John Kilroy
Stunt Coordinator
- Joined
- Jun 30, 1997
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"Microsoft takes heavy losses on the Xbox
Beating Sony and Nintendo in the gaming console market is apparently worth billions to the software giant.
By Dean Takahashi
June 24, 2002
Microsoft executives are predicting heavy losses related to the Xbox video game console, but the company is prepared to keep supporting its central offensive against Sony and Nintendo by launching a version with new features next year.
Microsoft expects to lose $750 million in the current fiscal year ending June 30 and another $1.1 billion in the next fiscal year, according to a source familiar with the matter. David Hufford, a Microsoft spokesman, declined comment on the financials.
Meanwhile, the Xbox team has been working for about nine months on a machine that combines the features of the Xbox with UltimateTV, a set-top box that features digital video recording. Mr. Hufford said, "Regarding a hybrid box, we are moving full steam ahead with Xbox in its current state while staying deadly focused on games. Of course we have engineers looking at dozens of possibilities for the future of the console."
While Microsoft does not break out the loss figures for the Xbox from the rest of its operating results, it has said it expects to sell 3.5 million to 4 million units by June 30, and 9 million to 11 million by June 30, 2003. It has also said about three games are selling for every box sold.
The losses suggest that it will be difficult for Microsoft to make a profit on the division for some time unless it starts selling a much larger number of games and begins reaping profits from the upcoming launch of Xbox Live, its online gaming service.
The losses aren't unexpected, but they do show that Microsoft expects to lose more money the more machines it sells. When Bill Gates approved the Xbox in the fall of 1999, he was told that the console could lose $900 million over eight years and that if Sony cut its prices aggressively, then Microsoft could lose $3.3 billion. After much hand-wringing, Mr. Gates approved the box because he felt Microsoft needed to face the threat of the PlayStation 2 and hook gamers on Microsoft products.
"There is a debate going on if it is better for Microsoft to lose more money and get an installed base, or underperform in unit sales and lose less money," said John Taylor, an analyst at Arcadia Investment in Portland, Oregon. "My sense in strategic sales is it is more important to get an installed base."
Microsoft can absorb the Xbox losses. The company has an estimated $42 billion in cash reserves and, for the year ending June 30, it is expected to report a net profit of about $10 billion and revenues of $28.25 billion.
Full Article here
Beating Sony and Nintendo in the gaming console market is apparently worth billions to the software giant.
By Dean Takahashi
June 24, 2002
Microsoft executives are predicting heavy losses related to the Xbox video game console, but the company is prepared to keep supporting its central offensive against Sony and Nintendo by launching a version with new features next year.
Microsoft expects to lose $750 million in the current fiscal year ending June 30 and another $1.1 billion in the next fiscal year, according to a source familiar with the matter. David Hufford, a Microsoft spokesman, declined comment on the financials.
Meanwhile, the Xbox team has been working for about nine months on a machine that combines the features of the Xbox with UltimateTV, a set-top box that features digital video recording. Mr. Hufford said, "Regarding a hybrid box, we are moving full steam ahead with Xbox in its current state while staying deadly focused on games. Of course we have engineers looking at dozens of possibilities for the future of the console."
While Microsoft does not break out the loss figures for the Xbox from the rest of its operating results, it has said it expects to sell 3.5 million to 4 million units by June 30, and 9 million to 11 million by June 30, 2003. It has also said about three games are selling for every box sold.
The losses suggest that it will be difficult for Microsoft to make a profit on the division for some time unless it starts selling a much larger number of games and begins reaping profits from the upcoming launch of Xbox Live, its online gaming service.
The losses aren't unexpected, but they do show that Microsoft expects to lose more money the more machines it sells. When Bill Gates approved the Xbox in the fall of 1999, he was told that the console could lose $900 million over eight years and that if Sony cut its prices aggressively, then Microsoft could lose $3.3 billion. After much hand-wringing, Mr. Gates approved the box because he felt Microsoft needed to face the threat of the PlayStation 2 and hook gamers on Microsoft products.
"There is a debate going on if it is better for Microsoft to lose more money and get an installed base, or underperform in unit sales and lose less money," said John Taylor, an analyst at Arcadia Investment in Portland, Oregon. "My sense in strategic sales is it is more important to get an installed base."
Microsoft can absorb the Xbox losses. The company has an estimated $42 billion in cash reserves and, for the year ending June 30, it is expected to report a net profit of about $10 billion and revenues of $28.25 billion.
Full Article here
