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Microsoft's X-Rated Problem | |
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| Time: 09:24 EST/14:24 GMT | News Source: The Motley Fool | Posted By: Byron Hinson | ||
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Go over last night's third-quarter earnings report from Microsoft and you'll be treated to the usual suspects. It topped profit projections by a penny per share. It was guarded in its near-term outlook. All of its operating divisions managed small yet definite gains. Wait a minute. Scratch the latter. While Microsoft managed modest gains in most of its businesses, one line item stands out like a Mac user at a Bill Gates Fan Club meeting. Its Home and Entertainment division suffered a steep 42% drop during the period. How can a company manage to grow revenue in iffy segments such as software and online subscriber services but fail to make headway in something as seemingly recession-resilient as home and entertainment? | ||
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| #1 By 2459 (24.170.151.19) at 4/16/2003 10:28:35 AM |
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#1
That's not it at all. Consoles are a lossy business. The simple adoption of the console by the consumer puts MS in greater debt. Game sells can make up for this, but then you add in not just price drops, but also increased marketing, acquisitions, and bandwidth/service costs from XBOX Live!, and this is where the money goes. MS knew they were going to lose money on XBOX going in, and they've still managed greater sells than they expected. They will continue to invest in the platform because XBOX gets their foot in the door of this market. XBOX 2 and beyond is where the battle for 1st place will occur, along with the possibility of profit due to experience gained in product development, design, manufacturing, etc., that will help them streamline those processes for subsequent generations. This post was edited by n4cer on Wednesday, April 16, 2003 at 10:29. |
| #2 By 2459 (24.170.151.19) at 4/16/2003 10:58:51 AM |
| lol, I love that guy. 3 cheers for the Information Minister (wherever he may be) :) |
| #3 By 37 (66.82.20.150) at 4/16/2003 11:15:29 AM |
| #1, step AWAY from the crack pipe. |
| #4 By 2332 (216.41.45.78) at 4/16/2003 11:26:55 AM |
| I love my Xbox. That's all that matters. |
| #5 By 37 (66.82.20.150) at 4/16/2003 12:24:03 PM |
| I am very satified with my Xbox. I only have 11 games, but they are all fun. Not to mention Xbox Live is pretty awesome too. It adds quite a bit to the fun of my games instead of playing the computer. |
| #6 By 3339 (65.198.47.10) at 4/16/2003 1:58:10 PM |
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"Consoles are a lossy business. The simple adoption of the console by the consumer puts MS in greater debt. Game sells can make up for this, but then you add in not just price drops, but also increased marketing, acquisitions, and bandwidth/service costs from XBOX Live!, and this is where the money goes."
enforcer, you have to read more closely. REVENUE was down 40.2%. It fell off from about 758 million to 453 million. REVENUE -- cash coming in before losses. It's not that the profit/loss grew by 40%--all the money coming in just disappeared. This isn't explained by marketing costs and other investments; this isn't explained by price reductions. The odds are that if REVENUE declined by 40%, the losses of the Home/Entertainment division increased by even MORE because of investments and price reducts. When your loss is increasing and your revenue is declining, I don't see how game sales are going to help--even if they had all of the top ten games for every month for the rest of the year--right, like that's going to happen. |
| #7 By 135 (209.180.28.6) at 4/16/2003 5:22:56 PM |
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n4cer - The Iraqi Information Minister is now working as an editor over at slashdot.
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| #8 By 3339 (65.198.47.10) at 4/16/2003 6:26:24 PM |
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I know y'all are amusing and distracting yourselves from the Xbox failure with these Iraqi propaganda jokes, but can any of you actually provide any evidence to the contrary? ANY. At all?
After all last quarter revenue was up, but losses actually increased substantially. I haven't dug through the filings too closely, but they are reporting over 40% revenue LOSS this quarter. How fckin bad are the losses NOW if the cash has all but disappeared? I bet the PS3 gets to 20 million units before XBox One does. Any takers? |
| #9 By 135 (208.50.204.91) at 4/16/2003 8:50:18 PM |
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cba-3.14 - Oh, you've got to be kidding me.
Look... here is how the world works. Someone or something get's popular, suddenly there is this giant backlash against it because well we don't like popular people. The backlash turns into nasty comments, and claims by people that they can do better with less. Eventually public opinion turns and says, "Ok, show me." At this point the proof is in the pudding, and the nasty people who said they could do better with less frequently fall flat on their face when the frying pan of reality smacks them upside the head. At which point we meet equilibrium and everybody goes back to buying what works best. stubear - Good point. But where is he now? Maybe VH1 can do a show on him. jerky boy - Wouldn't a PS3 have to exist first? After Sony's little 'Shock and Awe' fiasco this week, I wonder if they aren't starting to run into the popularity problem I just explained to cba. 'Cept I'm not quite certain I'd place bets on Microsoft being unable to put their money where their mouth is. I have to agree with Neb Okla, the XBox has become a far more popular console in terms of actual use. None of my friends with the PS2 still play theirs, but the XBox is quite active. |
| #10 By 135 (208.50.204.91) at 4/16/2003 8:51:22 PM |
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BTW, I have trademarked the term 'Frying pan of Reality'.
Just so you know. Oh crap... found prior use :( http://www.google.com/search?hl=en&ie=UTF-8&oe=UTF-8&q=%22frying+pan+of+reality%22 This post was edited by sodablue on Wednesday, April 16, 2003 at 20:52. |
| #11 By 2459 (24.170.151.19) at 4/16/2003 9:00:40 PM |
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PS3 won't be out for another 2 years. I think XBOX will have well over 20 million units in that time. They're already over half way there. Besides, in the timeframe of PS3's release, people will be looking towards XBOX 2 which will be available around the same time as PS3.
Assuming the 2005 release date, I'll take you up on your (non monetary, unless someone will sponsor me :-) ) bet. RE: MS Revenue MS Revenue is down for the quarter compared to last year's quarter. If taken over the last 3 quarters compared to last year, revenue for Home and Entertainment is up. Also home entertainment is not solely the XBOX. It includes PC games, consumer software, and hardware, and TV platform. This would include platforms like UltimateTV and possibly MSN TV (though this may fall under MSN, not sure). I imagine that these hardly-pushed TV platforms also contributed to less revenue. I'm not an financial analyst though, so if you feel I'm wrong, feel free to point out where. With that said, here's MS' info from the balance sheet. (In Millions) Three Months Ended March 31 2002 2003 778 453 Nine Months Ended March 31 2002 2003 2,005 2,265 Home and Entertainment includes the Xbox video game system; PC games; consumer software and hardware; and TV platform. Home and Entertainment revenue was $453 million in the third quarter of fiscal 2003, decreasing 42% from $778 million in the prior year’s third quarter. The revenue decrease was caused primarily by lower sales of Xbox video game systems and related games in all geographic regions, compared to the prior year’s third quarter which benefited from the recent launch of the Xbox console. The prior year’s third quarter reflected the launch of Xbox in Europe and Japan, and sales in the United States from the launch in the preceding quarter. Revenue from consumer hardware and software and PC games declined 22% compared to a year ago. http://www.microsoft.com/msft/earnings/FY03/earn_rel_q03_3.mspx#Channel BTW, sodablue, I thought the Iraqi Information Minister went back to his old job at Sun. It seemed to me that he received his previous training direct from Scott McNealey and his crew. :-) |
| #12 By 3339 (65.198.47.10) at 4/16/2003 9:04:01 PM |
| This comment has been removed due to a violation of the Active Network Terms of Use. |
| #13 By 3339 (65.198.47.10) at 4/16/2003 9:07:39 PM |
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"I think XBOX will have well over 20 million units in that time. They're already over half way there."
Umm, enforcer, seriously, read. They are HOPING (I'm sorry CONFIDENT) they will have 9 million in June 2003. ALREADY? OVER? HALF WAY THERE? Uh, huh. Nice math. "Assuming the 2005 release date, I'll take you up on your (non monetary, unless someone will sponsor me :-) ) bet. " I'll make a bet (but only if it is monetary) no matter what the dates are. This post was edited by sodajerk on Wednesday, April 16, 2003 at 21:08. |
| #14 By 2459 (24.170.151.19) at 4/16/2003 10:21:46 PM |
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My mistake. The projection is 9-11 million by June.
Still, with a 2005 release, I still say that XBOX will have over 20 million units before PS3. |
| #15 By 135 (208.50.204.91) at 4/16/2003 11:30:50 PM |
| stubear - Last I heard he was going to open Saddam's safe on national TV. |
| #16 By 2960 (156.80.64.196) at 4/17/2003 9:12:19 AM |
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It would not suprise me if XBox owners soon found out what it feels like to be an UltimateTV customer...
TL |
| #17 By 7390 (198.246.16.251) at 4/17/2003 11:13:45 AM |
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Jerkyboy, I will take you up on that bet.
1. Given the expected release date on PS3 is fall 2005. 2. Given this and next year holiday sales. 3. I am also factoring in the release of Halo2 and another price cut to possible $99. |
| #18 By 3339 (65.198.47.10) at 4/17/2003 1:15:17 PM |
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Factor in all you want, Red. A year and a half and only 6.5 million users. Another year and a half they are going to get 12.5 million? Uh, huh.
Okay, so $50 the PS3 gets to 20 million users before XBox 1 does. Deal? |
| #19 By 3339 (65.198.47.10) at 4/17/2003 1:21:45 PM |
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"You think that saying 9 million out of 20 million and saying over halfway there are two completely different statements?"
Yes. Clearly. It's not even halfway there and it certainly isn't over. And to remind you, it's not the end of June either. Considering it's taken them about 3 months (if not longer) to sell 1 million, I would absolutely say that 6.5 million is not over halfway there already to 20 million. How can you consider "close enough." It's just as close to being "almost less than a quarter of the way there" if that's the way you want to play it. This post was edited by sodajerk on Thursday, April 17, 2003 at 13:38. |
| #20 By 37 (66.82.20.150) at 4/17/2003 1:54:13 PM |
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Sodajerk,
Again, you spew incorrect information. June will exceed 10 million. http://www.gamesindustry.biz/content_page.php?section_name=ret&aid=1518 As such, the 6.5 million forecasted by Wedbrush Morgan analyst Michael Pachter for fiscal 2003 should be combined with the 3.9 million units sold in the previous year - leaving Microsoft with a healthy lead over its own overall sales estimates. We apologise for any confusion caused by the previous story. That would be 10.4 million sold by June. I too will take you on your bet. I will say that with one more price reduction to $149 before the holidays, and the holiday games coming out, that the Xbox will hit 20 million near Christmas, or just shy. 30 million + is my prediction by the time PS3 comes out. And my next prediction is that the PS3 and Xbox 2 will be neck and neck....no longer will there be this big window of difference. 10.4 million consoles sold with absolutely no previous console experience or legacy games that could be used on an Xbox. More games sold per console, and more time online than competing consoles. Outselling Ninentendo, even though Nintendo has been in the business MANY years prior. Yeah, it's kinda like that. The bet is on! |
| #21 By 3339 (65.198.47.10) at 4/17/2003 2:02:57 PM |
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"The bet is on!" Funny, I don't remember offering the bet to you. Presumptious little twit. If Red doesn't take it, maybe I'll offer it to you, but until then you are talking to yourself.
I misspoke a little, true, but they are still two months away from hitting the 10 million mark. My point was more to assert how wrong Jagged's comment were and that his notion of "close enough" is a joke. "Again, you spew incorrect information. June will exceed 10 million." I never said they wouldn't get over the hump of ten million by June so where's the freakin misinformation? "More games sold per console" yet the losses continue to widen while Nintendo and Sony can be profitable with lower attach rates. "more time online than competing consoles" because they require a consolidated service but they are still behind Sony in online connections and can't even compare their subscribership to ONE online game. "Yeah, it's kind like that." Oooooooh. This post was edited by sodajerk on Thursday, April 17, 2003 at 14:16. |
| #22 By 37 (66.82.20.150) at 4/17/2003 2:27:39 PM |
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Sodajerk,
Are you on crack? Sodajerk wrote: I bet the PS3 gets to 20 million units before XBox One does. Any takers? hmmm...lemme see. You resort to name calling by calling me a twit, yet at the same time, you have no idea what you wrote....******ANY TAKERS****** hmmmm, how is it that RED only qualifies for ANY TAKERS? Doesn't ANY TAKERS mean ANYONE who wants to TAKE on the bet? Please correct me if I am wrong. Thanks. This post was edited by Brian_MS_MVP on Thursday, April 17, 2003 at 14:28. |
| #23 By 3339 (65.198.47.10) at 4/17/2003 2:36:30 PM |
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Did we agree on a bet? Agree on what the loser would pay or do? Did I say everyone could just say "yes" and they get the bet?
I've done this two or three times before--I've done it the same freaking way. Offer it to someone in particular or open it up. First taker gets it. If the person doesn't respond, the next in line gets it. Is that so crazy? You're welcome. |
| #24 By 37 (66.82.20.150) at 4/17/2003 2:44:39 PM |
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So you make up rules as you go along. I see. Well, whatever works for you man.
Love, The Twit. |
| #25 By 3339 (65.198.47.10) at 4/17/2003 3:13:33 PM |
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Change the rules? Here's standard betting rules:
1. Do you want to bet? 2. Yes or No. 3. What are the terms? 4. These are the terms. 5. Okay or revise terms. 6. Then it's a bet then. Agreed? 7. Agreed. For some reason, you interpret "Does anyone want to make a bet?" as a deal signed, delivered, and shaken upon. Odd rules. This post was edited by sodajerk on Thursday, April 17, 2003 at 16:20. |
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