XBox Price Cuts – The financial effect on the division – A FINANCIAL ANALYSIS

[heruamon]

Ail said:
I know you would have to change your past analysis if you changed the software numbers but I don't see a way around .



My estimations for software number would be something like :

80% third parties at 12$ revenue, 10$ margin.

20% first party at 35$ revenue, 30$ margin ( console makers do make a killing on first party, they earn what a third party would earn + the licencing fee, MSFT made a fortune on Halo 3 last year, it will be tough to beat that this year)

This averages at 16.5$ revenue, 14$ margin for software.

PS : I think the real explaination for Q4 2008 loosing money is that it was the first quarter with Euro price cuts reduction and MSFT sold a lot more consoles in Euros than elsewhere that quarter and that price cut was huge ( 150$ time 1 million console sold in Others that quarter = 150 million$).

Well, that would differ from the stated numbers in the Quarterly report, which showed increases of $204 million in R&D and Marketing.  While Marketing will probably not go down, as we head into the holiday season, you've gotta figure that R&D is not going to keep going up 38%, and this was the major driver.  With what growth they are forecasting for Q1 and beyond, it's looking like M$ has some rosy expectations for gaming.