Until recently, MS didn't even pay dividends on their stock, so most MS investors look for stock valuation as ROI instead of earnings.  This is similar to why many people invested in McDonalds until a few years ago... their stock valuation just kept going up for 22 straight quarters.  If the MS stock holds for periods but goes up over time, investors are happy.

I agree that most investors don't invest in MS for their games division, anymore than most Sony investors do for their games division.  If Sony didn't also sell TVs, receivers, movies, etc., I would be getting out of Sony stock in a hurry.  The same with MS.

Last quarter Sony posted $646M profit and $18B in revenue. Not good but not as bad as you state. 

$646 Million off of $18 Billion in revenue works out to be (about) 3.5% profit which is not healthy ... it is highly likely that the reduction in revenue that the price reduction on the PS3 will reduce their profit margin to below 2% by years end. When a company produces a profit margin smaller than inflation there is a serious problem.

Sony and Nintendo are both winners in this generation of consoles. Microsoft is in a pickle, because it has yet to recoup the $6.5 billion it has lost since launching the Xbox line, or to reclaim the 31% market share it had as recently as 2006.

Also, it's too easy to bash the PS3 for being pricy and for losing Sony billions. The billions were well-spent, in the form of a top-notch media player - for every yen Sony loses on a PS3, it gains three back in the form of TVs, electronics and BluRay discs. The PS3 is part of an integrated media strategy, it's not a standalone product.

MS has over $100 b in cash reserves.  Why do you feel they need to recoup their losses in the games division?

Sony going from 70% of the Market to less than 40% is not winning. I posted this in another thread will repost here to show how the 360/PS3 matchup is going for Nov and Dec.

Hardware sales for November and December. PS3 has not cut the 360 lead.


360                          Ps3
594520                 619388
523628                 524907
437650                 439404
359728                 381207
375759                 356894
244829                 242097
204012                 222455
200287                 150076
======                ======
2,940,413             2,936,428

Software sales for November and December. 360 seems healthy to me.

360                              ps3
3756473                  2096683
2998411                  1852603
2894880                  1561150
2990378                  1512772
3756279                  1859060
2983844                  1480943
2389671                  1234390
1955359                  659595
======                   ======
23,725,295             12,257,196

This is Winning?

Because both the Xbox 360 and the PS-3 are in fact small, relative cheap PCs. Take the SPUs from the PS-3 and you have a pure PC. If you didn't make any bigger mistakes between Host and network byte order you can more or less compile the same programs on both machines. The internal differences between the machines are not as significant as you might think.You can hide most differences behind small translation layers. The situation is in fact more or less as the programming on an Apple Macintosh. The so called universal binaries are in fact the x86 and PowerPC binaries in a special container format, due to the cross compiling capabilities of the gcc.

The better monitoring possibilities on the Xbox 360 even allow a better implementation for smaller PCs. Many PCs are not UpToDate and the market for PC games is not as superior as you think. Most PCs are not and never will be be used for action oriented games. So the difference is far from the number you stated. In some countries the market for PC games was even very limited, especially in Japan, where only "World of Warcraft" started a general turn of the market.

While the graphic cards of PCs were able to handle bigger resolutions for some time most action oriented times used in general smaller resolutions due to lacks in computing power. You must not underestiamte the pure computing power of the PS-3 and the X-Box 360, they can easily run faster than many PCs currently in use and they don't have to cope with as many resident programs as PCs.

These rather small differences come together with significant advantages: They use the same basic models, artwork and soundtracks. You have one advertising campaign instead of three.

 I recently saw this analysis done fully. Short answer: Sony has already nullified all their PS2 profits and have now eaten about 20 percent of their PS1 profits. 

 $100 billion? I'm not sure where you got that number from but from their balance sheet the number is not even close to $100B. According to the balance sheet MSFT cash reserve (Cash and Cash Equivalents + Short Term Investments) is "only" $23B. 

 Here's the link: http://finance.yahoo.com/q/bs?s=MSFT&annual

 But I agree that MS does not need to recoup the $7B loss from their Xbox division but the same can be true for Sony. Sony's cash reserve is at $11B (http://finance.yahoo.com/q/bs?s=SNE&annual=) so they should be fine too. The big difference is that Sony will most likely recoup a large chunk, if not all, of the over $2B losses from PS3 while MS has no chance to recoup the $7B at all. Also, please remember that Sony's lifetime PlayStation business is still $2.8B in the BLACK.

Well people keep pulling numbers out of the air, but I have to announce that the world wide release of the roller 9000 is going to be delayed for several hours due to production difficulties (movies) If you have pre-ordered somewhere I would check with them.. ok.