With a reported per console loss of $125, the Xbox 360 is proving to be a drain on Microsoft’s bottom line.
The proof is in the pudding so to say. Microsoft’s third quarter results are out, showing the company’s home and entertainment division, which supports the 360, took an operating loss of $388 million.
But, don’t cry for Bill Gates just yet. It’s not likely he’ll be applying for foods stamps anytime soon. The overall company saw a 16 percent rise in profits, which no doubt would be higher if the next-gen console didn't cost so much to make.
Better news seems to be on the horizon for the console, however. Analysts are saying the company is on target to have 6 million 360s on the market by the end of June with up to 12 million shipped by the end of the year. So far, Microsoft’s Peter Moore is saying that 3.2 million consoles have shipped worldwide.
Moore also said that "Our supply challenges are behind us operationally". Microsoft did however concede that the costs related to the Xbox 360's launch were greater than expected, as the company was inclined to expedite shipments to retail amidst the initial supply problems. Hyper-expensive airfreight was a significant factor here. … Microsoft hopes that the home and entertainment division will eventually turn a profit. Cost reduction factors such as the recently announced CPU switch from 90nm to 65nm tech will play a role when the update goes into production in first quarter 2007.
Next Generation
With a projected 12 million consoles on the market by the end of the year, Microsoft might still see loses on its consoles, but it will make up for it in game purchases. Mrs. Gates didn’t raise a fool.
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