| albionus said: That's great you think MS subsidizing the gaming habits of young males (I'm assuming youself included) is a good use of its money but I'm willing to bet most shareholders would not. I would also bet most would have preferred MS just give them $6 billion in dividends if they knew what a sinkhole Gates was getting them into. They could have done more with the money than MS has. Nintendo is doing just fine, the last thing they need is to throw there cash reserves into some new venture that bleeds so much money that they'll never make it back. Assuming market return rates is called "marginal cost of capital", ie the money spent on a venture should return more in profits than the money would have earned had it been saved or not borrowed instead. At this point MS could have made over $6 billion in investments, instead its lost $5.4 billion. Addmitedly I'm just using a rough average since I don't know what MS' exact cost of capital is. They do have more of their own money that may be locked in safe low interest savings or some such so it would probably be lower. Even so, if it were half of average for the Xbox division to ever be considered a good move it will have not only make back $5.4 billion but also the $3 billion in lost earnings (which grows every year). In short it's impossible. |
The conversation is going into deeper territories than I thought, but it's a good. What forums are for... though not necessarily a video game forum 
It is pretty much accepted, right or wrong, that the whole Windows shibang will eventually go the route of, say, railroads. For Microsoft's existence's sake, survival is diversification. As we have seen, MSFT has lost billions. They are willing to lose that much, IF this foray is worth it. Now, it's still up in the air whether it's worth it. I have always found Microsoft's decision to enter the video game console business utterly ridiculous, but they justify that by their "vision", i.e. integrated home hub. The technology and expertise harvested is an asset, and MSFT executives need to find a way to make good use of it. This "diversification" or "expansion" or whatever one like to call it is in line with the company's business, otherwise it could go out and buy NBC (still a GE property i think) or something but it's not Sony.
Now the question becomes, is diversification good for the MSFT shareholder? That is a much deeper question. One could argue that if MSFT eventually becomes irrelevent, it is the shareholder's job to reallocate, and the overall payoff to the economy might be greater. But there's also arguments along the lines of what's best for the company (individual) is best for the economy. It is not at all a trivial problem. In general, I would put faith in management--that's what their for--theoretically anyway.
the Wii is an epidemic.
