some hardware losses.

 

youre forgetting the 800pound gorilla thats also lumped under EDD
'retail windows office for windows + windows OSs'
which would conservatively make 500million profit in those 3 months
thus something in EDD is losing ~100million per month, Ill leave u to draw the obvious conclusion (+ no its not zune)

 

A 57% reduction in fiscal year earnings forcast. That's across all electronics - consoles, TVs, digital cameras etc.

Life definitely, but price cuts?

It is nice to see that the reduction in production costs were passed straight through to consumers with the recent price cut.

 

Umm, that profit is 100% all speculation on your part.

Not like that stuff hasnt been present in EDD right along, anyway. When it was losing money.

I'm not sure retail office is in EDD, link? I dont see it written up in the usual articles that describe whats in EDD.

Anyways, it's impossible to break out what does what in EDD. It's likely Zune loses money, various cellphone R&D loses money (acquisition of Danger last Q was blamed for the loss), and other stuff loses money, and makes money.

It doesnt really make sense to suggest 360 hardware is a great money loser, either. Based on the PS3, what various PC video cards cost, etc. I dont see greatly more than 199 of stuff in Arcade 360. When you can get video cards with a lot more silicon for $200.

 

Well, the top models at 299 (actually supposedly the default model) and 399 certainly have plenty of room to come down. Especially given this is approaching year 4.

 

I thinks this is a better explanation of the spreadsheet in the op:

Q1-2009 (JULY-AUGUST-SEPTEMBER/2008)

MS- Windows/servers/online services etc: 3.94 billion$
MS- Office/business solutions: 3.31 billion$
MS- Xbox/Zune/video games/mobile windows: 178 million$

(EDIT: operating Income)

 

Well yes, but they have to maintain the feature/price ratio across all three SKUs (well they don't have to, but there's not much point in three SKUs if they are all bunched too closely together in price), and another $50 off and the Arcade is sitting right on top of the PS2 - that's going to start hurting the price/quality perception.

 

Where on Earth did you pull that from?!

All I'm saying is, I don't think there are "plenty of price cuts" left in the 360. Nothing more, nothing less. My basis for that opinion is, if a this-gen console encroaches on a last-gen price point, some people may begin to ask themselves "why?". That's what price/quality perception means.

If you want to start a 360 vs PS3 argument, you'll have to find someone else to have it with I'm afraid.

 

Ahh the old "price cuts are bad" nonsense

imo this only was invented when you dont have the horsepower to back them up, which was the one specific case of the Gamecube.

 

Remember, a second console is worth much less to MS than a first console for somebody else, at least in the old profit-on-the-games model.

 

NavNuc I think it's safe to say that your spending and console habits occupy the top tenth of the top one-percent of owners. Multiple copies of the same game!?!?

I think Assen's definitely right that for most households, all a second console would mean is a loss on hardware costs for no additional game attach. That said though, if the hardware itself is profitable, then it's worth it anyway (I don't think it is within the context of the price cut), but more relevantly, I think it's obvious that for MS they are pleased with the direction of the business. I'm listening to the conference call right now... couldn't do it yesterday as I was just too drained.

 

I don't know...I have two 360's and I've bought a 2nd copy of the multiplayer games I've enjoyed so that I could have a second system ready to go if a family member or friend dropped by.

With the 2 360's I've kept, I'm maintaining a Gold LIVE account for both and tend to buy duplicates of the games I really enjoy (that are multiplayer).

 

its written there in MSs annual report
http://www.microsoft.com/msft/reports/ar08/10k_fr_dis.html

there we go tacked on the end, its like they were trying to hide it

about the $500million, that was a conservative guesstimate, check the latest NPD PC sales, nr#2 was MS office (behind spore) it was news since , month after month MSoffice is typically nr#1. $500million? easy

groper - they split windows + office into two divisions, A (the majority sold through OEMs) + B (retail which is stuck in EDD for some strange reason)

 

Do you pull these numbers out of thin air? Since I am currently looking through a fair number of annual reports, 10K and 10q to see if I can find some bargains or once in a lifetime opportunities due fear in the stock markets, let have a look at MS's numbers.

Lets look at MS financials to get a somewhat clear but still muddled picture

In FY 2008 ending June 30th 2008

Revenue for EDD was 8.14 billion.

"Xbox 360 platform and PC game revenue increased $1.7 billion or 41%" during 2008. Lets add in some math and that comes out to ~5.85 in revenue for the 360 and PC game platform. If retail windows office/OSs was worth 2 billion in revenue that would put that 360/PC game + Office + Windows = ~7.85 billion

That leaves about 290 million in revenue for Zune; Mediaroom; numerous consumer software and hardware products (such as mice and keyboards); Windows Mobile software and services platform; Windows Embedded device operating system; Windows Automotive; and Surface computing platform. 290 million doesn't look like a revenue for all those products, but maybe its true.

In FY 2007 ending June 30th 2007

Revenue for EDD was 6.083 billion.

"Mobile and Embedded Devices revenue increased $138 million or 28% driven by sales growth in Windows Mobile software and Windows Embedded operating systems." Add in the math and that puts revenue generated for this segment at ~630 million dollars. Who knows how much is actual profit, in 2006 when this was reported as its own division MS profit just 2 million dollars off 377 million in revenue. But looking at this segment alone and not including Zune and the dozens of other products that EDD encompasses that 2 billion a year in retail Office and OS profits looks like an exaggeration.

In fact I am not even sure that revenue of sales of retail Office or Windows is even recorded under the EDD division as the FY 2006 annual report states:

"In addition, the segment carries out all retail sales and marketing for Microsoft Office and the Windows operating systems (for which it receives an inter-segment commission),"

Its my thought that MS allows the EDD division to handle retail versions Vista, XP and Office because its the only division who sales and marketing team revolves around retail, which a majority of EDD's products would fall under. EDD doesn't record revenue from the product sales but from comission from those retail sales of Office and Windows.

Seems like to me, EDD's responsibility of retail sales of Windows and Office has nothing to do with nefariously trying to inflate EDD revenue or hide losses but rather allowing retail responsbility to fall under one sales and marketing team as it's more efficient than having several teams who handles the same duty.

 

It's great that Microsoft finally got to the position where they are both aggressive (price cuts, massive advertising etc.) and profitable. It does feel like a healthy change after they were losing cash for so many years or trying to be profitable but gave up marketshare a bit (FY 2008).
Hopefully soon to be released Sony's soon to be released financial report will show that Sony are going to that position as well. I'm sure Nintendo are breaking even more records in the category "how much money can be made on video games business".