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Old 02-03-2003, 05:07 PM   #1
Stokesy
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Sales contradiction?

Microsoft bravado undermined 3rd Feb 2003

Message to manufacturers contradicts sales statements as Xbox 2 shadow lengthens.

Microsoft has ordered suppliers of components for its Xbox console to cut back production, following the machine selling ?at the low end of estimates? over the Christmas period.

This flies in the face of the triumphant statements made by the firm during the post-Christmas dissection, such as Neil Thompson?s, Director of Marketing, Xbox Europe. ?We are pleased that this Christmas was the Xbox-green we predicted. Our increasing market share is great news for us. The steady increase in Xbox gamers over the year proves our strategy of offering consumers exactly what they wanted has paid off.?

Today the story, or at least the message to manufacturing partners, was somewhat different. ?At our second quarter earning announcement, we reported that we will end the fiscal year within the sales range originally forecast, but in the bottom half of that range, and for that reason we have asked suppliers to make applicable adjustments,? said the firm in a statement.

This has lead to some drastic cutbacks in order levels, estimated to be approaching 50% of original expectations for the year, as exemplified by Focus Enhancements. The firm, which makes certain chipsets for the Xbox, said, ?As a result [of Microsoft's statement], Focus Enhancements has been told by Microsoft not to anticipate purchases of the FS454 chips for Xbox in the first half of 2003 and that we will know future FS454 chip requirements, if any, prior to the end of the second calendar quarter of this year.?

It will be interesting to see how other component partners of Microsoft react to this in the coming weeks.

The question now remains, is this revision a direct result of Microsoft gearing up to launch its slimmer version of Xbox, expected to be debuted at E3 this May? We know that some of the components, not least the DVD drive, have been replaced?

http://www.spong.com/

I though MS were bang on with their sales plan?? It certainly seemed they were
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Old 02-03-2003, 05:12 PM   #2
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First thing to learn about Microsoft: they like to bullshit.
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Old 02-03-2003, 05:12 PM   #3
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Marketing spin.

What is this slimmer-Xbox?

I really really dislike Microsoft.

Hate is such a strong word.

Dam good Xbox exclusives.

You still readin'?

Hi.
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Old 02-03-2003, 07:16 PM   #4
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It's spong anti-MS spin.

The forecast was 8-10 million units, so if they sold just over 8 million, which they have announced, that would be the lower end of their estimate. If they sold 10 mill, that would be the higher end. Simple. This is just spong's way of turning this into and feeding anti-ms bs machines.

The fact that they have reduced the order for the chips is smart business. Why maintain the same level of production for the slow season coming up? The hardware sales across all platforms dropped like bricks after Christmas. I doubt Nintendo and Sony are planning to produce the same volume of consoles as they did for the Christmas season. Oh, but wait, that requires basic knowledge of retail that is beyond spong's grasp.

As Christmas 03 approaches, MS, Nintendo, and Sony will begin to ramp up production again to fill the demand, then in spring 04, slow down again. See a trend?
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Old 02-03-2003, 10:13 PM   #5
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fyi:
Title: Microsoft's Xbox losses almost double
Source: here

Losses at Microsoft Corp.'s Home and Entertainment segment, which includes the Xbox game console, nearly doubled in the last three months of 2002, the company disclosed in a regulatory filing Friday
The segment, which also includes Microsoft's TV platform and PC games, posted a quarterly operating loss of US$348 million, compared with $180 million in the same period a year ago, the Redmond, Washington, company said in a filing with the U.S. Securities and Exchange Commission (SEC) for its second fiscal quarter.
The loss grew as the Xbox became available around the world, driving up segment revenue from $833 million to $1.28 billion. In the video game console industry vendors typically lose money on each console they sell, but try to earn that back when selling games, accessories and services.
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Old 02-04-2003, 03:40 AM   #6
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Isn't it odd that no one bothers to list the all of the other products in MS's home entertainment division? Also, note that since there is no breakdown of which products are in the home entertainment division ( Ultimate TV - which they refer to as "tv platform" in the article which has done poorly), how can they attribute the entire loss to one product as they do by mentioning only Xbox by it's proper name.

I would like to know what the breakdown of how much impact the shuttering of Ultimate TV had in this loss. It is very likley that a huge chunk of the loss comes from Ultimate TV which has retreated from the market. But I guess that is too much to ask from the analysts. Or, is their PC games market share collapsing?
No way we will ever know now.

"The loss grew as the Xbox became available around the world, driving up segment revenue from $833 million to $1.28 billion."

Look at that. Somehow, segment revenue went up from 833 to 1.28 billion - a gain of a little under 400 million, but it's still characterized as a loss. Anyone with a financial background care to explain how segment revenue and quarterly operating loss are tied togeher?
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Old 02-04-2003, 12:05 PM   #7
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Quote:
Originally posted by DBJAY
Isn't it odd that no one bothers to list the all of the other products in MS's home entertainment division? Also, note that since there is no breakdown of which products are in the home entertainment division ( Ultimate TV - which they refer to as "tv platform" in the article which has done poorly), how can they attribute the entire loss to one product as they do by mentioning only Xbox by it's proper name.
In the article that was linked, they put the following.
Quote:

The segment, which also includes Microsoft's TV platform and PC games, posted a quarterly operating loss of US$348 million, compared with $180 million in the same period a year ago, the Redmond, Washington, company said in a filing with the U.S. Securities and Exchange Commission (SEC) for its second fiscal quarter.
Quote:
Originally posted by DBJAY

I would like to know what the breakdown of how much impact the shuttering of Ultimate TV had in this loss. It is very likley that a huge chunk of the loss comes from Ultimate TV which has retreated from the market. But I guess that is too much to ask from the analysts. Or, is their PC games market share collapsing?
No way we will ever know now.
These following losses that this article discusses are only recient losses. Ultimate TV is neither here or there, as it failed terribly a while ago. Its losses would have been well accounted for in the previous statements. It is quite obvious to a neutral observer that these losses the microsoft is eating are due directly to the XBox being as popular as it is. It isn't a bad thing if they can eventually recoup the losses with videogame sales for xbox and xbox2, but currently these figures shows them pretty well in the hole. Lets take a conservative estimate of 20$ loss per 200$ Xbox console sale. Since the price was lowered, lets assume microsoft sold 6 million xboxes at 200$ (these figures may be off, but it is only a very rough approximation). Therefore 6,000,000 * 20 = $120,000,000 in direct losses (revenue for selling xbox - cost of producing xbox). They will get make profit on games, but selling consoles at a loss puts them in a hole from the start.
Quote:
Originally posted by DBJAY

"The loss grew as the Xbox became available around the world, driving up segment revenue from $833 million to $1.28 billion."

Look at that. Somehow, segment revenue went up from 833 to 1.28 billion - a gain of a little under 400 million, but it's still characterized as a loss.
I don't have a financial background, but revenue is all the money that they earn. To get net income you subtract the expenses from the revenue. Hence to have losses in income means you are spending more than you earn.

Please understand that these figures don't mean that the Xbox is not popular, it just means that Microsoft is paying tooth and nail to get their console popular. Evenually Microsoft probably will be able to see a profit, but only after their revenue (from games) is more than their expenses (from console sales and advertising).
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Old 02-04-2003, 02:18 PM   #8
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The more Xboxes are sold, the more in the hole MS is...

| ))!! These losses mean nothing to MS...
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Old 02-04-2003, 02:35 PM   #9
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I question the impact of Ultimate TV because one my friends purchased Ultimate TV as a Christmas present. Therefore, I know it was around in the last quarter. Hmm, oh well. So if they posted an operating loss of 348 million, and then had segment revenue of a little under 400 million, then they came out ahead did they not?
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Old 02-04-2003, 05:50 PM   #10
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Quote:
Originally posted by DBJAY
So if they posted an operating loss of 348 million, and then had segment revenue of a little under 400 million, then they came out ahead did they not?
No, that is incorrect. As I said above
loss/gain(net income) = Revenue - Expenses.


As for Ultimate TV, clearly the xbox is a MUCH bigger piece of the pie. Do you really think its possible that Ultimate TV lost 348 million dollars just by themself? hell no.

You need not blindly back Microsoft on every arguement. In all actuality it is a good thing that the losses are high, because this means lots of xboxes are getting sold. The more xboxes sold, the more games sold and that is money in Microsoft's pocket. Microsoft will eat the losses of the Xbox division because the are assuming Xbox 2 will be extremely profitable.
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Old 02-04-2003, 07:29 PM   #11
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So

"segment revenue from $833 million to $1.28 billion."

to :

"posted a quarterly operating loss of US$348 million."

segment revenue rose 447 million over the period.

Operating loss rose 178 million.

I think it would be worse if operating losses increased and segment revenue went below the prior year. At least the revenue is increasing instead of decreasing. Anyone care to figure their operating expenses?

if loss = revenue - expenses, then how much were MS Home Ent. expenses?

new:
dug around and found out Ultimate TV is still in business,
http://www.ultimatetv.com/get.asp

also, the home ent. category includes other tv products, pc games, and online pc gaming. Learn something new everyday.

Last edited by DBJAY; 02-04-2003 at 10:40 PM.
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