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Microsoft EDD Q1 FY 09 end Sep 30, 2008 SIMPLE ANALYSIS

Forums - Microsoft Discussion - Microsoft EDD Q1 FY 09 end Sep 30, 2008 SIMPLE ANALYSIS

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.

 

 



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This was a quick death to my thread. Haha.



bumidan said:
This was a quick death to my thread. Haha.

Haha — that much information, particularly financial information, is intimidating. Good stuff, though.

Robbie Bach actually did an interview on the 11th with a German magazine and he discussed whether the console was making a profit: Link

Basically, he said that they break even on hardware costs now since the price break, meaning that they lose a little money on the Arcade and make a little on the Pro and Elite. He also said Microsoft expects the division to profit indefinitely from this point going forward.

LEFT 4 DEAD - November 17th

Some things you should note, Most likely the greatest number of live subscriptions are bought over Q4 by a substantial margin. More consoles are bought in that month, a large number of multi-player games are released and purchases and people would generally buy a resubscription when their old card expires. So for Q3 compared to Q4 this revenue is substantially less.

17,828,930 units of software sold with negligable Microsoft involvement. If my information is correct the royalty per software sold is between $6-7 so they likely made between 106 million and 125 million from software royalties. IIRC they recieve money per disk printed not sold. They had a reasonable stable of published games, they each didn't do brilliantly but together they probably added up to a fair bit of revenue.







Tease.

Normally, as per GAAP rules (from my recollection) - as well as what EA does....

Live Revenue (subscription) should be broken down almost equally.

Because the revenue is being recognized each month, as opposed to just 1 time (when it is bought)

This is the reason why EA revenue for PS3 and Wii are weird and have a lot of GAAP/nonGAAP difference.

(SEE MY PREVIOUS EA THREADS)

So I think Squilliam, even though a lot of Live Subscriptions may be bought during the holidays, my gut (and GAAP) tells me that revenue is being recognized throughout the year, not just one time.



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Hey Squilliam, did you see my reply?



bumidan said:
Normally, as per GAAP rules (from my recollection) - as well as what EA does....

Live Revenue (subscription) should be broken down almost equally.

Because the revenue is being recognized each month, as opposed to just 1 time (when it is bought)

This is the reason why EA revenue for PS3 and Wii are weird and have a lot of GAAP/nonGAAP difference.

(SEE MY PREVIOUS EA THREADS)

So I think Squilliam, even though a lot of Live Subscriptions may be bought during the holidays, my gut (and GAAP) tells me that revenue is being recognized throughout the year, not just one time.

I would be more inclined to say its a one off rather than something which is broken down over 12 months. Im no accountant, nor am I really up to date on the GAAP procedures. It just makes sense because the cards are sold to retail rather than sold online mostly, so its less messy in terms of returns etc to deal with the revenue on the month of sale to the retailer than spread it out over 12 months.

I would also suggest that live is now making up a larger proportion of the total revenue. Microsoft takes a much larger cut of online sales *30% for published Live Arcade games* more for games they publish themselves and unknown for other content. You should take a look at the Xbox Live Arcade games sales figures and possibly infer 30% of the revenue for Microsoft and if you consider previous statements that over a billion dollars has been spent online with the Live store and the fact that its probably increasing quite rapidly.

 



Tease.

Maybe. We would never know.
But based on EA numbers (which hosts games for PS3 and Wii apparently) - the GAAP numbers are different from their "internal" numbers.

Just to sum up again:
For EA (PS3)

They report a GAAP Revenue.

However, for comparison (unit) purposes, they report a different number
-- reflecting the one time revenue

eg. Madden = 2 million units PS3 (*example only)

they report their number like $50million - soyou can compare the numbers last year...

then they report the financial/public/GAAP number - like $30 million
-because a game like Madden has online component, and revenue is not recognized yet.
the next $20 million in this example, will be reported over the next few quarters.

FYI.
You can look up my previous EA post to investigate if you wish.

Thanks...



bump!



"...You can't kill ideas with a sword, and you can't sink belief structures with a broadside. You defeat them by making them change..."

- From By Schism Rent Asunder

thanks heruamon.