RicaneliteXbox 360 losses shrink, but so do shipments
The 360 hardware is a loss leader for Microsoft: they lose money with every console shipped out and hope to make it back via game sales and downloads in the Live Marketplace. While Microsoft's gaming division has always lost money, the company has said that it hopes to break even on the hardware sometime later this year. That could get harder now that there are plenty of signs that sales are slowing down.
Microsoft has released their quarterly earnings, and of note is the $315 million in losses the Entertainment and Devices Division reports for this quarter. Last year at this time they lost $415 million, and they clearly state why the loss has been lessened:
EDD operating loss decreased during the three months ended March 31, 2007 primarily due to decreased products costs from lower sales of Xbox 360 consoles and increased Mobile and Embedded Devices revenue, partially offset by expenses related to the launch of Zune and increased Xbox 360 console warranty expenses. EDD operating loss decreased during the nine months ended March 31, 2007 primarily due to increased Xbox 360 platform sales and improved Xbox 360 console margins, partially offset by expenses related to the launch of Zune and increased Xbox 360 console warranty expenses.
The demand for the system has slackened as time moves on. Microsoft sold 1.1 million units in the US in December, which isn't surprising in the holiday season. However there were only 228,000 units sold in February, and that further decreased to 199,000 systems in March. Microsoft has stated they're hoping to sell 12 million units by June of this year, and with their claims of shipping 11 million units since the system's launch that number could be attainable. Of course, with the shell game of shipped vs. sold that most console manufacturers play, actual sales could be hard to quantify.
I expect Microsoft to post an even smaller loss for the next quarter, as stocked supplies of the Xbox 360 should satiate the market and greatly reduce Microsoft's needs to ship more systems, if sales should stay mild.
Microsoft has released their quarterly earnings, and of note is the $315 million in losses the Entertainment and Devices Division reports for this quarter. Last year at this time they lost $415 million, and they clearly state why the loss has been lessened:
EDD operating loss decreased during the three months ended March 31, 2007 primarily due to decreased products costs from lower sales of Xbox 360 consoles and increased Mobile and Embedded Devices revenue, partially offset by expenses related to the launch of Zune and increased Xbox 360 console warranty expenses. EDD operating loss decreased during the nine months ended March 31, 2007 primarily due to increased Xbox 360 platform sales and improved Xbox 360 console margins, partially offset by expenses related to the launch of Zune and increased Xbox 360 console warranty expenses.
The demand for the system has slackened as time moves on. Microsoft sold 1.1 million units in the US in December, which isn't surprising in the holiday season. However there were only 228,000 units sold in February, and that further decreased to 199,000 systems in March. Microsoft has stated they're hoping to sell 12 million units by June of this year, and with their claims of shipping 11 million units since the system's launch that number could be attainable. Of course, with the shell game of shipped vs. sold that most console manufacturers play, actual sales could be hard to quantify.
I expect Microsoft to post an even smaller loss for the next quarter, as stocked supplies of the Xbox 360 should satiate the market and greatly reduce Microsoft's needs to ship more systems, if sales should stay mild.
