My prediction is that this will happen early (as in Q1-2) next year

http://ce.seekingalpha.com/article/42029

From the article:

"...Ok, ok, you say. Microsoft is in H&E for the long run. After all, they're in it for 20 yards ($20 billion in FX-speak), and there is the whole "window to the living room" strategy thing that will take years to play out. But they can afford it. My response: so what? So they can absorb $5 billion in operating losses and they just took another $1.1 billion hit. Is this better then, say, paying a big dividend back to shareholders? Or making a strategic acquisition that can augment a business they actually understand and that leverages their core competencies? Theirs appears to be a strategy of conglomeration which, by the way, generally is not rewarded in the stock market (see Electric, General). This isn't the 1960s, Microsoft is not ITT and Steve Ballmer is not Harold Geneen. So, I've never bought this diversification argument and I never will. And their numbers continue to bear out my thesis: success in their core, failure in their non-core. They can stop the bleeding if they want. But they won't."

I may have misinterpreted the 20 billion to mean losses rather than cost...

As for Wii taking 50% of the console only market (in lifetime sales)...Wii accounts for ~56.7% of all consoles sold in 2007.  By year end, lifetime sales for Wii should be roughly 45% of all consoles (Wii,PS3,360) sold worldwide.  50% lifetime could come sometime between March 1 and June 30 2008, although alot depends on MGS4, GTA, pricedrops, manufacturing, etc. 

Sony is not like Microsoft because the playstation brand consistently generates a profit with no consecutive fiscal years of loss.   Microsoft hasn't generated a single fiscal year of profit yet, and has lost an average of more than one billion per year on their xbox division.

Microsoft is going to push hard to generate a profit at all costs in fiscal '08 because they've told their investors time and time again that profitability was around the corner with the 360 and now they've put their flag down and said it will happen in '08.  They've even set aside all of the costs for repairs and assigned it to fiscal '07 so they could mask their losses in '08 and set themselves up for a faux victory, claiming they're profitable even as they spend money for repairs.

Sony also runs their 10 year mantra a lot, and it actually means something from a business sense.   It means that 7 or 8 years from now they'll likely still be manufacturing and selling a lot of PS3 units and making a lot of money with the PS3, as they're doing with the PS2 just now. 

Wonderful read, thank you very much, The Source!

It will be interesting to see how things progress from here.


Remember guys, this is a historical moment: The second Nintendo era is upon us. The last time Nintendo was market leader both in the handheld and home console market was in 1994 when the SNES was the best selling platform worldwide. Let´s see what a meal they will offer to us.

True, what i was saying with profits though was that microsoft even with loses from game division still is doing quite well. I dont think they truely expect to make money off the game division yet, though i dont think they expected the amount of loses they have had. Like sony they expect profits in the future, though i find there plan failing while sony can succeed

Microsoft is in it for the long run they want in and they can afford a few billion in loses.

Yes, but how much was sony losing in money with ps2 each time one sold (please tell me if you can) right now sony is losing 240 dollars a ps3 sold at the 500 or 600 dollar sells, now for them to really drop that price they would have to accept loses on the ps3 for some time. What id like to know is if sony makes a decent profit for each ps2 sold or what.

wow almost 20k in wii sales by end of 2007! what was GC's lifetime sales again?

21,5 million. The Wii will pass Gamecube LTD sales after just a bit more than a year. Crazy, isn´t it?

Lost tears of Kain -

MS as a company as a whole is at a crossroads. Just read the link provided by The Source within this debate. MS's growth is rather bloated right now, and they are making money yes. But mainly that is coming from their chokehold monopoly with Windows.

Thing is, that itself isn't doing very good. Computers are starting to see similar the trends we saw with early TV's. People, and business, are slowing down their needs for top of the line PC's. Most PC's work well for the things people are interested in doing overall. People aren't buying a new PC every year, or even every other year like we saw during the 90's. The early adopter rate for uber higher end PC's is slowly falling away. And by the nature of things, so too are the huge adpotion rates for Vista.

Not to mention the general public is really starting to like what Apple has to offer, and they have been steadily growing. Look at what Dell has started to do: They are now offering PC's outright with Linux on it, and they even re-started shipping new PC's with XP. Why? Because people demanded it, and by in large, are rejecting Vista right now. Not a good sign for MS when this is your money maker.

Many people are familar with loss leading strategies; MS is a practitioner of this, and has bled heavily as a result, especially within the videogame industry. They have yet to make a penny out of their gaming department in SIX years! They are nearly SEVEN BILLION (!!!) in debt as a result, and once they become profitable, it will be years untill they are able to get out of the hole they have dug. Nothing short of being #1 in games and dominating will help them pull out of that red sea. Consider the fact that, for all of its domination, Sony only made two billion last gen on PS2.

Speaking of Sony, yes Sony has burned away its minimal PS2 profits with PS3. Thing is, Sony made the most money in gaming around 98-99. This was during the prime of PS(one)'s life. So Sony hasn't waisted all their profits in gaming on the investment of the PS3. And as TheBigFatJ has mentioned, and quite well I must add, Sony has planned PS3 for a very long term investment. While there are aspects in the industry that might take away the length of that plan in due time ( Wii's momentum and the launch of next gen of systems ) Sony has set themselves up for a long term investment with PS3. Also I think everyone knows Sony's approach is two-pronged, as they can make more money by winning the HD battle, than they can by gaming alone. Hence PS3's being used as leverage.

MS's strategy might really please their rabid fans, but don't think Wallstreet is interested in how fun the Xbox can be due to MS burning its massive piles of money on it. Shareholders will be seeing red soon enough if 360 doesn't show any sings of paying off, that is, if they don't own a 360 and haven't had a RROD already.

@TheBigFatJ

I agree with you and you've summed up several of my arguments quite well. 

Why is it not a problem with Sony burning money to leverage Bluray but a problem with MS burning money to leverage Live/Marketplace?

You could just as easily say "Sony's strategy might really please their rabid fans, but don't think Wallstreet is interested in how fun the PS3 can be due to Sony burning its massive piles of money on it. Shareholders will be seeing red soon enough if PS3 doesn't show any sings of paying off".