[Am-info] Life expectancy of Xbox

[John Poltorak]

On Thu, Apr 25, 2002 at 03:17:04PM -0400, Geoffrey wrote:
> 
> 
> John Poltorak wrote:
> > With Microsoft sunstantially cutting the price of the Xbox by around $100 
> > or so they must be running up huge losses. I keep reading about the loss 
> > they were supposed to be making before the price cut and it seemed like a 
> > pretty high figure then. What could it be now?
> > 
> > Does anyone have any idea of the development costs? It would be 
> > interesting to see any of Microsoft figures about when they expected to 
> > see some payback. As it is now, the Xbox must be causing a severe 
> > haemorrhage, but I suspect Bill Gates has a stubborn streak and won't want 
> > to pull the plug on it. He may even throw more money at it in an attempt 
> > to recover some investment. I hope he does.
> 
> 
> Money magazine had an article on Billy and M$.  Noted they have over 40 
> Billion in cash, and generating an additional 1 billion a month.  I 
> doubt the're losing a billion a month on the Xbox.  The article noted 
> that with this kind of cash, M$ could buy the entire airline industry, 
> TWICE, it's more cash than Ford, Exxon/Mobil and Wal-Mart put together.

However, the all important share price is going down. Microsoft are 
shedding jobs. Some of the investments that Microsoft have made in other 
companies have failed spectacularly. When you have saturated the market 
and there is no opportunities for growth where do you go?

Consumers' satisfaction with Microsoft is going down. Eventually they will 
discover alternatives. People get fed up of getting attack by virus time 
and time again. Eventually, Microsoft will be seen as the culpable party.
Unfortunately, the people who make the decisions are not yet able to 
discern the hand of Microsoft behind spiralling IT budgets and low 
productivity, but all the while, evidence is mounting and one day the 
they will see the light, and there will be a snowball effect where company 
after company will be trying to outdo their competitors in proclaiming a 
Microsoft-free zone.
 
> The article gagged me a couple of times with comments like 'a near 
> monopoly.'  Even money magazine is afraid of Bill.  A few more 
> interesting comments:  "Windows ships on 92% of all desktop computers 
> today and Office account for 96% of all business productivity suite 
> software sold."  If that's not a monopoly, I'd like a better example...
> 
> Just like software, as the games sell, they'll reap their rewards. 
> Games cost a bit more to physically manufacturer then a software CD, 
> still, at $50 a pop, don't worry Billy will be just fine.  Yet another 
> quote from Money: "Although Microsoft is losing money on every box sold, 
> that's part of the plan: build an installed user base now, then rake in 
> the profits with higher-margin game software later."

This is the reason why they got into the console business, but 
unfortunately for them, they do not understand competition. There are 
bigger, more established players in Sony and Ninentendo both of which have 
new products due to appear soon. Both have far more games available, and I 
would be surprised if Xbox manages to grab 10% of the market in time. If 
it doesn't get above that then any return on investment will take a very long 
time. The analysts at Microsoft will have projections for when 
profitability should arrive and it looks much further away than ever 
after the price cut. I don't think they can expect to see any profit 
within five years personally.
> > 
> > Can anyone speculate on when Microsoft will pull the plug?
> > 
> > There are quite a few signs around the place the Microsoft is tightening 
> > up on expenditure and there are reports of the company shedding jobs in 
> > various places.
> > 
> > BTW, I wonder if there are any Xbox viruses yet... 
> > 
> > 
> > 
> 
> 
> -- 
> Until later: Geoffrey		esoteric@3times25.net

-- 
John