Something seems very wrong with those conclusions seeing as how MS lost money after selling around 20 million units even with the software advantage versus their competitors: granted that advantage was from having a year in advance to develop a large install base of around 6 million people.

However if your going off of the idea that the some magical gnome came out of no where and reversed Nintendo today and Microsoft today in sales and only sales then it would have to be some strong magic as Xbox360 would have to be something else and not what it currently is to sell like the Wii.. forcing thought though... this would mean higher revenue however I'm not certain about profits. Not that they are selling units at a loss... but then you'd have to take into account the RROD issue that's still being fixed as roughly 20 million Xbox360's potentially have the issue.

Also 1st party software is what gives Nintendo a major bump, the ones that do fail like elebits don't have a huge impact either... if Halo Wars fails I'm sure it won't look pretty in the bottom line.

In addition, I think your operating profit calculations for the 360 are way off. In the last fiscal year, the E&D division only made $426 million OP on revenue of $8.14 billion. And that's including probably the two biggest games of this generation for the 360, Halo 3 and GTAIV.

The What If kind of addresses that concern.

IF the 360 were selling that much hardware:

1. hardware costs will be less due to scale

2. r&d will not be as big a percentage of revenue - right now its 20% (for the whole EDD).  Even you postulate the same percentage just for XBox platform - then if you use 20% on revenue of $16Billion, that would amount to $3.2 Billion in R&D ANNUALLY.

That does not make sense.  That's basically a new PS3 every year. (sorry bad joke)

Nintendo R&D last year = $320 million

So of course R&D is less.

3. same for marketing, right now its about 15%(for the whole EDD).  For $16Billion in revenue, that about $2.4 Billion.

In contrast, last year, Nintendo spent about $1 Billion in Marketing.

So it may make sense that XBox may be more profitable, if it has the same scale of business as Nintendo Wii.  That's all.

Again, this is a WHAT IF scenario.

FishyJoe,

This is what I based my MSFT projections on:

http://www.vgchartz.com/forum/thread.php?id=35336&start=0

Please read carefully.  This is where I got my operating income and gross margin assumptions.

That's taking into account the other business segments.

In my What If Scenario, I stripped out the XBox Platform (less PC games) and just scaled it up to 25 million units GOING FORWARD INTO THE FUTURE.

So - there should be no more RROD - coz it will be NEW X360s.

BTW, FishyJoe,

I hope I can get your feedback on the MSFT analysis, if you can.
I would appreciate it.

I also have Nintendo and Sony ones, if you want to read and comment.

Let me know.

Thanks.

Again, you're making a ton of assumptions based on limited data. I think if I were to dig down into your analysis, I could find deep flaws in them. I'm not going to do that because I don't think it's worthy of my free time.

I don't know how your assumptions can be accurate, when of the first 20 million MS has sold they've lost money, so how could you assume that selling another 25 million would make them billions?

Alright, no problem.

If you do, then please do point out the flaws.  I would be more than happy to change them. The goal is to have a good working model.

However, I do want to state that until someone points out a flaw(s) and fixes them with their own numbers, then it's not really very valid.

Until you work out the numbers, along with all the other figures that are connected, then changing 1 or 2 figures will not result in a more "correct" financial model.

For example:

You can't say change the X360 gross margin to $X, without changing Live gross margin to $X.  Because 1 change affects all the other numbers.

It's like a big formula:  a+b+c+d+e+g = z

You can't change a, without changing b, c, d , etc.  Given that z is fixed - ie. z is true - from reported numbers.

Thanks.

Prehaps some clarification, in your conjecture did the 360 sell at Wii rates since 2005?

Also a few things would have to be reset if it was selling at the Wii rate - I'm not even talking about hardware.

Price Point for the hardware and software, marketting efforts and hiring new employees for Japan administrative/corporate.

The more money they make the more money they spend.

Hi DKII - please take a look at my previous MSFT thread:

http://www.vgchartz.com/forum/thread.php?id=35336&start=0

to see if you can find mistakes, and your suggestions for corrections.

For reference, this is my Nintendo thread:

http://www.vgchartz.com/forum/thread.php?id=36136&start=0

You can see the gross margins and expenses that EDD division had.  I stripped those off (proportionally if need be) to arrive at the XBox Platform projection in this thread.

I didn't elaborate, because too many numbers sometimes is too hard for most people to understand.

If you want, I can post them with explanations and notes.

thanks.