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

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spaceguy on 04 December 2012
VGKing said:
B-B-But Microsoft is rich! They can sell a $500 XboxNext for $250 and kill Sony and the PS4! They have the money!!!



Actually they are and can if they wanted. So not sure what this post is suppost to prove.



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Kynes on 04 December 2012
VGKing said:
B-B-But Microsoft is rich! They can sell a $500 XboxNext for $250 and kill Sony and the PS4! They have the money!!!


With their cash reserves they could sell more than 200 million consoles doing this, and they would still have money in the bank. They won't do that, because it is stupid to do so.



GreyianStorm on 04 December 2012
spaceguy said:
VGKing said:
B-B-But Microsoft is rich! They can sell a $500 XboxNext for $250 and kill Sony and the PS4! They have the money!!!



Actually they are and can if they wanted. So not sure what this post is suppost to prove.


Actually, shareholders probably wouldn't back something like that. Every million units sold would cost the company $250 million. Imagine if they were selling 10 million units a year, that's $2.5 billion per year. Even if they knocked Sony out of the gaming business, they wouldn't really be able to raise the price of the system (it would alienate potential buyers) and they'd probably be looking at losses throughout the generation of $10 billion, if not more (R&D and huge annual losses with no end in sight really). While the company as a whole could certainly afford it (as in, they'd still make a huge annual profit overall), the shareholders would not support such a move, seeing as there isn't really a big profit to be made afterwards.



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spaceguy on 04 December 2012
GreyianStorm said:
spaceguy said:
VGKing said:
B-B-But Microsoft is rich! They can sell a $500 XboxNext for $250 and kill Sony and the PS4! They have the money!!!



Actually they are and can if they wanted. So not sure what this post is suppost to prove.


Actually, shareholders probably wouldn't back something like that. Every million units sold would cost the company $250 million. Imagine if they were selling 10 million units a year, that's $2.5 billion per year. Even if they knocked Sony out of the gaming business, they wouldn't really be able to raise the price of the system (it would alienate potential buyers) and they'd probably be looking at losses throughout the generation of $10 billion, if not more (R&D and huge annual losses with no end in sight really). While the company as a whole could certainly afford it (as in, they'd still make a huge annual profit overall), the shareholders would not support such a move, seeing as there isn't really a big profit to be made afterwards.

Who said they would? I just said they could. The point being the guy above is being a smarta--. Then you jump in to prove it's a stupid business idea to lose money by selling lower then you should. Thanks for the tip bro.



Pjams on 04 December 2012

Read my sig, All the insight you could ever want



 

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A203D on 04 December 2012

Great article. It is questionable on whether Microsoft investors 'want' the Xbox 360 to remain in the market. I think when Microsoft first started out they never expected Sony or Nintendo would put up such a tough fight for market revenue.

Personally I think the Xbox has been immensely successful. It's done great things for the gaming market, and I feel it has done great things for the western based developers.

Whether Microsoft want to see if its worth continuing that momentum is up to them. It depends on the Wii U. It could be Microsoft and Sony all the way next gen if the Wii U dosen't gain enough traction. I would like to see that!!



Akvod on 04 December 2012
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?



JimmyDanger on 04 December 2012

Is the sky falling?

Lolcopters at that profit/loss sheet. Are those figures straight made up?

MS making more profit per console sold, higher software sales and subscription fee revenues, and Sony made 10 billion more between 2008-11?

To paraphrase Ricky Gervais - "He's having a laugh! Is he having a laugh? He's having a laugh."



Akvod on 04 December 2012
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.



Cobretti2 on 04 December 2012

Yahoo doesn't get it.

The xbox was never designed to bring in billions, It was a way to fight Sony on another front in the media side of the business (i.e to win the living room space).

The problem is whether the investors agree or not.