| cleveland124 said: Too many assumptions. The $550 is the material cost. Like my truck. It's transmission went bad. As such, it cost me $530 in parts and $670 in labor. Obviously the xbox is not as labor intensive but a reasonable guess would be the 360 was originally produced with $550 materials and a total cost of $700. Why wouldn't you speculate that most of the R&D costs are actually due to the major xbox redesigns? If you assume that most of it is due to the Zune. We'll say that $1 B is due to the zune. And the Zune sells about 1 million units a year, so that is a whopping cost of $1,000 in R&D due to the Zune. That's before you take into manufacturing costs of each unit. Are they really losing $1,000 per Zune? This is the math I like: Software, accessories, zune - Profitable assume $0 because it lessens possible Xbox losses. Total 2007 loss for the year $2 Billion. Subtract one time warranty charge of $1.1 billion. Approximately 10 million xboxes sold. .9 billion loss / 10 million = $90 loss a unit. So can xbox afford this price cut, yes they are Microsoft. But their is no way they make money on hardware with the drop. |
Thanks for the feedback Cleveland, to answer some of your questions:
1. I didn't speculate anything - in the sense that it changes the analysis for the whole division. I still put the whole R&D expense and took into account the same 40% increase in the projected FY Jun 09.
2. No, I don't have any data on the Zune, so can't comment really.
3. FY End Jun 07 loss is $1.892 Billion. $1.06 Billion is due to RROD. So the actual loss, less 1x charge is about $800 million. In the same FY, they only sold 6.6 million XBox.
If you look at the previous thread, you can see how I broke it down. If you take into account all the numbers, it's ALMOST IMPOSSIBLE, that they are losing money on hardware in FY End Jun 08.
Because there are no other places where you can attribute enough profit to make up the $426 million that they reported.
Unless you assume that Zune is actually VERY PROFITABLE - which is even more unlikely than the XBox actually making a positive gross margin.
So I am not quite sure what calculations you are making in your above post.
I hope this clarifies my position. Please take into account the other segments and use different numbers so you can see what your suggestion on 1 line item implies.
THANKS. Please let me know if you still have any questions.
