RSSHuge Xbox 360 Sales Boost Microsoft Revenue
By Scott M. Fulton, III | Published January 25, 2007, 9:37 PM
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The surprise of the day came during Liddell’s guidance for the next quarter: “With that strong momentum, we’re making tradeoffs and choices in managing the Xbox business to achieve our targeted profitability in fiscal year ’08. In the near term, this means we will optimize for profitability.”
What does that mean? Good news often comes in small words; with Microsoft, the word “great” is most common. Bad news often comes couched in euphemisms, such as the need to “optimize for profitability.” It means, brace for a storm.
While Liddell projected Xbox 360 will go into the spring quarter with the strongest third-party game lineup of the three major consoles, inventory levels could start to rise as demand gets soft. “As we look at historical seasonality, pricing, and inventory levels,” Liddell continued, “we’re taking a more cautious view of the market, and our Half 2 revenue and console guidance reflects that. We’re now forecasting full-year revenue growth of 26-31%, and a decline of 15-25% for the third quarter, and expect to exit June having sold about 12 million Xbox 360 units since launch, down from our previous guidance of 13-15 million. That reduction in console units also results in a reduction in revenue related to attached software, accessories, and [Xbox] Live.”
In case your calculator isn’t handy, that means Microsoft expects to sell as many as three million fewer Xbox 360 consoles worldwide in the coming quarter, despite its metamorphosis, as touted at CES two weeks ago, into what Microsoft described as the only IPTV console anyone would rationally desire.
Does this mean, one analyst asked, that Microsoft’s considering price reductions? Liddell gave a fuzzy response: “Certainly, the healthy inventory that we’ve seen, which is partially a result of the very good sales into the channel...is one of the factors behind what we’re looking for in the second half. We’re also starting to look at fiscal year ’08, and what the best approach to take [is] in terms of profitability. So we’re just making some strategic decisions around what we might do there, too.”
Analysts kept pressing: Is Microsoft planning to pare down inventory levels prior to a price cut? “I wouldn’t put it in those terms,” replied Liddell, who might have preferred the term “optimizing for profitability.” “We’re looking at the numbers that we sell into the channel based on where we see the inventory at the start of the year, and the patterns of sales that we think will come up. The net result of that may well be that we see inventory come down, but that’s an outcome, not a management of that.”
If Microsoft is planning a price cut for Xbox 360, then it doesn’t want to execute that cut while the channel is awash with product, partly because the company doesn’t really reap much from console sales anyway. It would rather make that cut when demand has begun to taper off, and the channel is a little drier. Those conditions may very well be the “patterns” to which Liddell referred.
Meanwhile, for the eighteenth consecutive quarter, the Server and Tools division came through for Microsoft with double-digit revenue growth, and 30% revenue growth in SQL Server alone. Steadily, SQL Server is becoming just as principal a pillar of Microsoft as Office. Colleen Healy did confirm today that Windows Server “Longhorn” (the latter term having served as a blindfold for the product’s model year) is being planned for release-to-manufacturing during the second half of the calendar year.
The problem is mostly is supply and demand. 360 has been out for more than a year so they can relase million of consoles at once seems to be different for PS3 and Nintendo. Heck im still not able to find any Nintendo's in Canada or on the net. except threw those crooks on ebay but will never get that desperate.
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|idk if anyone has noticed it. but i thought, what the hell, and i have been kinda keeping mental track of the 360, ps3, and wii sales lately. and there must be a surge of 360 sales lately. as of this minute its sales are outpacing even the wii. i know ur gonna say that every single wii that hits the shelves is sold(which is true, and im gettin one as soon as i find one) but that makes a statement. when every single wii in existence is being sold and the 360 is still selling more? wow!! definitally top contenders here. ps3 better make a recovery strategy fast cause every second that goes by the light at the end of the tunnle is getting farther away.
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|This doesnt make me happy being a Sony, PS3 and Blu-Ray fanboy.
As I dont have the money for a PS3, 360, HD-DVD or Blu-Ray player, I'll keep sticking my nose in the forums with my opinions even though I dont actually support a single product I am always yapping about.
Hi plague.
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|Herror, I got my guess at who Shadow Davey is, tee hee.
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|God, that was pretty funny.
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|Dave my fellow believer, don't worry about it too much. I'm sure the PS3 will catchup up soon. Until it does you can come to my place and play on the 360. I've started collecting aluminum cans and like I offered you a while back you can still join me and together we should be able to save enough cash for a PS3 joypad... with a bit of a modification I heard you can get it working on the 360...can't use a wireless one though. I've got some black paint too and I figure if we paint it, stick a PS before 360 and remove the 60 we've got ourselves a pretty good substitute. Blu-ray movies should be ok, a blue diode is a blue diode so we'll get the HD-DVD external drive and wish for the best. Times are tough my old friend.
btw thanks for trying to take the blame for the You-tube Fox incident, you are a true friend.
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|ahahahahahaha. i had myself a good laugh. thanks shadow mark.
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|LMAO this is by far the best Shadow Marky post EVER!! It even beats Marky already doing his time for child porn/ or molestation, I cant remember.
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|Personally, both BlueRay and HDDVD will have a short life... Why? Simple! People will be downloading their movies via any digital connection and watching them at their convenience.
"Zero Media" is the future!
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|Don't know if I really agree with this article.
"and a gain of nearly 76% over the 2005 holiday season."
In the previous holiday season, the xbox 360 was even more limited than the rack warming PS3's. It's not a good referance.
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|You know the article is hyperbole when you see amateurish stuff like "(this is not a typo)".
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|So, the Xbox, a product put out by a division which has only posted a profit for one year--2004--has suddenly propelled Microsoft to one of the best quarters any company has ever had?
Why do I detect a smidgen of bias here?
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|http://www.gamespot.com/news/6164755.html
"For the quarter, the Entertainment and Devices division posted an operating loss of $289 million, slightly greater than the $286 million loss it sustained over 2005's holiday quarter. Microsoft has previously said it expects to post a profit with the division in its 2008 fiscal year, which starts in July of 2007. Overall, Microsoft's profits were down more than 25 percent for the quarter, slumping to $3.47 billion from $4.66 billion in the same quarter the previous year."
As Ace Ventura once said, "Man, I'm tired of being right!"
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|There's no bias, Desides, other than what the calculator tells me. The cost of doing business is still huge. But that 25% reduction in profit comes entirely - and I do mean "entirely" - from a deferral of income to the next quarter.
It's an earnings statement, not a position paper.
SF3
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|Lately I've been starting to feel kind of bad for SMFulton3 and a few other writers on BetaNews. All their articles relating to Sony or Microsoft are viciously bashed by the fanboys on here. SMFulton3 writes decent articles and I don't usually see much bias, if any.
Whenever there's a positive article about Microsoft, all the MS haters and Sony fanboys cite bias. If the the article reflects negatively on Microsoft, then all the MS fanboys cry foul and MS haters + Sony fanboys applaud it. When the article is about Sony, if it's negative, then the Sony fanboys cry foul and Sony haters applaud it. If it's positive, then the Sony fanboys applaud it and the anti-Sony squad cite bias. You get the idea.
Most of these articles aren't trying to convey an opinion, they're simply reporting what's going on out there. You know what, I forget where I was going with all this, so I'll just click the Post button now.
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|"Expect Huge Xbox 360 Sales to Boost Microsoft Q2 Earnings"
No.
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|YES!
Latz,
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