Microsoft’s pockets not so deep for the Xbox 360 division

[mike_intellivision]

Microsoft -- as a total company -- will do well because it has several MUST BUY products. (You get a computer, you get an OS, you get a package of software -- usually the last two are Microsoft).

The Microsoft Entertainment Division meanwhile, is facing the same pressures that Sony and Nintendo are facing. Potentially soft (to sagging) sales because of the worsening global economic climate. Stock prices are a measure of relative wealth and were admittedly over-inflated (remember when Nintendo had the second-highest stock value of any company in Japan?). It does not necessarily measure or even correlate with profitability.

The economic conditions will mean reductions in R&D and risk-taking. That makes it harder for a console using newer technology than for one using older technology. So Sony will NOT be getting rid of the PS2 anytime soon and Nintendo will benefit from its lower-tech Wii. Meanwhile, the HD consoles will have trouble as those who do not have them will probably delay purchases. And all software sales will slump (less units bought).

So the reaction to economic tough times is "down-sizing" and "right-sizing" -- no one can say that is a surprise for units that are losing money (or have a history of losing money). Actually, the bigger surprise is that they remain open because often entire units/product lines can get canceled when the economy tanks. And if conditions get much worse, we could see that -- and the Crash II.

Mike from Morgantown