These may well be areas of high return now but a lot of the more traditional markets are now declining. Microsoft needs to branch out and now they have cracked the console market it would seem a little shortsighted of an investor having already made the bulk of the investment.

This argument only works if somebody says sorry mate it did not work out as planned here is all the money you spent. 

Very true. Microsoft has yet to prove it can make money in this business. Add both losses from each console and the near fact that to stay ahead in this generation it many need to make more losses.

Basically, Microsoft have failed in the entertainment business as a whole apart from MSN. They can't cut it here like they can in the PC world.

Consumer wise though, they are good for competition.

not really that much more

slim will make profit for MS but they investing in exclusivity takes lot out too

also they will cut price too this fall so not that much

Profit is profit, and more profit is better.

MS hasnt bought any exclusives since GTA Liberty City stories, and who says the Xbox will get a price cut?

investors r always right cause its their money, GOOD WORK INVESTORS

YOU think FF13 just came like that,MW2 extras came like that.XBLA games and other things come just like that

profit is profit but they need to make more to cover their loses cause this way its gonna take alot of time

i'm sorry but who are the investors in question here? the board of MS holds most of the stock and I doubt any major shareholder needs to be in an article to get their points heard by MS...

Also this article is ignorant to the notion of sunk cost. you make strategic planning on the future gains, not on the past losses (all you do for that is fire executives). Xbox is profiatable -> article is retarded.

MS obviously haven't made the business case to investors well enough if they're grumbling. You've got to go back to the reason MS got into the console hardware game in the first place, which wasn't about bringing more choice to gamers, or establishing another source for more profits. If MS thought console gaming was going to stay as a simple recreational device for geeky teenagers they never would have gone into it. PC gaming is still very much alive and well after all.

MS saw a threat to its core business coming from left field out of the gaming console. It saw the future with MS not in the gaming console arena and decided it wasn't such a bright future for MS. So it spent some billions of dollars to shore up a long term future where that 72% profit margin core business was preserved long term, which meant getting into the console hardware business.

I don't think it's MS's long term strategy to make consumer electronic devices its core business (unlike Sony and Ninty for whom it is and always has been their core business). Those devices are there to protect MS's core business. If MS never makes any profit from consumer electronic devices, but in being in those markets it protects or even increases the profitability and long term viability of its core business then it's money well spent.

Investors don't expect MS's HR department to turn a profit, but an excellent HR department that spends considerable amounts of money ensuring MS is staffed by the best people possible, including investing in its current employees (staff retention) helps to maintain a viable and profitable company. EDD should be looked on in a similar vein, although because EDD can potentially be modestly profitable that should be part of EDD's long term business strategy.

So the thing for MS's board to consider is whether the original purpose for MS to get into the console gaming hardware market is still valid, and whether the Xbox brand is achieving that purpose. If the answers to those questions are yes, then the profitability angle is secondary. Given Xbox is now contributing positively to the MS bottom line I'd say there is almost nothing that investors can legitimately complain about.

Am I the only one who thinks that a comparison with the Windows division is unfair?

No division is as profitable as the Windows division. The investors are not complaining about the money they make with the console, they are complaining about the profit not being as big as the profit of the windows division.

I think the profit of the EDD division is nice to have for MS and not essential. The potential this division has with zune, Windows Mobile and Xbox 360 is huge, so it could become essential in some years. And almost 1 billion USD this year isn't that bad either.

And I doubt the Windows division would become more profitable or MS would make more money with Windows if they close the EDD. I think Windows is really running at high speed and there is VERY little romm for further expansions or increased profitability.

I basically agree with the above poster. You can only pour so much oney into one things before returns just start to lower. I think windows is probably maximised profit wise, so the best way to increase overall profit is to breakthrough into new markets such as video games, music players, and phones/mobile devices. As long as they are turning a profit or almost i think it is a good idea for ms