Just as things seemed to be going XBox's way, new figures released by Microsoft reveal the real cost of chasing Sony's PS2.
A filing with the U.S. Securities and Exchange Commission made by Microsoft at the end of last week has revealed precisely the extent of that cost. The filing detailed sales and profitability by division. Home and Entertainment division, dominated by XBox, made a quarterly loss of USD 348 million on a sales total of USD 1.28 billion. That drop for the same quarter last year was only USD 180 million.
Those figures, roughly, means that in their effort to become Number 2 in the console war, Microsoft have lost almost twice as much money as they did last year. These new figures suggest that Microsoft are currently losing USD 100 for every XBox sold.
The bulk of the losses is almost certainly due to the price cuts and bundle deals which Microsoft recently introduced.
Considering the above mentioned numbers it is easy to assume that the increased losses mean that more units have been sold. Recent news however, released by Focus Enhancements, the producers of XBox's video encoder chips, claim that Microsoft have warned of reduced demand for their console for the first half of 2003. Such a warning of course, could be a result of the successful holiday season and the sales lull which usually follows such periods.
In any case Microsoft have managed to creep and crawl their way into the console market, establishing a basic user base which will, eventually, begin purchasing services and content for the console, the profitable side of the product.
The recent holiday season will mean that Microsoft will remain comitted to their console and will keep up the pressure on PS2. Losses or not Microsoft can definitely back their product, in fact the filing shows that their only other loss making division is the MSN Internet access division, which lost USD157 million during the same quarter. But with Windows alone making a profit of USD 1.97 billion and Office USD 1.88 billion, there is no fear that the MS money well will run dry.
You can find the full Microsoft filing by following the download tab.