Microsoft Q2 2010 Earnings

[Rangers]

Profit and revenue was up, console sales was down. MS implied/stated that lower console sales was offset by a larger ratio of Elite vs Arcade selling. Implication being that revenue was either relatively unchanged or slightly up for the console hardware despite selling less consoles YoY.

Regards,
SB

They said paraphrasing "we saw the mix shift more to Elite", which means nothing since, the Pro is gone now. Of course it did.

It's possible they meant what you infer, even probable, but not explicit.

 

[Silent_Buddha]

They said paraphrasing "we saw the mix shift more to Elite", which means nothing since, the Pro is gone now. Of course it did.

It's possible they meant what you infer, even probable, but not explicit.

It's a business call, it's obvious they'd be refering to the product segment. But yes, I suppose someone looking in could always interpret that to mean they are directly referring to a line which no longer exists.

Not to mention that the Pro was EOL'd prior to this quarter, so I'd be surprised if they were referencing versus that.

Even with that it doesn't make sense in a business call to say the mix has shifted from our 299 console to our 299 console.

Regards,
SB

 

[NathansFortune]

There could be cost savings involved. Plus casual users are more attracted by bigger numbers, so someone is more likely to buy an Elite with 120GB for $299 than they were a Pro with 60GB for the same price. The perceived value has increased for the $299 price-point so of course some extra consumers will buy that instead of the HD-less Arcade.

 

[Silent_Buddha]

There could be cost savings involved. Plus casual users are more attracted by bigger numbers, so someone is more likely to buy an Elite with 120GB for $299 than they were a Pro with 60GB for the same price. The perceived value has increased for the $299 price-point so of course some extra consumers will buy that instead of the HD-less Arcade.

Yes that's the point. The shift is from the 199 price point to the 299+ price point. Not from the 299+ pricepoint to the 299+ pricepoint.

Saying that the mix shifted from the Pro at 299 USD (EOL'd prior to the this last quarter) to the Elite at 299 USD (continuing product) would be similar to saying that the sky is blue. Of course it did, what else would take up sales at the 299 USD price point?

Regards,
SB

 

[Crossbar]

There could be cost savings involved. Plus casual users are more attracted by bigger numbers, so someone is more likely to buy an Elite with 120GB for $299 than they were a Pro with 60GB for the same price. The perceived value has increased for the $299 price-point so of course some extra consumers will buy that instead of the HD-less Arcade.

Not to mention that in a few European countries they even raised the price of the Arcade, which made the step even smaller.

 

[NathansFortune]

Yes that's the point. The shift is from the 199 price point to the 299+ price point. Not from the 299+ pricepoint to the 299+ pricepoint.

Saying that the mix shifted from the Pro at 299 USD (EOL'd prior to the this last quarter) to the Elite at 299 USD (continuing product) would be similar to saying that the sky is blue. Of course it did, what else would take up sales at the 299 USD price point?

Regards,
SB

I explained it poorly, I think with the Elite, the shift went from $199 purchases to $299 purchases in comparison with last year.

The pricing is exactly the same as 2008 Q4, but the $299 has more value, obviously this will attract a higher proportion of consumers.

 

[dobwal]

from various MS financial report of ~a year ago



In another report theyve also mentioned ED+D income was down since they sold less Mac software

My bad. Even though your quotes refer to Mac software which inconclusive of alot of different MS software which is sold for Macs, MS makes a comment in Q3 2009 Q-10 thats makes specific reference to Mac Office.

"EDD revenue decreased primarily due to decreased sales of application software for Apple’s Macintosh computers, partially offset by increased Xbox 360 platform and PC game revenue. The decrease in revenue included an unfavorable impact from foreign currency exchange rates of $38 million or two percentage points. Sales of application software for Apple’s Macintosh computers declined 63%, reflecting the launch of Mac Office 2008 in the prior year as well as a decline in sales of Apple computers. "

"EDD operating income decreased primarily due to increased research and development expenses and cost of revenue. Research and development expenses increased $66 million or 18%, primarily reflecting increased headcount-related expenses associated with the Windows Mobile device platform. Cost of revenue increased $52 million or 6%, primarily driven by increased costs associated with the Xbox 360 platform, reflecting the increase in console and video game sales."

The question is how big is Mac Office because they attribute the 63% drop in Mac Office sales to the 2% decline in revenue which is like 25 million dollars.

They don't attribute Mac Office as the primary reason for the operating income decline which went from 106 million to a loss of 31 million.

Even if we assume Mac Office's revenue is pure profit with zero revenue cost and assume that Mac Office drop off is responsible for 100% of the effective 137 million dollar drop in operating income. That would effectively put Mac Office quarterly profit at 220 million in Q3 08 but more like 83 million for Q3 09.

That would be a guess based off a best case scenario with all other businesses with EDD being cost neutral. But its highly unlikely that Mac Office is pure profit or that the 360, windows mobile/embedded OS and Zune are all cost neutral.