Microsoft Gaming Division Records $1.89B Loss, Maintains Profit Expectations
The bulk of the losses came during the fourth quarter due to a costly extension of the Xbox 360 warranty prompted by excessive hardware failure. The move cost Microsoft $1.06 billion and fell within the company's previous estimate of $1.05 billion to $1.15 billion.
The charge made fourth quarter operating losses significantly higher than any other quarter, at $1.20 billion, yielding an inordinately high 183% increase over the fourth quarter fiscal year 2006 losses of $423 million. Staffing increases were also mentioned as a secondary reason for the fourth quarter's heavy losses, with a 19% increase in headcount-related expenses.
Despite these daunting figures, Microsoft CFO Chris Liddell maintained the company's guidance on achieving profitability for the division in fiscal year 2008 during an analyst conference call on the earnings. "We have the best first and third party title lineup we've ever had highlighted by the launch of Halo 3 this September," he said. "These games, combined with Xbox accessory attach and an expanding Xbox Live installed base, set us up for an excellent year in our Xbox business."
Liddell would not address specifically which quarters he expected to see profitability from the division, as he said that would require him to reveal too much of the company's plans. "It's profitability overall for the year, and that's the key from my point of view," Liddell said. "To be honest, we have a pricing strategy for the next 12 to 24 months we've embedded in that, and a console strategy as well, and those two are related to each other. At this stage we're keeping relatively quiet about that because from a competitive point of view, we really don't want to signal anything."
Microsoft reported shipments of Xbox 360 consoles during fiscal year 2007 at 6.6 million, up from 5 million in fiscal year 2006. This brings the total number of Xbox 360s shipped to 11.6 million, just shy of the company's earlier projection of 12 million. Fourth quarter shipments for fiscal year 2007 were down to 0.7 million from 1.8 million during the same period the previous year.
As one of three divisions under Microsoft Corporation, the Entertainment and Devices division's losses weren't enough to stop the company from growing overall during both the fourth quarter and all of fiscal year 2007. Microsoft's revenue for the quarter increased 13% year-over-year to $13.37 billion, bringing fiscal year 2007 revenues to $51.12 billion, a 15% year-over-year increase.
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I wonder what their loses would have been w/o the system being pushed out too quick, double, triple, if the system was released 1+ years later than it was.
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Its very hard to say, because their objective was to gain massive market share, but this was not the case.
The wii and ps2 are still dominating.
Had they released the console 1+ their console would be as stable as he wii and ps3 and their reputation would have not been hurt.
I guess the execs at ms were thinking shorter term goals vs sony's long term goals... after all they are still new to the market.
As a consumer the xbox 360 is already a tarnished product in my mind, because of the red ring. And I am not considering it in the future unless the product is redesigned with new hardware like the ps2>ps2 slim transition. I think we will see Xbox Three annoucement sooner than expected.
Ms is slowly breaking into the market with their current stratgy.-
MS market share seems pretty good to me, especially compared to where they were with the first Xbox. Even more so if you look at market share of games sold (where they make the real money and where the other two companies need to play catch up however you look at it).
This is ignoring Japan, of course.-
Its more like the other way around
MS is playing catch up right now
The way I see the market just like the shareholders is the gaming division as a whole.
Sony still has ps2 and slowly creeping up is the psp
As for Nintendo they still have their ds and gba.
There is really nothing for ms to fall back on .
While sony and nintendo have previous generation products to help fund their next generation products.-
Microsoft has nothing to fall back on... except for their Windows and Office divisions which make so much money that it doesn't matter if every other division loses money. It's Nintendo who has nothing to fall back on if suddenly everyone stopped buying the DS and Wii (disclaimer: I'm a Nintendo Fan)
Wii's not really dominiating as there's just not enough of them out there yet. Not sure when that will happen.
The PSP is selling more nowadays but it's still a tiny fraction of the people who are buying DS units.
It will be interesting though to see how the PS2 pans out since PS1 --> PS2 was a given path since so many people bought a PS2. People are not buying PS3 in mass numbers at all and unless the price goes down and/or people start giving a damn about BluRay the way they gave a damn about DVD (yes BluRay is "winning" over HD-DVD but most people with HDTV's still don't give a shit about either) then the PS3 might just be "skipped". Unless Sony can drive down the price quick, play up its availability (vs. Wii) and reliability (vs 360).-
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The other thing is they only make the *real* money by selling games, and it's harder to do that if there are fewer overall consoles out there. And if they keep the shortage going artificially, they run the risk of pissing off consumers, which is worse than the "cool" appearance of having a console so desirable it can't be found on shelves anywhere.
I think they just screwed up and didn't ramp up their production accordingly. -
the wii is doing exceptional right now, but imo they have pushed into a different gaming market.
something I dont want to be really a part of. After this years e3 it seems like they are catering to a different demographic (individuals who dont play traditional games) And with all those accessories coming out it just pushes the issue more... ITs a business in the end I hope them the best but IT can also ruin their reputation in the long run for classic gamers.
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