Thursday, July 20, 2006

MS Sells "Approximately" 5 Million Xbox 360's.

Microsoft announced today as part of its earnings release that it's hit its sales target for the Xbox 360 console. The company had expected to sell between 4.5 and 5.5 million units by the end of its fiscal year. The Home and Entertainment division said that "approximately" 5 million units were sold in the last fiscal year. 1.8 million of those were shipped during the fourth quarter. This surge in Xbox 360 supply drove Xbox revenue up by 129 percent to $503 million for the fourth quarter. That said, Home and Entertainment's operating loss increased to $414 million for Q4. "Home and Entertainment operating loss increased primarily as a result of a $682 million increase in cost of revenue primarily associated with the Xbox 360, partially offset by the revenue growth," said Microsoft. Looking at the full fiscal year for H&E, operating loss skyrocketed 160 percent to $1.26 billion. "Home and Entertainment operating loss increased primarily as a result of a $1.64 billion increase in cost of revenue primarily as a result of the number of Xbox 360 consoles sold and higher Xbox 360 unit costs, partially offset by the revenue growth," explained Microsoft. "Our fiscal year 2006 operating loss increase was also attributable to the significant impact of Halo 2 in fiscal year 2005". While Microsoft's Xbox business continues to be a drain on the company, MS does expect it to eventually become a profitable venture. "Our business model anticipates that while we currently sell Xbox 360 consoles at a negative margin, product cost reductions and the future margins on sales of games and other products will enable us to achieve a positive margin over the Xbox 360 console lifecycle," said Microsoft. The company added, however, that it continues to sell the original Xbox at a loss. Aside from H&E, Microsoft as a whole saw record fourth quarter revenue of $11.80 billion for the period ended June 30, while net income was down from $3.70 billion to $2.83 billion. For the entire fiscal year, revenue was up 11 percent to $44.28 billion and net income was up only slightly from $12.25 billion to $12.60 billion. "We delivered a very strong finish to the fiscal year highlighted by customer demand for our recently launched products of Xbox 360, SQL Server 2005, Visual Studio 2005 and Microsoft Dynamics CRM 3.0, which fueled a combined 31% revenue growth of their business groups for the quarter," said Chris Liddell, chief financial officer of Microsoft. Microsoft also provided guidance for the current quarter and fiscal year. For the quarter ending September 30, the company is expecting revenue in the range of $10.6 to $10.8 billion and earnings per share of $0.30 to $0.32. For the fiscal year ending June 30, 2007, Microsoft is expecting revenue to be between $49.7 and $50.7 billion and earnings per share to be in the range of $1.43 to $1.47. As a side note, the company has announced a new share repurchase program and the completion of its previously announced $30 billion stock repurchase program. The new program, approved by Microsoft's board of directors, is "comprised of a $20 billion tender offer scheduled to be completed on August 17, 2006, as well as authorization for up to an additional $20 billion ongoing share repurchase program with an expiration of June 30, 2011."


Anonymous Brain said...

Hmm, the 360's losses don't really seem to affect much of anythign when it comes to Ms's overall income. I wonder if you could find similar statistics for both Sony and Nintendo to see how they compare in terms of console income/total company income.

7/20/2006 09:55:00 PM  

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