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Microsoft Loses $177m on Xbox in Three Months

CmdrTaco posted more than 11 years ago | from the its-not-like-they-can't-afford-it dept.

Microsoft 809

Albanach writes "The BBC News are reporting in this story that Microsoft's Home Entertainment Division has filed a submission to the Securities and Exchange Commission reporting a loss of $177 million for the three months to 30 September 2002. The loss comes on revenues of $505m for the division that manufactures the Xbox games console. Microsoft are said to be prepared to spend $2 billion funding Xbox live over the next five years, suggesting it will be some time before the home entertainment division break into the black."

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Only $177m? Who cares? (5, Funny)

turambar386 (254373) | more than 11 years ago | (#4677567)

That's probably less than billg's annual pizza budget.

Re:Only $177m? Who cares? (5, Insightful)

xirus (584691) | more than 11 years ago | (#4677759)

I'm surprised that's even legal?!
Even if that's not a lot of money for MS, in Belgium it's forbidden to sell products for less money than you needed to produce it...
It's unfair competition.
If they put Playstation and Nintendo out of business because they don't have the money to use this trick, some American judge should finally see what MS is doing and give them a REAL punishment...

this is similar (-1)

Anonymous Coward | more than 11 years ago | (#4677568)

To the 100 million sperm I just "lost" in your mom's "SexBox."

Good. (-1, Flamebait)

Anonymous Coward | more than 11 years ago | (#4677569)

It's a piece of crap anyway.

Bill Gates gets angry, slashes Ballmer's buttocks! (0, Offtopic)

Gizzmonic (412910) | more than 11 years ago | (#4677571)

Story here [local6.com] !

Re:Bill Gates gets angry, slashes Ballmer's buttoc (1)

mary_will_grow (466638) | more than 11 years ago | (#4677717)

Hey... I read that link. Did you notice he was being charged with "Terroristic threats" ?
What the heck is that?

Dont mod me down, he started it!! I'm on HIS topic, his off-topic. :)

Accounting Tactic (4, Interesting)

sdjunky (586961) | more than 11 years ago | (#4677572)

Of course... This could be an accounting tactic to allow them taxbreaks on their losses.

Re:Accounting Tactic (2)

GoofyBoy (44399) | more than 11 years ago | (#4677604)


I assume you mean "taxbreaks on their profits."

Re:Accounting Tactic (2)

tmark (230091) | more than 11 years ago | (#4677617)

My guess would be that it would be bad strategy to use accounting tactics to cut their earnnigs here. The video game market is defined by market and mind share. To the extent that MS' video game division looks like it's bleeding money, it augers poorly - in Joe Public's mind - as to the XBox's future.

Re:Accounting Tactic (-1, Offtopic)

Anonymous Coward | more than 11 years ago | (#4677632)

This could be an accounting tactic to allow them taxbreaks on their losses.

WOW. You must be an accounting major.

Re:Accounting Tactic (0)

Anonymous Coward | more than 11 years ago | (#4677663)

There's definitely something strange with their accounting. How can they claim to have made such a large company-wide profit when X-box is dragging them down and large corporations are refusing en masse to "upgrade" to XP. Despite having their knuckles lightly rapped for cookie jar accounting in the past it would appear that they are still playing the same game.

Re:Accounting Tactic (3, Insightful)

jasonditz (597385) | more than 11 years ago | (#4677758)

Two words: Microsoft Office

Companies may be bitching and moaning about the cost of the new licensing system for it, but not many of them are actually switching to Word Perfect or OpenOffice/StarOffice.

Office productivity suite dominance is still MSFTs cash cow, and until major companies are willing to jump ship they're going to be pretty profitable.

Is this like a movie company's "loss" (5, Interesting)

The Evil Couch (621105) | more than 11 years ago | (#4677574)

or is there something actually legitimate about this? Granted there's stiff competition in the home console market, but MS was throwing consoles at people in hopes that they'd recoup their losses with the sale of games. to hear that they're losing money with game sales seems odd to me.

Re:Is this like a movie company's "loss" (3, Interesting)

tshak (173364) | more than 11 years ago | (#4677741)

to hear that they're losing money with game sales seems odd to me.


Well, that's because they aren't losing money on game sales. The problem is that the game sales isn't enough to recoup the loss that the console itself generates. Also, none of this is strange because this was predicted by MS before it launched it's console. Of course, there's strong hopes that Christmas game and accessory sales will help get the XBox division out of the red.

Really... (0)

Anonymous Coward | more than 11 years ago | (#4677578)

Yay! Xbox rules!!!

Big Deal (1, Funny)

Anonymous Coward | more than 11 years ago | (#4677579)

$177 million, that's what, about four seconds worth of profits on Office and Windows. Why's this news?

Sigh.... (1)

JoeLinux (20366) | more than 11 years ago | (#4677585)

If *I* were MS, I'd take almost a total loss on the consoles...make those things appear everywhere. Then, after like 3 years, I'd start charging for the consoles. Kinda like the IE approach.

It'd certainly make sure that everyone has them.

JoeLinux

Re:Sigh.... (2, Interesting)

melonman (608440) | more than 11 years ago | (#4677637)

Which is exactly what France Télécom did to introduce the Minitel. They gave away the terminals and charged for the services. The Internet in France still hasn't managed to do better in terms of market penetration.

Re:Sigh.... (2)

GoofyBoy (44399) | more than 11 years ago | (#4677641)


"Kinda like the IE approach."

When did they start charging for IE?

When they started charging for my soul!!!!

Re:Sigh.... (2, Interesting)

Bohnanza (523456) | more than 11 years ago | (#4677735)

When did they start charging for IE?

That's right - IE is included "Free" with your $299 licence for Windows XP.

Re:Sigh.... (0)

Anonymous Coward | more than 11 years ago | (#4677664)

Yeah! I'm sick of all those checks I have to write to Microsoft in order to use IE!

Holy Cow! (0)

el_mex (175423) | more than 11 years ago | (#4677586)

It is astounding how much economic muscle MS has...

What else can I say but ... (1)

MCMLXXVI (601095) | more than 11 years ago | (#4677587)

WOO HOO!! Just think how much it would be if Linux on it really took off.

Re:What else can I say but ... (0)

Anonymous Coward | more than 11 years ago | (#4677696)

It would be $177,000,000.50

Like that hurts them.. (3, Insightful)

jamesdood (468240) | more than 11 years ago | (#4677589)

They have said from the get go that they didn't care about losing money to dominate the market.. And they have taken some market share from Nintendo and a small amount from Sony.. But that number seems pretty small for a company with like 20 billion in cash..

"Lost" (3, Insightful)

Xerithane (13482) | more than 11 years ago | (#4677591)

We really need to redefine business loss. Microsoft didn't lose money. They knew ahead of time that they were going to be in the red on the Xbox. Not that I'm saying Microsoft is bad for following this practice, it's common practice in many markets.

I just don't think that purposefully loses should count like a standard lost. They know that this $177m they drop now, it's an expense. Not a loss. They will get it back, they are just taking credit out on their budget and getting the government to pay the interest.

Please go away. (2, Interesting)

DAldredge (2353) | more than 11 years ago | (#4677716)

What are you a former AA employee? Did you work on the Enron account?

If expenses > revenue = LOSS
If expenses < revenue = PROFIT

It is that simple. This playing stupid accounting tricks is one of the reason the stockmarket went down so much. The investorers could not trust the numbers the companies where giving out.

Re:Please go away. (2)

dildatron (611498) | more than 11 years ago | (#4677748)

I thought profit was step 3?

Re:"Lost" (4, Insightful)

Ieshan (409693) | more than 11 years ago | (#4677723)

Not to mention redefine "Monopoly".

It's absurd that a company can consider a 200 million dollar loss "acceptable" and continue operating (under the same management) with plans for expansion.

This reeks of the ability to undercut the console market.

Doesn't take a monopoly to invest lots of money (2)

Plasmic (26063) | more than 11 years ago | (#4677789)

Are you joking? Many companies invest hundreds of million dollars to build a product, take it to market, and scale it. Look at projects like Sprint's Broadband Wireless Group and their national ISP build-out to companies laying dark fiber across the country and around the world -- huge capital investment before they see any ROI.

Re:"Lost" (2)

GoofyBoy (44399) | more than 11 years ago | (#4677746)

"They know that this $177m they drop now, it's an expense. Not a loss. "

And eventually expenses are considered as a loss.

Re:"Lost" (5, Insightful)

manyoso (260664) | more than 11 years ago | (#4677757)

" ... redefine business loss. ... it's an expense. Not a loss. They will get it back ..."

No, they need to report this as a loss. Look, the Xbox division is a gamble by the larger company to enter into the home entertainment market. As with any gamble it contains a significant amount of risk. This loss quanitifies exactly how large a risk and let's the shareholders and prospective investors have some insight into how the gamble is going. Perhaps, this whole experiment will bomb ... who knows what can happen in five years ... So, you see, it is in the best interest of everyone for losses like this to continue to be reported for exactly what they are: immediate losses on a long term gamble with no guarantee on seeing the money again.

Re:"Lost" (2)

kevlar (13509) | more than 11 years ago | (#4677768)

Redefining a loss as a one time business expense is what companies like Enron, Lucent et al were doing to cover their debt. We shouldn't change a thing.

Ooze on over to infest the next marketplace (5, Interesting)

Rader (40041) | more than 11 years ago | (#4677592)

This is of course, how Microsoft takes over a marketplace. They are eternally funded, and can oulast anyone.

They'll chip away at Sony and Nintendo's profits until even these successful companies can't make a profit.

I wonder why they're trying to pull out of the DVR market. They say that there's no money in it. Maybe. I thinks that maybe it conflicts with their DRM agenda.

Re:Ooze on over to infest the next marketplace (0)

Anonymous Coward | more than 11 years ago | (#4677692)

Easier said than done. Video game consoles aren't commodity hardware, they depend on a lot of other factors, like available software. Microsoft may well be able to eat into Sony's market, since both depend so heavily on third parties, but I doubt they've got the money they'd need to take out Nintendo.

Its not like the big N is cash poor either, a quick look at some Japanese financial sites reveals a stockpile of billions of dollars themselves, and an incredibly profitable handheld market that no one has been able to touch. Good selling first party software is the biggest money maker of all, and that's why even marginal selling consoles like the N64 managed to turn a profit.

Microsoft isn't in business to lose money. They might be willing to throw a few billion dollars at this project, but only so long as it looks like they've got a chance of taking over the market and making it back in the future. MSFT has $40 billion in cash in the bank, but I doubt they're willing to blow it all on the console market, even if it meant becoming the market leader.

Re:Ooze on over to infest the next marketplace (2, Insightful)

peterpi (585134) | more than 11 years ago | (#4677713)

(Disclaimer; yeah, check my profile, I'm biased!)

Yeah, I bet you must feel really sorry for poor little Sony. Big bad Microsoft has soooo much more money then Sony. Sony are just the little guy trying to make an honest buck.

Jeez, open your eyes people, Sony has much more of a monopoly over Joe Public's possesions than MS do. Sony can piss money away on a loss leader just as well as Microsoft can.

Re:Ooze on over to infest the next marketplace (2)

dildatron (611498) | more than 11 years ago | (#4677776)

You are correct, Sony is not a poor little guy - they do enough things to piss me off. However, does Sony have sole control over a single market in anything?

Microsoft's management just seems to know when to "Bet the farm" and when not o, and so far they have been right.

Register has the numbers, too (2)

Rupert (28001) | more than 11 years ago | (#4677602)

Here [theregister.co.uk] .

As El Reg [theregister.co.uk] points out: "it's also clear that Microsoft is the dominant force in the PC market, and only the PC market. It can afford to shoulder big losses in the areas where it wishes to be the dominant force for a very long time. Which is fortunate, because in several cases these look suspiciously like ventures normal businesses would be forced to put a bullet into. Now."

Isn't this the exact definition of (5, Insightful)

beldraen (94534) | more than 11 years ago | (#4677642)

an abusive monopoly. No other company can just throw this kind of money away in this market. The only reason why people are not saying something is because Sony is actually beating Microsoft's stupidity.

Re:Isn't this the exact definition of (2)

Glonk (103787) | more than 11 years ago | (#4677777)

an abusive monopoly. No other company can just throw this kind of money away in this market. The only reason why people are not saying something is because Sony is actually beating Microsoft's stupidity.


It's incredibly common in the console industry to sell the hardware below cost and make up for it eventually in game sales and when the hardware drops in production cost.

The PS2 started out being sold at a big-ish loss also.

Reminds me of a line form Citizen Kane (5, Funny)

foistboinder (99286) | more than 11 years ago | (#4677603)

You're right, I did lose a million dollars last year. I expect to lose a million dollars this year. I expect to lose a million dollars *next* year. You know, Mr. Thatcher, at the rate of a million dollars a year, I'll have to close this place in... 60 years.
-- Charles Foster Kane

Re:Reminds me of a line form Citizen Kane (0)

aflat362 (601039) | more than 11 years ago | (#4677672)

Right, But Kane's passion was to be a newspaper man. I kind of doubt that this is Ballmer's / Gates's passion. They just want to expand into a new market and try to make more $. If XBox doesn't turn a profit soon, they'll drop it. Which is a shame to us video gamers because competition amoung video game producers = better games.

Selling one's soul (1, Offtopic)

skroz (7870) | more than 11 years ago | (#4677605)

I've done it... I've sold my soul to the Beast and picked up an x-box live kit. I felt bad enough supporting MS, but when I had to give them a CREDIT CARD NUMBER, I knew I was screwed. But like all those that have sold their souls before me for riches, wealth, power, etc... I'm having one hell of a time. Mmmm... mech assault.

I'll probably be able to pick my soul back up on e-bay soon anyway, but eh.

Re:Selling one's soul (2)

Xerithane (13482) | more than 11 years ago | (#4677634)

Gabe [penny-arcade.com] still owns you. Sorry buddy.

doesn't mean anything (1)

mistermoonlight (80842) | more than 11 years ago | (#4677607)

MS has always had hard times making inroads with hardware, I can't really speak for their loss in MSN.


As long as there is profit in the Office and Windows end, other divisions can languish for as long as they want. Or until they embrace and extend.


The waiting game continues, let's see who runs out of money faster (yeah, right)...

500lbs Gorilla ... (1)

polin8 (170866) | more than 11 years ago | (#4677608)

when you have $40b in the bank I guess 2 doesn't sound so bad. Another sad aspect of the monopoly is that MS is in a position to brute force its way into other markets like this.

Re:500lbs Gorilla ... (5, Funny)

Rader (40041) | more than 11 years ago | (#4677658)

Yea, I'm waiting for them to go into fast food. Give McDonald's a run for their money.

Just think, a free 2-day Serial Key to MS-Office with every BillyBurger sold!

Not too sad (1)

ELCarlsson (570500) | more than 11 years ago | (#4677610)

I'm not too sad to hear about this. Microsoft bought Rare and the rights to Perfect Dark Zero. That's a big reason I bought my GC. So when/if the X-box goes away, maybe Rare will start putting out quality shooters on the GC again.

Rare may go to WinXP, not GCN (1)

yerricde (125198) | more than 11 years ago | (#4677673)

So when/if the X-box goes away, maybe Rare will start putting out quality shooters on the GC again.

What makes you think Rare will crawl back to Nintendo? If the Xbox fails, Microsoft could just make Rare develop games for Windows XP.

Is The XBOX Fun for Other People? (0)

Anonymous Coward | more than 11 years ago | (#4677611)

Why is no one playing it? I got my first blowjob while playing Halo, so I guess I don't have a rational view.

Re:Is The XBOX Fun for Other People? (1)

AyeRoxor! (471669) | more than 11 years ago | (#4677671)

Wow.

My mom would just tell me to stop playing.

XBox Linux (1)

AlgUSF (238240) | more than 11 years ago | (#4677612)

When XBox linux finally gets out, and stable. I would like to buy an XBox just to fsck it to microsoft, and use the XBox as an MP3 player for my home stereo. Too bad I already have a really nice Sony DVD, otherwise I would use it for that too!

How is this news? (3, Insightful)

bay43270 (267213) | more than 11 years ago | (#4677614)

Who here thinks games consoles are profitable?!? The money is made from the games.

Re:How is this news? (3, Interesting)

FatherOfONe (515801) | more than 11 years ago | (#4677744)

Wow thats kinda the attitude that Sega took. Both Sony and Nintendo MAKE money on their consoles.

But, can they reign in the cost? (1)

beldraen (94534) | more than 11 years ago | (#4677615)

I'm not at all suprised that they are willing to throw all this money. The real question remains, however. How in the world are they going to be able to get the cost of the Xbox down such that they can ever compete with Sony? I think I've heard that Sony is actually making a sliver of a profit on the PS2 per box. I see that as the fundamental flaw in Microsoft's attempt.

I'm not surprised (2)

Evil Adrian (253301) | more than 11 years ago | (#4677620)

I'm not surprised; they lose money selling the systems, and since they didn't make a huge splash when it debuted, they're not catching up with the software sales. I mean, hey, the library is pitifully small compared to the Playstation 2 (it's about the same as Gamecube, but the Gamecube is cheaper and the games just look more fun.)

I played an Xbox a couple times... I don't know. I just don't have the same fun that I do on a PS2 or Gamecube. Xbox has all this horsepower and no track to race it on.

I knew I should've got another! (5, Funny)

teamhasnoi (554944) | more than 11 years ago | (#4677621)

I was trying for 200 mill, by pouring Pepsi in the boxes at Walmart. Now I'll never get my 'Corporate Killer Anarchist' badge.

Billy Henderson always wins, 'cause his dad's the scout leader.

Playing for the long term (1)

Saddam Hussein (625956) | more than 11 years ago | (#4677622)

It seems that this will only be a short-term hit. How long will it be before certain types of game are only available on the X-Box? Already, you can't get Colin McRae 3 on PC - you have to go for X-Box or PlayStation.
Surely this the way Microsoft want things to go... gamers will move away from PC if they want the latest stuff.

Business Plan... (1, Funny)

Cap'n Canuck (622106) | more than 11 years ago | (#4677623)

1) Create Gaming platform
2) ???
3) Losses
4) ???
5) Profit!

Re:Business Plan... (1)

AlgUSF (238240) | more than 11 years ago | (#4677701)

1) Create Gaming platform
2) ???
3) Losses
4) ???
5) Profit!

How about:
1) Create Gaming Platform
2) Sell it for less than it costs to make it
3) Losses
4) Sit on our 40bln, and eat the losses till Sony runs out of money.
5) Profit when we have 95% of the market

$177 million. Are you doing your part? (0)

Anonymous Coward | more than 11 years ago | (#4677627)

Buy an Xbox. Hurt MIcrosoft. Buy three. Destroy Them.

I am Hannible Lecter! (0)

Anonymous Coward | more than 11 years ago | (#4677689)

I killed a corp just to watch it die [rosensys.com] .

There's a serial killer on the loose! (0)

Anonymous Coward | more than 11 years ago | (#4677737)

All stupid companies [ftc.gov] should be killed [ftc.gov] !

And... (1)

slackerfilm (520597) | more than 11 years ago | (#4677630)

M$ will just sell it to a non-assuming company that will use Linux to clean it up and make a profit.
Then blame the Open Source community for stealing all the games anyway

IANAL (-1, Offtopic)

Anonymous Coward | more than 11 years ago | (#4677631)

But.....I liek ANAL!!!

Pee with the Forrest Newmans!

Standard Oil (5, Interesting)

Bonker (243350) | more than 11 years ago | (#4677638)

One of the tactics Standard Oil would employ was to sell oil and petroleum products well below cost, absorbing the loss for the sake of driving competitors to the point of ruin, and then buying their ruined competitors' assets.

Sony is a strong, powerful company. Nintendo is slightly less so. I think, however, that if you were to do a direct comparison, Microsoft has the ability to lose more money and stay solvent for longer than either Sony or Nintendo.

This tactic was found to be in violation of the Sherman act when applied to Standard oil. It's amazing to me that MS is able to get away with the same thing without its competitors screaming more loudly at the US government.

Re:Standard Oil (1)

karlowfwb (542982) | more than 11 years ago | (#4677736)

There is a big difference here. Standard oil was using their monopolistic powers to drive competitors out of business by charging below what they could possibly produce at.

Microsoft is merely taking a loss to produce a product at an <i>equal</i> rate. The only way they would be driving competitors out of business is if their product is truly superior.

good (0, Flamebait)

Ryokos_boytoy (259245) | more than 11 years ago | (#4677653)

haha

Guess the console crowd are a little smarter than the desktop computer crowd in choosing which is best platform to use. With titles like SOCOM, GTA3 and GTA3-VC, ps2 will be king a little while longer. M$ probably never felt comfortable making something that couldn't be hacked by a 12 yr old or would BSOD at the drop of a hat.

M$, I wouldn't piss on them if they were on fire

Re:good (0)

Anonymous Coward | more than 11 years ago | (#4677769)

hacked by a 12 year old? oh.. so it was easy for you to sniff the rc4 key?

The reason... (-1, Troll)

GoatPigSheep (525460) | more than 11 years ago | (#4677657)

The main reason the x-box is losing money is quite simple: because it uses the pc architecture.

Other systems such as the playstation2 or the gamecube have been sucessful because they have a large amount of propreitary games and use propreuitary hardware. For instance you can't buy a gamecube or playstation2 to and run linux on it, but on the x-box you can.

Apple uses propreitary hardware and software, and they have had consistantly good sales for the past few years. By using the PowerPC chip instead of the standard x86 architecture for computers apple has created a propreitary market which is very profitable. EG. If you want to run Itunes you have to buy a 3,000$ computer. Microsoft hasn't latched on to this and by using standard PC hardware anyone can use their system any way they want.

Since microsoft loses 100$ on each xbox sale, a person would have to buy at least 2 games for them to make the money back. If a user simply buys an x-box to run linux on it, which many have done, then MS loses 100$. The simple answer is: Linux has killed the X-box sales. This is good. Lets just hope Microsoft doesn't begin to take legal action on X-box hackers.

Re:The reason... (2, Funny)

rampant mac (561036) | more than 11 years ago | (#4677726)

"If you want to run Itunes you have to buy a 3,000$ computer."

That's odd...

The $300 iMac I bought off eBay plays iTunes. :)

Re:The reason... (0)

Anonymous Coward | more than 11 years ago | (#4677740)

get a clue or stop trolling.
Sony sells linux for PS2, that debunks your whole thesis. This is well known.

lies (0)

Anonymous Coward | more than 11 years ago | (#4677779)

try and back up your false claims with a link...

YOU CAN'T

Re:The reason... (2)

Tuzanor (125152) | more than 11 years ago | (#4677772)

Do you really think enough XBoxes were sold for linux hackers that it would actually undercut Microsoft that much? Most of their losses are probably from MOD chips (once you have those installed you don't have to pay for games and Microsoft loses out on licensing) and the expensive R&D costs of starting in this market from scratch. Nintendo is really the only company immune (right now) as they use completely proprietary discs.

Re:The reason... (0)

Anonymous Coward | more than 11 years ago | (#4677778)

"For instance you can't buy a gamecube or playstation2 to and run linux on it"

Hmmmm. The main reason this post makes no sense is quite simple: wildly innacurate statements like the above throughout*.

*written from a PS2 running Linux

Re:The reason... (1)

Schik (576085) | more than 11 years ago | (#4677794)

I don't want to downplay the Linux effect, but I'm sure people using mod chips or buying an Xbox as a DVD player have made more of an impact.

This is why MS does so well (2)

91degrees (207121) | more than 11 years ago | (#4677660)

Ignore short term losses. Few companies do, by MS can afford to. The company as a whole is making a profit, so the shareholders will allow it to carry on.

In the long run, the plan is to eliminate console competition, just as Sony tried to do beforehand. They'll give X-boxes away if they have to.

But this is really sad! (1)

melonman (608440) | more than 11 years ago | (#4677666)

I always hate the bit in the movies when the bad guy gets what's coming to him. Why don't we organise a whip-round to show Ole Bill that there are no hard feelings, and maybe he wll be so touched that he will go open source and let us run VB?

Microsoft Good at Business? (2, Interesting)

shiflett (151538) | more than 11 years ago | (#4677667)

You know, I always hear the argument that, although Microsoft's products are arguably poor, their superior business practices (whether legal or otherwise) keep them financially on top.

One interesting thing in the article is that several of their divisions (mobile divices, xbox, msn) are consistently losing money.

So, is Microsoft as a company really good at business strategies? It seems to me that the "$3.5 billion profits from its operating system and software divisions in the quarter" are what keeps it afloat. I doubt any other business could fail quite as much as Microsoft and still survive.

Xbox free coverage on Slashdot.... (1)

wobedraggled (549225) | more than 11 years ago | (#4677677)

I know, I know, we all hate Microsoft yadda yadda yadaa. Then why everytime time, there is something related to the xbox we get a submission on it, last time I checked this was not a video game site. Hell Capcom just announced 5 killer apps for the Gamecube, but I don't see that on here. Xbox IMHO is a cheap ass pc, I got one free with my dsl sign up, and I gave it away for a Nextel, something I actually will use. Microsoft is just trying to take another market, one that I hope they do not.

And overall... (2, Insightful)

HaloZero (610207) | more than 11 years ago | (#4677678)

XBox: Down.
Windows OS sales: Up.
Office Package: Up.
Pre-packaged units with retail machines: Up.
MSN Subscriptions: Up.
Mouse sales: Up.

Boo hoo hoo? Psh.

Ridiculous (3, Insightful)

matusa (132837) | more than 11 years ago | (#4677681)

It always bothers me when we (the linux community, technically the underdog) make some snide reference to the failures of our competitor, especially when in the big picture the direct issue is rather silly.

  • Consider:
  • We _know_ that they have lots of cash. Granted a loss is not cool, and they will try to remedy it, also consider
  • How widely popular the xbox is. Even people that planned on hating it drool over it
  • The upheaval in the console market

This is similar to how we report linux and windows vulnerabilities. When a windows vuln is mentioned, we bitch about the OS and its quality etc. etc.; when a linux vuln is mentioned, we downplay the potential risks, and then compliment the speed of patch/update/fix release.

Don't get me wrong--I love linux, use nothing else, and haven't for many years; this ridiculous attitude of most zealots is annoying, however.

Moolah (1)

mary_will_grow (466638) | more than 11 years ago | (#4677687)

Proving you can put anything in homes across america, assuming you have $2 billion to spend on it.
I dont want to start a fight here, I admit I've never even used an X-Box, but I think I could have freezers installed in every Igloo if I had $2 billion to market them.

Was this part of the plan? (2)

standards (461431) | more than 11 years ago | (#4677695)

OK, I expected kind of big losses foir the XBox - new product, tough marketplace, lots of competition... and I'm not sure how much Sony and Nintendo are losing on their consoles.

But I'd think that Microsoft had a huge advantage - after all, they own MS-Windows and can leverage that technology within the internals of the X-Box. Furthermore, the X-Box should be a great game box, because there are so many software vendors that already produce software for Windows.

So where did Microsoft go wrong? Is the X-Box just grossly mismanaged, with a seemingly unlimited budget? Or is this something that is "expected", and therefore was part of the grand plan, and therefore will ultimately result in the glowing profits and new markets for Microsoft?

The only other thing I know is that I bought a PS2. I thought of going with the X-Box - heck, it is a sweet game console. But I stuck it out with the PS2 because of game availability - after all, the PS2 has already been proven. Not sure if I made the right choice, but I don't think I made a bad choice.

Opportunity (1)

afreniere (611999) | more than 11 years ago | (#4677702)

So: Microsoft is subsidising the XBox to gain market share. Buy one, mod it [sourceforge.net] , and run it as a cheap linux box. Kills more than a couple birds with one stone.

Oh, did I just violate the DMCA? Oops... -Nafry.

XBOX #3 in this console iteration (3, Insightful)

smd4985 (203677) | more than 11 years ago | (#4677709)

i'm a (not so proud ;) ) xbox owner, and while i'm excited about various applications (sega's games, xbox live), the xbox is already #3 in this console war and will stay that way. the main reason is their DISAPPOINTING presence in japan (which is virtually non-existent). you simply can't win a console war without support from nihongo developers and users.

that said, i don't this MS really cares. for a first iteration console they've done well, and you can kind of think of xbox as a testbed for future MS consoles (especially xbox live). also, they only have some 50 billion left in the bank (oh, the convenience a desktop OS provides!).

my bet is that xbox2 will come out BEFORE ps3 simply because first-mover momentum in the industry has become more important. the ps2 is hard to develop for, but the installed base is NUTS so developers flock to the ps2. MS realizes this so i wouldn't be surprised xbox2 comes out by 2004ish.

Market Share (2)

Omkar (618823) | more than 11 years ago | (#4677711)

MS is trying to gain market share by selling hardware below cost. The trouble is that that strategy won't work against a dominant force like Sony. So while MS takes a $177mill loss on the XBox, but touts its US market share, Nintendo is laughing all the way to the bank with strong software sales for the GCN and dominance of the handheld market with the GBA (even MS produces games for it).

How to make the Xbox a success (2, Troll)

b.foster (543648) | more than 11 years ago | (#4677718)

As an avid gamer and self-proclaimed "gadget freak," I can tell you that Microsoft has spent the last two years shooting itself in the foot with regard to their Xbox strategy. I have seen Xbox Live, and to be frank, the extra voice features and other refinements are nothing to write home about. I have a few suggestions as to how Microsoft can turn the trend around and avoid a massive failure like Microsoft Bob or UltimateTV:
  • Keep it open, stupid. The barrier to entry is very high for Xbox development - the very opposite of the strategy that have made Linux and Windows very successful amongst amateur programmers such as the founder of this site. "Developer" Xboxes which will run all signed and unsigned software should be plentiful and cheap - not subsidized, but rather sold slightly above cost. This has the benefit of making Microsoft's economy of scale pay off for thousands of potential game developers (read: licensees) as well as hardware hackers who are looking for a cheap PC.
  • Buck the content industry. Manufacturing Xboxes that defeat region encoding and macrovision with small modifications would cause sales to skyrocket. Likewise, since Sony has their own gaming arm and no other RIAA/MPAA company is involved in game production, the support of the content industry is meaningless.
  • Focus on getting better games. Why does nobody develop good games for the Xbox? For starters, Microsoft has failed to push Xboxes in the game capital of the world, Japan. Microsoft needs to revamp their entire strategy with regard to this country, starting with the release of hentai games and ending with the successful ports of many PS2 games over to the Xbox platform. The Xbox will go nowhere if there is no good software to run on it.
  • Keep manufacturing costs down. Microsoft needs to switch to AMD or Transmeta chips, which pack more power for the buck, run cooler, and are 100% compatible with their existing software base. Also, this will allow them to use cheaper graphics coprocessors by using a cheaper, more powerful main CPU.
These are just a start, but if Microsoft takes these suggestions, their Xbox division will be well on its way to profitability.

Xbox 2 (5, Interesting)

Kirby-meister (574952) | more than 11 years ago | (#4677727)

The common theory is that by 2005, the Xbox division will be profitable. Why?

1) They are said to be abandoning dependency on third party chip makers (aka Intel and nVidia). This means they will probably buy a chip company.

2) They will want their console to be the latest and greatest, so they will probably release it late but with extremely powerful and expensive hardware. If they learned their lesson this time they will release it concurrently with their main competitor, but I don't think they have. The hardware will probably be a derivative of x86, but they could abandon that for a custom chipset (although that's doubtful - they might pull a PS2 and allow backwards compatibility with Xbox 1 games). They will probably sell at a loss in the beginning (as some console companies do).

3) Who knows how much PR money they will spill into the Xbox2's budget.

I'd say profits at 2005 would be during that small window of time, those few months, between when Xbox 1 + Xbox Live! + PR Money for Xbox1 + nVidia/Intel-tax become profitable, and when Xbox 2 will be unleashed (assuming the usual 5 year cycle).

Actuallly, $177M isn't that bad (4, Insightful)

joeflies (529536) | more than 11 years ago | (#4677729)

Microsoft already said they were spending $500M in marketing ALONE for xbox in the first year. Losing $177M in 3 months isn't all that bad, because it means that out of all the exhorbinant money they spent, they still only lost $177M which isn't an insane number given the insanity of spending $500M in marketing (a sunk money used for demand generation).

I expect that they will scale back their marketing a LOT as soon as they proliferate a base number of boxes, which was their entire objective anyways.

Besides, Microsoft was already planning for first year loses [com.com] so it isn't like that this wasn't forseen.

Re:Actuallly, $177M isn't that bad (3, Insightful)

Yankovic (97540) | more than 11 years ago | (#4677784)

Mod this parent up... even simple math says that without the PR says they're more than $300 M in the black! That's pretty phenomenal for a box that's been out for just over 1 year (as of today!). This is actually amazingly good, not bad.

You mean until they break the competition.. (2)

nurb432 (527695) | more than 11 years ago | (#4677734)

"Microsoft are said to be prepared to spend $2 billion funding Xbox live over the next five years, suggesting it will be some time before the home entertainment division break into the black."

Must be nice to flood a market, and push out all the existing competition, thats the advantage of a monopoly that has no bonuds, branching out into other markets, to do the same practices that worked so well before..

How Sad (4, Insightful)

VividU (175339) | more than 11 years ago | (#4677743)

How sad that on the day Microsoft launches [washingtonpost.com] Xbox Live, we have a story about how much money MS is losing on the Xbox.

The desire among the overzelous Linuxites for the Xbox to fail is palpatable at Slashdot. Just look all the posts advising people to buy a Xbox but not buy any games. Just so MS can lose money. Its pathetic and sad.

Go ahead and buy a Xbox, waste your time and install Linux on it. But I dare you not to play Halo on it (Game of the Year and a work of art).

I dare you not to plug in your Cat-5 and fire up Unreal Championship (released Today!). Oh! and when Halo2 is released later late 2003, please do'nt go and buy it. Leave it to the serious gamers.

The Xbox is a great piece of tech. Real gamers know it. Thats why in the states its outselling the GameCube (read linked article above).

Yes, we lost 1 million this year (0)

Anonymous Coward | more than 11 years ago | (#4677749)

And we will lose 1 million next year, and the year after that.

We will go out of business in 1000 years.

So there!

Losses are larger than 2 Billion over 5 years (2)

bryanbrunton (262081) | more than 11 years ago | (#4677755)

The 2 billion over 5 years was the initial projected loss. I imagine this was the loss figure that was presented to Gates and Ballmer so that the project could get an approval.

They have since upped the loss projects to 2 billion over the first two years of the project. See:

http://www.msnbc.com/news/772001.asp?0si=-

The XBox is classic monopoly leverage at work. Use the revenue from the desktop monopoly to dump product on an emerging market and attempt to control it.

I suggest boycotting Microsoft and purchasing a GameCube or PS2.

IANAASCM - I am not an accountant, so correct me. (2)

teamhasnoi (554944) | more than 11 years ago | (#4677766)

buuuuuut...can't they write that loss off? I read somewhere that Bill and his Co. don't pay much for taxes (say in proportion to a /. reader), doesn't this mean that the Gov will refund the lost $$$? So in other words, we are still paying MS for X-Boxen?

If I am wrong, please tell me. I have an oogy feeling about it.

Can't buy me love (1)

Tseran (625777) | more than 11 years ago | (#4677770)

The problem is that Microsoft tried to buy their way into the console market with money, and not quality. They tried to throw money at the problem in the hopes that it would yield a huge market share, thinking their 'good name' would get them in with gamers. Hate to tell Microsoft, but Blue Screens are the LAST thing a gamer wants to see, and seems like every other time Bill has shown us a new OS, its has done that for him. Its nice to see that the gamer market isn't as blind as MS hoped they were. Give me a PS2 and Gamecube anyday.

News? (1)

jimmyCarter (56088) | more than 11 years ago | (#4677786)

Is this really news? It's my understanding that all console makers lose money on the consoles, but make the cash back up via the games. With this type of revenue model, it takes a little time. It's not quite interesting to look at the months near a platform launch. Of course, I could be wrong..

Pass the Cheetos (1)

mugnyte (203225) | more than 11 years ago | (#4677790)


Now anybody here could scoff at the meager relative amount, or the fact that MS doesn't get a clue about gaming, or whatnot. I take this for what it is: Microsoft's Xbox is not going to ever be economically profitable.

Sure, they may capture the market, but consoling gaming is way too competative, and fast moving, to get swept by any single machine, IMHO. I believe this is simply news because MS is finding it tough to crack the market.

But let's combine the stories here, folks. We've seen the "all eyes on MS" comments from those involved in the anti-trust litigation. We have the new licensing scheme brewing in the pot, with poor suckers tasting the spoon now and then. Plus, we have the .NET, Palladium and LongHorn-now-LongAway initiatives.

I have no summation. Somebody tell me what this smells like altogether.. Errant direction-by-committee? Or is there a cohesive strategy?

Should we expect secure versions of Banking, Movies, Games and whatnot to be pouring through an xBox? Will they upgrade on push/demand via .NET components? Will the company split itself to streamline the most profitable sections and challenge the losing areas? Is Microsoft expecting to no longer make money with it's PC OS's?

Oh the drama. Pass them chips.

Is this really frontpage news? (2, Insightful)

solostring (620535) | more than 11 years ago | (#4677791)

Is this really frontpage news?

After all, M$ has repeatedly said that it is expecting to lose $2billion over the next few years, and has had to drop the prices od the unit a couple of times since its launch to shift the units. Plus, with the extra costs of constantly remodifiying the boxes to stop the Xbox-linux crowd etc. etc.

Microsoft has taken a big gamble by putting the amount of money that it has into the Xbox, and hopes that its unit will the THE home entertainment system of the future. It is common knowledge that they are banking on losing money selling the units to recoup their losses with the sales of games, but with the recent winning battles by the Xbox-Linux crowd, and M$ losing every 'closed box DRM encryption' battle so far, maybe its a gamble that will seriously cripple the company in the future....

Its going to be interesting to see how this turns out :)
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