Last quarter: Microsoft lost $289 million on Zune, CE devices

Microsoft “is betting heavily on the consumer electronics business for future growth, and late last year it introduced a digital media player, Zune, which competes with Apple’s iPod. But Microsoft’s consumer entertainment and devices unit has contributeds no profits yet, losing $289 million in the quarter,” Steve Lohr reports for The New York Times.

Full article here.

The Associated Press reports, “Microsoft Corp. said Thursday its fiscal second-quarter profit fell 28 per cent, as delays from the launch of its new version of Windows cut into holiday-quarter revenue. For the three months ended Dec. 31, earnings fell to $2.63 billion from $3.65 billion… Revenue rose to $12.54 billion from $11.84 billion in the year-ago quarter.”

Full article here.

[Thanks to MacDailyNews Reader “Tom S.” for the heads up.]

[UPDATE: 9:42am EST: Updated headline.]
The figures for Apple’s last quarter: revenue of $7.1 billion and net quarterly profit of $1.0 billion vs. Microsoft’s much larger figures of $12.54 billion and $2.63 billion, respectively. Windows and Office are licenses to print money, it seems, regardless of how such licenses were obtained. Apple generated revenue of $4.061 billion on iPod, iTunes Store sales, iPod services, and iPod accessories vs. Microsoft’s $289 million loss on Zune and CE devices. That’s a differential of $4.350 billion.

Related articles:
The Motley Fool: Apple makes Microsoft’s Zune a paperweight – January 10, 2007
Zune: Apple cannot lose. Microsoft cannot win. – July 26, 2006

58 Comments

  1. It just occurred to me why the Zune will not be able to replicate the X-Box’s 2nd generation success.

    It’s all to do with Apple’s secrecy. When Apple finally produce a new product, it can be years ahead of the competition.

    I can’t see Microsoft competing with the 6G wide touchscreen iPod. Based on what they did with the Zune…. They’ll probably just take a Windows-mobile PDA and add a media player interface on top of that.

  2. To be fair, MDN clearly doesn’t understand accounting, and in this case has posted a very misleading and biased headline.

    Apple did not “make” $4 billion on iPods. That implies $4 billion in profit. They had sales of $4 billion for iPods.

    More importantly, the $289 million loss was for their entertainment division that, along with the Zune, also happens to sell the Xbox. So you really have no way of knowing what the numbers were for the Zune.

    While this is obviously a Mac centric site, it’s a bit disappointing that MDN actually doesn’t want to rely on facts and will put up a headline like this that has no basis in reality.

  3. So… If I read this correctly Apple, in terms of revenues, earnings and the like, is about 1/2 the size of Microsoft? I wouldn’t have thought the difference between the two was that small, given MS seems to be the behemoth industry leader (dinosaur) and Apple the “small” “niche” up-comer…

    If this is so, this really is good news.

    Oh, and if Critic’s critique of MDN’s headline is right, let’s get it corrected MDN – no need to confuse or distort – the straight news is plenty good.

  4. Inquirer, that’s the thing, Apple may have a smaller market share in terms of Computers so might appear to be smaller than Microsoft, but because they make the hardware and software the difference isn’t always as huge as you might first think.

  5. Inquirer,

    In terms of revenues, yes. Earnings, no.

    This past quarter was an aberration, with lower revenues from software than usual as people held off waiting for vista and new Office.

    In a typical quarter they post much larger gross margins and generate a lot more free cash flows than Apple. This is why they have $40 billion in short-term assets AND pay dividends. This is what makes MS more valuable in terms of market cap.

    In any case, it’s difficult to make a direct comparison between the two, since they actually are in different businesses. MS is pretty much a straightforward software company (despite Xboox and Zune), while Apple’s business is still driven by hardware (computers and iPods), which makes for completely different economics in running the business.

  6. “critic” — Ouch. I think MDN better correct their headline, or end up looking foolish.

    Still, it’s amazing how much money Microsoft loses on every single division except Windows and Office. When the inevitable happens, and revenue growth in these areas begin to slow to a stop, Microsoft’s stock will collapse.

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