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[CTLance]

Things can't be that bad. I mean, I'm no friend of Microsoft, but that seems like crazy talk, even for my most beloved target of disdain.

They have so many fans who continue to throw exorbitant amounts of money their way. I mean, I could theoretically imagine the 360 being a mismanaged mess of epic proportions or something and thus bottoming out at a black zero with the XBone R&D generating a huge loss, but that last part would be business as usual, for sure - and it would involve some outright unhealthy mental gymnastics.

Would love to see some hard numbers on this.

 

[Miles Quaritch]

$2b a year? With the amount of money gold brings in? And with how profitable the 360 must be right now?

showmethereceipts.gif.

 

[Aquamarine]

No that's the gaming division. Didn't the gaming division only get bundled with the E+D division recently?

No. ED&D has always included Xbox.

 

[gofreak]

Hmmm.

Rick Sherlund is the analyst who seems to be well sourced with regard to ValueAct, the activist investor that successfully lobbied for a seat on the board and was linked to Ballmer's exit.

He also seems to always offer commentary that has shared ValueAct's world view.

Now that ValueAct is inside MS and would have access to all kinds of information, I wonder if he got this information from one of his ValueAct friends - and/or if it's part of a campaign to publicly sully perception of the Xbox business among investors. He has previously said that ValueAct wants to get rid of the Xbox business and he has agreed with that idea.

 

[thepotatoman]

$2b a year? With the amount of money gold brings in? And with how profitable the 360 must be right now?

showmethereceipts.gif.

The article puts the time period as the total of the last few years, whatever that means.

 

[Eliciel]

This is crazy, who's in charge? From a business point of view xbox is a poor dog and should be disinvested immediately. Market potential is as good as it gets if you can't generate revenues you're doing it wrong

 

[Alx]

If it includes the One R&D, I'm almost surprised it's not more actually. Didn't they say the CPU alone cost 3 billions in R&D ? And if the kinect R&D is half the total, that means we're talking at the very least 6 billions (not counting the pad, architecture, tools,...)
Of course that cost would be spread on several years, but it's still a lot.

 

[iamshadowlark]

Not that total part, which is why the chart is pointless.

It shouldn't be named "total" maybe but thats the net gain/loss for that time period. If you want to discuss MS' net profitablitly for a time period, then yes it has plenty of point.

 

[Feorax]

I suspect this doesn't quite give us the full picture, but $2 billion losses, plus skeptical board members, plus a desire to re-focus on B2B, as well as the PR disaster the console has been up until launch does not bode well for the future of Xbox.

 

[gofreak]

If it includes the One R&D, I'm almost surprised it's not more actually. Didn't they say the CPU alone cost 3 billions in R&D ?

I think that was the value of the cpu contract - i.e. over the lifetime of the system.

For reference, Cell R&D was $400m - and that was a far more involved, lengthy and custom process than anything Sony or MS did this gen with CPU design (i.e. next to nothing).

 

[Skeff]

Hmmm.

Rick Sherlund is the analyst who seems to be well sourced with regard to ValueAct, the activist investor that successfully lobbied for a seat on the board and was linked to Ballmer's exit.

He also seems to always offer commentary that has shared ValueAct's world view.

Now that ValueAct is inside MS and would have access to all kinds of information, I wonder if he got this information from one of his ValueAct friends - and/or if it's part of a campaign to publicly sully perception of the Xbox business among investors. He has previously said that ValueAct wants to get rid of the Xbox business and he has agreed with that idea.

Yea, it's interesting where he got the information from, It does seem likely that the person who gave him the data would have something to gain from doing so and you've put a very good point forward as to who would benefit from this.

 

[Miles Quaritch]

The article puts the time period as the total of the last few years, whatever that means.

Ah yes, you're right. I read the $2b a year from Android patents and thought the analyst was implying that they'd been covering $2.5b a year losses with the android money.

$2b over the course of a few years makes more sense. RROD, Kinect, building/buying studios, paying for timed exclusive,content, X1 R&D, etc.

 

[Seanspeed]

If it includes the One R&D, I'm almost surprised it's not more actually. Didn't they say the CPU alone cost 3 billions in R&D ? And if the kinect R&D is half the total, that means we're talking at the very least 6 billions (not counting the pad, architecture, tools,...)

I don't think many people actually much time to think about these things. They just read news - process in their brain 'good or bad' and then react to it. Stimulus -> response.

 

[RamzaIsCool]

Seems really a stretch. If you look like at it logically there is no way the Xbox division is taking those kind of losses. I have no idea about the R&D and extra costs of the XBO, but still can't see them losing that much on a yearly base.

 

[TheGreyHulk]

Yeah, I'm not buying this. All the investor data doesn't show this and this isn't the most trust worthy a article. There's no hard data or any source to back this up. All the hard data show the xbox brand making nice profits since 2008. Dunno what the analyst is trying to pull.

 

[antipode]

Hmmm.

Rick Sherlund is the analyst who seems to be well sourced with regard to ValueAct, the activist investor that successfully lobbied for a seat on the board and was linked to Ballmer's exit.

He also seems to always offer commentary that has shared ValueAct's world view.

Now that ValueAct is inside MS and would have access to all kinds of information, I wonder if he got this information from one of his ValueAct friends - and/or if it's part of a campaign to publicly sully perception of the Xbox business among investors. He has previously said that ValueAct wants to get rid of the Xbox business and he has agreed with that idea.

Rick Sherlund is even closer to Microsoft than that. He's close friends with Bill Gates and his family, dating back to when he worked at Goldman Sachs.

 

[soundscream]

It shouldn't be named "total" maybe but thats the net gain/loss for that time period. If you want to discuss MS' net profitablitly for a time period, then yes it has plenty of point.

But it's irrelevant for discussing the health of a business.

You own a company that makes 51 million in profit year one. Over the next five years you lose 10 million a year. Make yourself a chart like that one and you are 1million in the positive. No right thinking person would invest in that company because they had one great year.

 

[Aostia]

"Of that, $2 billion in losses are attributable to the Xbox platform."

if it is "per year" as for the Android revenues, I don't believe it.
If it is for this particular FY, could be, because of the R&D and promotional expenses of the new console

 

[cuyahoga]

Pretty sure this is nonsense, as posters have mentioned previously other initiatives such as Phone, Surface, whatever have been significant blunders financially. Just because he fits into a popular narrative doesn't mean I think he carries more weight than Patcher.

 

[Mindwipe]

Yeah, I'm not buying this. All the investor data doesn't show this and this isn't the most trust worthy a article. There's no hard data or any source to back this up. All the hard data show the xbox brand making nice profits since 2008. Dunno what the analyst is trying to pull.

Agreed (well, I know what the analyst in question is trying to pull...)

 

[rouken]

so that's why they're putting everything behind a paywall.

 

[lensoftruth]

Cost of Rrod, advertising, repairs and money hatting

 

[Jarmel]

Smells like bullshit.

 

[Acheteedo]

No. ED&D has always included Xbox.

Ah yes you're right, just checked.

So E&D post profits in 2007 after years of losses, looks like Microsoft and analysts put that down to Xbox sales. Now 6 years later the 360 is generating ludicrous amounts more revenue than in 2007 and we're to believe that this results in 2bn loss per year? Doesn't add up.

 

[cookie-monster]

Not surprising that they want to shut it down. The original vision of getting their software into the living room and living off the royalties has turned into a war of attrition between cable, satellite, Netflix, Amazon/LoveFilm, Apple, and dedicated media players. The video game console was the wrong angle of attack.

 

[iamshadowlark]

But it's irrelevant for discussing the health of a business.

You own a company that makes 51 million in profit year one. Over the next five years you lose 10 million a year. Make yourself a chart like that one and you are 1million in the positive. No right thinking person would invest in that company because they had one great year.

Which means what exactly? Its not valid in one scope of conversation, so that means is irrelevant in all scopes? Is that how your mind works or?

 

[Aquamarine]

"Of that, $2 billion in losses are attributable to the Xbox platform."

if it is "per year" as for the Android revenues, I don't believe it.
If it is for this particular FY, could be, because of the R&D and promotional expenses of the new console

That's the beauty about being vague with these proclamations.

It could very well be $2 billion operating loss because of Xbox One and localized to the past 1 or 2 years.

 

[Coldsun]

Wonder if some of the loss is to money hatting exclusivity?

 

[Skeff]

Wonder if some of the loss is to money hatting exclusivity?

Of course, EA didn't cut their sales in half for titanfall for free.

 

[SparkTR]

Not surprising that they want to shut it down. The original vision of getting their software into the living room and living off the royalties has turned into a war of attrition between cable, satellite, Netflix, Amazon/LoveFilm, Apple, and dedicated media players. The video game console was the wrong angle of attack.

They should have made a living room optimized version of Windows and let other companies do the heavy lifting back in 2003, something like what Google has done with Android. Microsoft's core is software, going into hardware was a mistake 10 years ago, and it's not doing so hot now.

 

[soundscream]

Which means what exactly? Its not valid in one scope of conversation, so that means is irrelevant in all scopes? Is that how your mind works or?

Once the year is over it's done losses profits it all goes away and you start a new fiscal year. Since the Xbox isn't it's own company it's part of the overall financial health of MS, and since it's been profititable over the past few years is all that matters, not how much it has lost because Microsoft as a whole was doing fine during that period.

 

[cookie-monster]

They should have made a living room optimized version of Windows and let other companies do the heavy lifting back in 2003.

I think they tried with XP Media Center, but it was really just another layer of crap on top of the already inappropriate XP base, far too heavy for a small, unobtrusive media system with the tech of the era. It seems like they haven't been in the right place with the software management side for many years, ref:

 

[mocoworm]

How?

Seriously how is it the Xbox division hemorrhaging money like that?

How much do you think buying exclusivity costs?

Just Titanfall with EA is probably in the hundreds of millions.

 

[Jedipottsy]

Timed exclusives, rrod, r+d, advertising, support, servers, slim profit margins on hardware. It's easy to see they are losing money. There is a reason top Microsoft board and shareholders wasn't too drop Xbox. if it was profitable they wouldn't want it gone. Microsoft always throw money at every problem.
Tbh I hope they spin off the Xbox division. Then Xbox would be about improving gaming, trying to make a better system that earns a profit rather than money hatting so that Sony doesn't.

 

[allan-bh]

That doesn't make any sense.

 

[szaromir]

http://www.neowin.net/images/uploaded/asfd3221125511352.jpg

So Xbox was profitable before Android gained any sort of traction. I'm calling BS on this news.

 

[iamshadowlark]

Ah yes you're right, just checked.

So E&D post profits in 2007 after years of losses, looks like Microsoft and analysts put that down to Xbox sales. Now 6 years later the 360 is generating ludicrous amounts more revenue than in 2007 and we're to believe that this results in 2bn loss per year? Doesn't add up.

There's plenty of reason to believe that this isn't necessarily the case. There's a reason alot of top execs don't exactly like the Xbox.

 

[Pound_lb003]

I don't have trouble believing this with the numbers they been shouting about.

They've invested (or accounted for) half of that loss in their budget for XB1 games alone. Forget console R&D, Manufacturing, Marketing among other things. How much was the NFL deal again?

 

[Triggerhappytel]

I wonder that too. The 360 has high sales, xbox live brings in millions in subscribers alone, decent first party sales, kinect was the biggest hardware launch in history, but it's down 2 billion every year? I don't get it.

Agreed; unless they're still selling at a large loss, I don't see how the Xbox 360 can be losing them money any more.

Yeah I dunno how that's possible. R&D for Xbone?

If they're currently making a loss on the Xbox division, this would be why. I remember reading in Edge, I think, that the Xbox 360 cost $2 billion in R&D, so the Xbone probably cost a similar amount if not a little more.

I think if anything, this loss is more likely to be on Windows Phone and Surface than the Xbox. And they really generate $2 billion annual profit just from Android patents?! Holy shit; no wonder they wanted to buy Nokia!

 

[Maximilian E.]

Come on gaf.

Of course its not per year basis.
Even though, MS can sustain a 2 billion dollar less profit a year and still make billions in profit, it is still not true that it is a 2 billion dollar loss/year.

 

[Clefargle]

Oh god this again.

This chart isn't how businesses operate, everything is based off each fiscal year.

Isn't each year labeled "FY" or am I missing something?

 

[cebri.one]

So people with no business knowledge are saying that an analist from Nomura, which is one of the most respected banking firms in the world... is lying. LoL

 

[Spinluck]

BRING GATES BACK!

No but really, that is bad.

 

[Dr_Swales]

How?

Seriously how is it the Xbox division hemorrhaging money like that?

Kinect

 

[iamshadowlark]

Once the year is over it's done losses profits it all goes away and you start a new fiscal year. Since the Xbox isn't it's own company it's part of the overall financial health of MS, and since it's been profititable over the past few years is all that matters, not how much it has lost because Microsoft as a whole was doing fine during that period.

Its one division, and probaly on the lower end of the spectrum at that. If there's one division that projects MS overall health, its Windows.

 

[Momentary]

Like I said before for the last 2 years... Expect Sony and Microsoft to have digital platforms next go around.

 

[cebri.one]

Its one division, and probaly on the lower end of the spectrum at that. If there's one division that projects MS overall health, its Windows.

Office is the real deal, that's MS money printer.

 

[Dr_Swales]

Its one division, and probaly on the lower end of the spectrum at that. If there's one division that projects MS overall health, its Windows.

I think Office is their money maker

 

[soundscream]

Its one division, and probaly on the lower end of the spectrum at that. If there's one division that projects MS overall health, its Windows.

Obviously, but the point I'm saying is that chart would never be used in evaluating the current health of any product, or company, because focusing on past losses is not done, if multiple years of profitability are achieved.

 

[Monty Mole]

There's plenty of reason to believe that this isn't necessarily the case. There's a reason alot of top execs don't exactly like the Xbox.

They just don't like games. It's like Sir Clive Sinclair all over again