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Forums - Microsoft Discussion - Yahoo: "Microsoft can no longer afford to keep investing in the Xbox"

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d21lewis on 04 December 2012

Man, if Xbox makes money and Microsoft still quits the business, that would be like the ultimate slap in the face. It would be like some guy beating you up and taking your girlfriend and then giving her back to you because he didn't even think she was worth fucking.



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Akvod on 04 December 2012
kowenicki said:
Akvod said:
kowenicki said:
Akvod said:
kowenicki said:
Akvod said:
kowenicki said:
Akvod said:
Proclus said:
What kind of a failed article is this?

A: $67 billion in cash reserves say hi.

B: Despite massive R&D expenses during the last 3 Q's the division is still profiting.

C: The rest of the business collapsing? lol.

Kinda suprised anyone bothered to post this failure of an "article".

http://en.wikipedia.org/wiki/Cost_of_capital

http://en.wikipedia.org/wiki/Opportunity_cost

Just making a profit isn't enough. The money they make has to be greater than the money they (investors) could have made by investing in something else.

For investors... yeah thats right, I agree. 

Stock YTD:

Google v Nintendo v Sony v Dow v Microsoft.

 

 

So its pretty much in line with Google and the Dow.  Not much opportunity cost there given the correct diversification and volatility required in an effective portfolio.   This of course doesn't factor in the dividends payable.  


But you're looking at the entire company. We're looking specificly at the XBox division (although getting cost of capital for that would probably be difficult, since there's only 2 other comparable companies, a few more if you look at historical data [but that's probably irrelevant now]).


You cant look at the "xbox division", it doesnt exist and hasnt for some time. 

You talked of investors opportunity cost.  I presumed you meant investors buying stock.

If you were talking about MS as the investors in the Xbox then I'm sure they have a plan and the opportunity costs is fine, they have cash to burn so they are spedning to diversify and at the same time create an ecosystem. 

To quote an oft used phrase elsewhere....  "If they were thinking of closing a division  then the gaming division would be way down the list right now"


Do you know what cost of capital is?


I own a business that employs dozens of people and is in the financial sector.  What do you think?  and what do you do?

So then why were you looking at Microsoft as whole? Why were you looking at the Dow? Why are you saying that Microsoft should "burn" cash? And yes, I did mean investors buying stock when I was talking about opportunity cost.

My whole point is what is the theoretical cost of capital for XBox (or Microsoft's entertainment division if you want to broaden it)? Then the second question is, is that division making enough return, given it's risk? Who knows, but that goes back to my original point that making a profit in one year alone isn't enough, you need to do a more thorough analysis.

Which is impossible unless you are in MS and know their long term strategy / intentions. It's not public domain. We can only surmise.

You should be able to make an estimate of their cost of capital. At least a rough one.



Kai Master on 04 December 2012

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TheLastStarFighter on 04 December 2012

I know Microsoft's inside strategy. They don't care if XBox loses money. They are not going to quit the division. If anything, it will get more of a push. They need to fight PC opponents (such as iPads) on this front. It protects the Windows side of things. XBox can lose as much money as necessary to do this job.



richardhutnik on 05 December 2012
Turkish said:
I agree, if Xbox 3 doesn't become the success they want, it could be the end. MS will probably shift all their focus on desktops and tablets because those are existential problems.

The Nintendo is the only one left?  What makes you think that the next XBox will do badly and the next Playstation do well?  I see if Microsoft pulls out, it likely means Sony does also, and 2 out of 3 console makers pulling out, is bordering on "crash" level, of the early 1980s.  It is NOT a good thing.



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Ganoncrotch on 05 December 2012

wooow someone linked a Yahoo news story on here, the last article I seen on yahoo suggested saving money on your home heating by leaving your oven door open to save on heating oil :o That site is an absolute shambles now, more people visit it as a bad internet habit of the '90s than anything else nowadays.



Why not check me out on youtube and help me on the way to 2k subs over at www.youtube.com/stormcloudlive

Wh1pL4shL1ve_007 on 05 December 2012
richardhutnik said:
Turkish said:
I agree, if Xbox 3 doesn't become the success they want, it could be the end. MS will probably shift all their focus on desktops and tablets because those are existential problems.

The Nintendo is the only one left?  What makes you think that the next XBox will do badly and the next Playstation do well?  I see if Microsoft pulls out, it likely means Sony does also, and 2 out of 3 console makers pulling out, is bordering on "crash" level, of the early 1980s.  It is NOT a good thing.


No I think Turkish was trying to say "I rate games on Metacritic without even playing them, just drop Xbx becuase Halo 4 deserves a 0/10"



Yay!!!

MoHasanie on 05 December 2012

Wow, those are such huge loses for Microsoft in 2007! Everyone here always points out that PS3 made huge loses, but Microsoft did as well. The Xbox 360 should probably make up for all its loses by next year (probably helped out a lot by Xbox Live) but I'm not sure if the PS3 ever will.



    

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Turkish on 05 December 2012
richardhutnik said:
Turkish said:
I agree, if Xbox 3 doesn't become the success they want, it could be the end. MS will probably shift all their focus on desktops and tablets because those are existential problems.

The Nintendo is the only one left?  What makes you think that the next XBox will do badly and the next Playstation do well?  I see if Microsoft pulls out, it likely means Sony does also, and 2 out of 3 console makers pulling out, is bordering on "crash" level, of the early 1980s.  It is NOT a good thing.


When did I say it would do badly? Look at the turnaround of the different services MS offers, their game business is insignficant to what other things they offer in terms of revenue. If xbox doesn't become what they hope to be (nr1 in the game industry), they could pull the plug. MS is in to win it, they don't want to be stuck in the 2nd/3rd place forever.



BradleyJ on 05 December 2012
Proclus said:

Sorry bud, but what point is that? That they should take away the device that has been raking in 100's of millions and throw it out the window? Very next Q you'd see a massive loss in the EED due to devices that are the ones actually losing money. Anyways, someone on gaf put it perfectly: " Yeah, take fucking advice from Yahoo . That'll definitely work out for you. ".

It's opportunity cost. I've seen before that the XBox makes a LOT less money per dollar of inivestment than its other products and services. So while it's still making money, theoretically MS would make more if they took any spending allocated towards XBox and put it towards more profitable divisions. I would find the article but I'm lazy, tired, and quite possibly making this up (though I don't think I am).