Here's a guideline for MS profits:

(1) If it's Windows or Office, MS makes a lot of money on it

(2) Otherwise, MS loses money on it.

MS is not good at competing for business. They're a huge, slow, inagil company that rarely (if ever) innovates. They make money in the areas where they have monopolies.

Look at MS' best efforts in the console market: they're about $7 billion in the red. Look at their best efforts in the online search market: they've given up and now want to buy their way in to the tune of $40 billion. They simply cannot compete with innovation. They need a monopoly.

The 360 does have a lot of great games, not due to Microsoft but due to third parties, but I think the "majority" of people seem to be buying a Wii which is approximately the same price as the 360 ($250 vs $280) even though the Wii is really hard to find.  It's strange that these people think the 360 has the best games, and yet they buy the Wii at just about the same price point and with a lot of difficulty.

@zenfolder

thanks for putting some factual sense into the thread

TheBigFatJ said: 2. 360 may not be profitable overall yet but it has the best games thus far. One can argue with taste but majority will agree taht the best games are on the 360. The 360 does have a lot of great games, not due to Microsoft but due to third parties, but I think the "majority" of people seem to be buying a Wii which is approximately the same price as the 360 ($250 vs $280) even though the Wii is really hard to find.  It's strange that these people think the 360 has the best games, and yet they buy the Wii at just about the same price point and with a lot of difficulty.

Agreed but this is the genius of nintendo. Resell you a console with more ram, add a gimmicky controller that 70% of games dont work or work worse with and sell out like hotcakes. Only Nintendo can do this and not go out of business...

I like the wii, but i seriously think gamecube had a much stronger lineup of games.

 

Also, about 3rd party support and xbox360...isnt that a success of microsoft? The fact they are getting great 3rd party support?

@original poster

Microsoft only provides guidance on divisions. The consoles are part of a much larger division. So where we perceive losses is a subjective exercise. Basically the figures seem high, but only because Microsoft is eating losses across a great number of product lines. For all we know the majority of those losses might not be attributable to the consoles. You cannot lay all the losses in the division on the consoles they probably do not account for the majority of the losses. They might even be profitable.

The last two quarter statements however indicate that the divisions product lines are gaining acceptance, and sales are getting stronger across the board. More lines are generating profit then posting losses, and based on how many consoles are being sold, and how many games are sold for the hardware the console is probably one of the more profitable lines at this point in time.

Can they afford to cut the price on their hardware. Most likely yes given the age of the hardware. The manufacturing costs have most assuredly been reduced dramatically since the latest consoles launch, and given the licensing fees its a safe assumption they will make up the extra profit on unit sales in software licensing.

I actually think if you were able to remove the line from the division and do the math you would probably find that the 360 is actually very profitable. The consoles figures only look shallow thanks to a number of products in the division that are not performing.

Beyond that Microsoft most definitely has a strategy. This company gets to the races years before others even bother to show up. That is part of how they maintain dominance. This is a company that is actually developing operating systems, and development tools for autonomous robots. Even though the demand right now is almost nonexistent. Hell they even fund mathematical think tanks with no obvious profitability. Just to churn up new ideas.

The product is probably profitable at the moment, and will probably be profitable even after a major retail price cut. The fact that they are doing so indicates that they have great faith in its future potential. Otherwise they wouldn't be cutting prices, and be maxing out their profit potential in the short term.

Dodece said: @original poster Microsoft only provides guidance on divisions. The consoles are part of a much larger division. So where we perceive losses is a subjective exercise. Basically the figures seem high, but only because Microsoft is eating losses across a great number of product lines. For all we know the majority of those losses might not be attributable to the consoles. You cannot lay all the losses in the division on the consoles they probably do not account for the majority of the losses. They might even be profitable. The last two quarter statements however indicate that the divisions product lines are gaining acceptance, and sales are getting stronger across the board. More lines are generating profit then posting losses, and based on how many consoles are being sold, and how many games are sold for the hardware the console is probably one of the more profitable lines at this point in time. Can they afford to cut the price on their hardware. Most likely yes given the age of the hardware. The manufacturing costs have most assuredly been reduced dramatically since the latest consoles launch, and given the licensing fees its a safe assumption they will make up the extra profit on unit sales in software licensing. I actually think if you were able to remove the line from the division and do the math you would probably find that the 360 is actually very profitable. The consoles figures only look shallow thanks to a number of products in the division that are not performing. Beyond that Microsoft most definitely has a strategy. This company gets to the races years before others even bother to show up. That is part of how they maintain dominance. This is a company that is actually developing operating systems, and development tools for autonomous robots. Even though the demand right now is almost nonexistent. Hell they even fund mathematical think tanks with no obvious profitability. Just to churn up new ideas. The product is probably profitable at the moment, and will probably be profitable even after a major retail price cut. The fact that they are doing so indicates that they have great faith in its future potential. Otherwise they wouldn't be cutting prices, and be maxing out their profit potential in the short term.

What your saying is very logical , I won't dispute that at alll. However I'm having trouble believing what your saying since it mostly seems to be based on speculation and probability . your first paragraph isn't conclusive neither does it apear to be based on any factual information , without it the rest of your argument falls apart.

I'm fully open to the possibility of a profitable 360 but the vast majority of information availible to me indicates that , that isn't the case.

 

ZenfoldorVGI said: starcraft said: Why would they do that when they are first starting to make money and properly build brand name? They are in this game (get it?) for far more than actually outselling competitors unit to unit like Nintendo. Because that's why Nintendo is here, to emptily outsell their competitors with no real substance to show for it.     Don't be a shill, their "profit" doesn't include the billion dollar loss due to RRoD, and does include Zune sales.   360 has been a total stinker so far, like the Xbox before it. Now with price cuts and no Halo 3, or first party supersellers.

EDIT: Oh, I get it now.

ZenfoldorVGI said: They aren't even close to making a profit, and here's why: According to my "Microsoft is dying" article I posted, the "Financials" that said they made 500,000,000 dollars last year include Zune revenue, and don't include the Billion dollars set aside to fix the RRoD. Now with price drops looming, probably inclusion of an expensive Blu-Ray addon, and failure of HD-DVD with no bail out Halo 3 type first party games on the horizon, I think the 360 gaming devision, even with Zune support, will go back into the red pretty deep this year. What do you guys think about that?

Wow this is an interesting post.

The Zune is the profitable part of the division that the 360 is in.

Microsoft must have been counting on huge profits on HD-DVD drives.

Now MS is going to start selling Bly-Ray  addons at a loss or putting them into the 360 at a loss.

 

I think someone is really stretching.  Reason MS can drop price on 360 is because cost to produce has dropped far enought. Falcon units dont have the RROD problem so less potential repair costs. Software profit is just going to continue to rise.

ZenfoldorVGI said: starcraft said: Why would they do that when they are first starting to make money and properly build brand name? They are in this game (get it?) for far more than actually outselling competitors unit to unit like Nintendo. Because that's why Nintendo is here, to emptily outsell their competitors with no real substance to show for it.     Don't be a shill, their "profit" doesn't include the billion dollar loss due to RRoD, and does include Zune sales.   360 has been a total stinker so far, like the Xbox before it. Now with price cuts and no Halo 3, or first party supersellers.

Correct me if I'm wrong, but I believe the 2007 number in that chart contains the $1B writeoff so the total IS including that number.   And not to piss on anyone's parade, but Sony's numbers aren't any better.  Yes, Sony had a profit in the past, but they have dumped nearly $3B in 2007-2008...  That's a hell of a lot of money.  Almost 50% of Microsofts losses over the last 6 years.  If the 360 is a "stinker" in terms of profits, then the PS3 is as well.  Both companies have taken the "give away the razor and sell the blades" mentality just a bit too far.

ZenfoldorVGI said: They aren't even close to making a profit, and here's why: According to my "Microsoft is dying" article I posted, the "Financials" that said they made 500,000,000 dollars last year include Zune revenue, and don't include the Billion dollars set aside to fix the RRoD. Now with price drops looming, probably inclusion of an expensive Blu-Ray addon, and failure of HD-DVD with no bail out Halo 3 type first party games on the horizon, I think the 360 gaming devision, even with Zune support, will go back into the red pretty deep this year. What do you guys think about that?

Oh yeah, I remember that, I also remember people telling you off on how they're not dying and their still making billions of dollars..

ZenfoldorVGI said: starcraft said: Why would they do that when they are first starting to make money and properly build brand name? They are in this game (get it?) for far more than actually outselling competitors unit to unit like Nintendo. Because that's why Nintendo is here, to emptily outsell their competitors with no real substance to show for it.     Don't be a shill, their "profit" doesn't include the billion dollar loss due to RRoD, and does include Zune sales.   360 has been a total stinker so far, like the Xbox before it. Now with price cuts and no Halo 3, or first party supersellers.

The billion dollar loss was part of the 2007 fiscal year, and it was counted then, so you are wrong.

Edit: kn beat me to it.