Warning: This thread has a lot of material AND there are many posts. Each post will explain how the numbers came about.
PLEASE READ CAREFULLY. This is a fairly in-depth analysis. All assumed figures will be indicated with a (*). All other numbers are taken directly from MSFT publicly reported financial statements.
I didn't have time to really get into the numbers, but I hope this is OK.
Q1 FY 09 – SEP 30, 2008 Revenue = 1,814 Income = 178 Q1 FY 08 – SEP 30, 2008 Revenue = 1,929 Income = 167 Revenue decreased, but income increased. XBox Platform and PC Games revenue DECREASED by $330 million (-22%) -$330 million was due to Halo 3 launch Other Revenue increased by $216 million (51%) – due to Office Mac, Zune, etc. If you do the math: Xbox Platform and PC Games Revenue = 1,174(*) Other Revenue = 640(*) Total = 1,814(Check) You can see that Halo 3 was an important revenue driver for the Xbox division, accounting for almost a quarter of the Xbox revenue for the same period last year. Let’s analyze the XBOX Division further: Q1 FY 08 1.8 million consoles 7 million Live Members US NPD Software Attach = 6.2 US NPD Accessory Attach = 3.3 Q1 FY 09 2.2 million consoles 14 million Live Members US NPD Software Attach = 8.1 US NPD Accessory Attach = 3.9 In terms of financial implications: 400,000 more consoles sold -at a lower price point 100% more Live Members -implies maybe at least double the revenue (subscription, downloads, etc.) Increased Software Attach Rate -on average, each OLD owner bought 2 more games, compared to last year – translating into approx. 0.5 games more per quarter --- implying that this quarter saw at least (0.5 games x 22.5 million consoles sold LTD) 11.25 million games sold from previous owners PLUS 17.82 million games (2.2 x 8.1attach rate) for the quarter alone = approximately 30 million games sold Cost of Revenue and Expenses Cost of revenue decreased $251 million or 21%, primarily driven by decreased Xbox 360 manufacturing costs. Sales and marketing expenses decreased $27 million or 10%, reflecting a decrease in product advertising and bad debt expenses. Research and development expenses increased $145 million or 46%, primarily reflecting increased headcount-related expenses associated with the Windows Mobile device platform, driven by recent acquisitions. Doing the math, this implies: Q1 FY 08 COR = 1,195(*) Sales & Marketing = 270(*) R&D = 315(*) Other (Variance) = (18) (*) Total = 1,762(*) Q1 FY 09 COR = 944(*) Sales & Marketing = 243(*) R&D = 460(*) Other (Variance) = (11) (*) Total = 1,636(*) If you subtract these expense numbers from the Revenue numbers, you will come up to the reported income figures of 167 and 178 respectively. Cost of Revenue: Even if we assume that Zune hardware, Xbox Accessories and all other products (eg. Software, Mobile, etc.) doesn’t cost anything (which is silly) THEN you come up with: Q1 FY 08 1.8 million consoles – costing 1,195 Average cost = $664(*) Q1 FY 09 2.2 million consoles – costing 944 Average cost = $429(*) Obviously these numbers are silly – but it shows that the cost per XBOX console have dropped down dramatically in the past year. Is it a 50% drop? It is very possible because of the other COR factors. Remember COR can include: Zune Hardware Costs Software production costs Xbox Console Costs Games Costs (packaging, disks, shipping, etc) Xbox Live/Accessories Costs (Retail packaging, hardware, etc..) Other Hardware Costs (Mice, Keyboard, etc) These other costs should actually be increasing (eg. Packaging, shipping, etc.) compared to the past year. So we can infer that Xbox Console costs have DROPPED dramatically. Does the $199 console make or lose money? Hard to tell. However, given more console sales, less revenue – and still turning a profit – gives the impression that either the console is breaking even or even making some profit. DISCUSS.
