LudicrousSpeed said:
I'm not keen on all this financial stuff, but how does MS have roughly the same revenue as Sony but over five times the profit? Do they just have divisions that lose way more money? |
Its because the revenue that Microsoft generates (mostly software and services) has very high gross margins. Gross margin is revenue - cost divided by revenue and is given by a percentage. On average microsoft keeps 60 cents (60%) out of every dollar of revenue they generate as profit, mostly because the cost of product mix they sell.
Sony's gross margin is only 6 cents (6%) because their products have very high input costs and make little profit or are sold at a loss to increase marketshare. They hope to make money on higher margin items such as services, software, music and movies (when those businesses are doing well).
