X360 Price Cut - Effect on MSFT financials - Analysis - With Actual Numbers

[dschumm]

Even if they do sustain revenue with a 30% increase in sales, there cost is only going down slightly.

Yes I realize that Jasper is coming but they would have those saving per unit no matter what they were selling. They will make slightly more based on my prediction of a larger percentage of units being the slightly cheaper to make Arcade.

As for if the 360 will be sold at a loss or not I really can't say at this point. The consensus was that they were making money all year on the on the Pro and Elite at least. I am guessing the arcade was about break even with average console profit somewhere around $50. Now with Jasper and the slightly higher blend on harddrive free models they might drop their costs another $30. So at best I say breaking even or at an average cost of $270 per console.

This means they would have made $225 million for consoles in those 4 months with nothing changed and instead they will be making 0. But they were introducing Jasper either way so that would have been making $70 per unit.

So in my estimation this was a $315 million decision for Microsoft for this year. Most of that cost will be felt in the last quarter of this year. Increased holiday sales in that quarter of accesories and games should still mean a profit but a slim one as they have been narrowly profitable this year.

Ongoing costs of having a drop this year instead of waiting a year are probaly closer to $1 billion. But anyone who thinks that MS didn't make the right move probably thought 24 months was soon enough for the first price drop.