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
The Xbox still isn’t profitable, and with the competition they’re facing, it may never be. The Zune is just a pipe dream. Even if it were a better product, it would have a huge challenge catching up with the iPod. Microsoft has two cash cows: Windows and Office. With all the free alternatives to Office, why pay MS for what at this point is a stale product? Windows is showing its age too. XP is merely tolerated, and Vista is a disappointment, even to Windows fans. Microsoft needs a hit soon, or they will be in trouble, whatever the numbers are now.
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The Xbox is not really a success when measured against the other consoles. The Nintendo gamecube was considered a major failure by most people, and it sold just as many units as the Xbox did! So how does that make Xbox a success? Also, when I go to the store, I see that people are begging for PS3’s and Wii’s, and there are Xboxes sitting on the shelf that they don’t even consider getting instead.
Matthew
Can you imagine if Apple’s customer base was as brain dead as Microsoft’s customer base?
Apple could really make big bucks selling any old piece of crap and not have to spend untold millions working for 2.5 years developing a cell phone killer.
They would just have to rebrand a piece of LG crap, stick a half-baked OS on it and force it on their fan-base.
Wait! That didn’t work for Microsoft’s Zune.
Is the Microsoft customer base finally getting a clue?
“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.”
I like what that guy wrote. It’s true, Apple didn’t make 4 billion, they SOLD 4. Guess who else lost money when they released a new product – Apple! No one makes all their money back when the product is released – they make it back when they hit the BEP (break even point) So don’t gettin your panties in a wad Apple folks, it’s not an abberation for Microsoft, it’s part of business. Sony lost money on the PS 1-3 until they hit that point, so just stop.
I really used to like this site, but the more I visit the more it makes me hate some of you guys. Just because MS sucks and Apple rocks, doesn’t mean that every thing MS does sucks or everything Apple does is invincible. Anyway, go Appple!
That zunethang crap guy, did MS stopped paying him because of the loss ??
I agree w/ the last post, in spite of the massive revenue & profitability of MS today, they are solely dependent on two products clearly at the end of their product life cycle…
Those that say ‘it’s just too big to implode’, remember it wasn’t that long ago that the same was said of AT&T (not the regurgitated renamed SBC, but the ‘real’ AT&T)… Look how quickly a company that once had annual revenues of $60B collapsed due to poor leadership in a changing market…
Isn´t Apple dependent on the iPod to be profitable?
What was the profit on the computer line-up for Apple?
With all the R&D, marketing and other costs you think the Apple iPhone (or any new Apple product) is profitable withing the first 3 months of introduction (like the Zune).
And while Microsoft is subsidizing its XBox hardware, how much are they making off games and games licensing???
The idea that the xbox is a success in the marketplace is a myth. Sure it sold more than PS3 or Wii over the holidays, but that is because they were available, and the others weren’t. PS2 sold more than the xbox over the holidays. You rarely see that printed anywhere. BFD, there are 10 million xboxes supposedly in living rooms. We are nearing 100 million iPods. Which one do you consider a success.
The fact that the Zune and the xbox are lumped into the same division that lost $300 million last quarter, probably means that the xbox is losing the majority of that money. MS admits that they lose money on each console sold. They claimed they break even on Zune sales. If I owned MS shares, I would be pissed that they are throwing my money away due to mis-management.
c’mon ZuneTang. Come back to the (white earbud) social! Surely you got a cute of that $289M, right?
MDN wrote, <<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.>>
You can’t take Apple sales, and subtract MS’s loss and get a differential. You can take sales and subtract MS’s sales on Zunes. You can take iPod profits and subtract MS’s loss on sales of Zunes, but you can’t do what you just did!
And, for the person who asked, the gross margins on iPods vs Macs is roughly the same, in the 28% range, plus or minus a couple percent. All you need to do is look at Apple’s gross margins before the iPod, ie 6 years ago, and compare it to today. The gross margins are in the same range. This comes up all the time in regards to Apple’s cost of goods sold. Look at the iPhone. When the parts breakdown showed the parts cost about 50% of the retail price, some journalists thought Apple could drop the price. However, it’s typical for Apple to have a product that costs about 50% of retail in just parts and labor. When you factor in all their costs, they’ll find gross margins to be about 30%, just like all the rest of Apple’s product line. When you take away all the other expenses, Apple is left with net margins of about 12%. This quarter was higher, but 12% is Apple’s typical net.
schmluss: “Sure it sold more than PS3 or Wii over the holidays, but that is because they were available, and the others weren’t. PS2 sold more than the xbox over the holidays.”
So Microsoft did good and the others didn´t.
Schmluss, if one´s nusiness can´t get product out when the selling is happening…well, game over.
Do you ever question the profitability of each Apple product? Mac mini is a dog seller, Apple desktops sales way off…the only thing that is going great for Apple is iPods and maybe notebooks (don´t know how much they profit/lose on each sale).
There is too much analaffixation by MDN about Microsoft.
With the iPhone coming will it be Nokia, Motorola and others profit/loss statments that MDN will be regurgitating over?
I went to the linked NY Times article – it had a large video ad for the iPod.
Nice tie in going there for the zune!
Mac owner x 5: “So Microsoft did good and the others didn´t.
Schmluss, if one´s nusiness can´t get product out when the selling is happening…well, game over.”
I’m not saying that xbox didn’t sell. I’m saying that they had ONE ‘good’ holiday season. Once Nintendo and Sony can make enough consoles, then game over for the xbox. With the PS2 selling more that the xbox, it shows that a lot of people are looking to play for less.
sclmuss – wrong again.
xBox outsold them all.
“Nintendo, Sony and Microsoft sold, respectively, 604,200, 490,700 and 1.1m next-gen games consoles in the US in December 2006, retail market watcher NPD said last week. The company’s figures show the Xbox 360 as the clear winner.
December marks the first month during which all three consoles were on sale for the full 31-day period. November’s figures, released by NPD last year, inherently showed lower numbers for the Wii and PS3 as these machines didn’t go on sale until the middle of the month.
Adding the numbers for November and December together, you get 1.61m Xbox 360s, 1.08m Wiis and 687,700 PS3s – rather less than the figures quoted late last year for sales from the beginning of November through to Christmas Day, though these would have been early estimates.
Of the recent launches, Wii handsomely beat PS3, but was equally trounced by the Xbox 360. Hindering both Wii and PS3 sales was widely reported supply tightness. Had supply been equal, the Sony and Nintendo console would have shown higher numbers.
Older consoles did well too. Sony’s PS2 chalked up 1.4m US sales in December, while 1.6m Nintendo DS handhelds flew off the shelves during the month, compared to 953,200 PSPs. Undoubtedly, all three machines were helped by the difficulties some consumers experienced getting hold of the more advanced consoles from those companies.”
http://www.reghardware.co.uk/2007/01/15/us_console_sales_npd/
“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.”
You must be new here…
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Halt die Schnauze, Sie dummes Weibchen! Niemand möchte die Unwissenheit hören, von Ihrer öffnung zu kommen! Warum nicht Sie fornicate mit einem Juden?
I wonder how much of the loss was from paying Zune Tang to come on this board everyday and troll? Did they pay him in cash, buy him a laptop with Vista, or squirt him some special pictures and movies?
Speaking of special pictures and movies, MDNMW: position
To: “Eva Braun’s other sister’s brother in law”— Oh my, Not another anti-Jew comment from a German speaking person…I thought that was long over. Shame,shame, shame.
YOU NEED TO FIX THE INCORRECT FINANCIAL CALCULATION…
“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.”
BAD MATH.
If you want to add something to the $289 million loss you can add Apple’s profits on iPods, if you know what that is, not their gross revenues.
Please fix.
Moderator:
Please remove the Eva Braun comment forthwith. No place for that type of crap here.
As has been already pointed out by others, MDN needs to correct its Take on this story. $4 billion was Apple’s iPod REVENUE. The $289 million is a loss for Microsoft, which is NOT revenue. You can’t compare total revenue to a profit (or loss) – this is an embarrassing and elementary mistake that needs correcting asap.
Rather, let’s just say that Apple is catching up to Microsoft in total revenue. Apple had a $7 billion quarter, Microsoft with all their monopoly power had $12 billion. Who knows, in 3-5 years, Apple may actually top Microsoft in raw revenue, which is really an amazing thought.
Chris:
The Xbox still isn’t profitable, and with the competition they’re facing, it may never be.
WRONG. According to iSupply (which takes the stuff apart and figures what it costs to produce), “the HDD-equipped Xbox 360 has a manufacturing and materials total of $323.30, based on an updated estimate using costs in the fourth quarter of 2006. This total is $75.70 less than the $399 suggested retail price of the Xbox 360.”
Microsoft needs a hit soon, or they will be in trouble
Yeah. 97.46% market share (according to OneStat.com) sucks, right? Windows could lose over 30% of its market share and still be doing better than the iPod.
Matthew:
The Xbox is not really a success when measured against the other consoles.
WRONG. The Xbox 360 has sold 10.4 million units thus far and in the 4th quarter of 2006 (4.4 million units) outsold the PS3 (750,000 units) and Wii (2.0 million units) COMBINED.
Ben Dover:
in spite of the massive revenue & profitability of MS today, they are solely dependent on two products clearly at the end of their product life cycle…
You’ve got it backwards. In spite of having two major products clearly at the end of their product life cycle, MS posted massive revenue and profitability. Speaking of being solely dependant on a few products COUGHiPodCOUGH, how did Apple’s computer sales do last quarter? 20% lower than expected, that’s how.
Those that say ‘it’s just too big to implode’, remember it wasn’t that long ago that the same was said of AT&T (not the regurgitated renamed SBC, but the ‘real’ AT&T)… Look how quickly a company that once had annual revenues of $60B collapsed due to poor leadership in a changing market…<i>
WRONG. Nice try, though. Maybe do a little research. AT&T shows $63.055 BILLION in annual revenues for FY2006, with a profit of $7.356 BILLION. Oops. Don’t forget — SBC was taken over by AT&T, not the other way around. Imagine if Apple takes over Adobe. Would you refer to that company as “the regurgitated, renamed Adobe”? I thought not.
Schmluss:
<i>BFD, there are 10 million xboxes supposedly in living rooms. We are nearing 100 million iPods. Which one do you consider a success.
You’re right. There probably were 10.4 million iPods one year after it’s introduction. Just point me to the stats…
Sure it sold more than PS3 or Wii over the holidays, but that is because they were available, and the others weren’t. PS2 sold more than the xbox over the holidays.
Following Schmluss’ logic: Sure Apple sold more iPods than Zune in 2006, but that is because they were available, and the other wasn’t.
Any way you do the math, if Microsoft’s “consumer entertainment and devices unit” was a separate business, and it lost $289 million, it would soon be out of business. Only Microsoft can afford to be so wasteful and inefficient.
not bob: “sclmuss – wrong again.
xBox outsold them all.
“Nintendo, Sony and Microsoft sold, respectively, 604,200, 490,700 and 1.1m next-gen games consoles in the US in December 2006…
Older consoles did well too. Sony’s PS2 chalked up 1.4m US sales in December,”
First of all, spell my name right. Second what part of xbox = 1.1 million vs. PS2 = 1.4 million don’t you understand. I AM NOT WRONG! 1.4 is higher than 1.1. The OLD PlayStation is still outselling the xbox 360! How can you define that as a success!?
Bryan: “Following Schmluss’ logic: Sure Apple sold more iPods than Zune in 2006, but that is because they were available, and the other wasn’t.”
No, following my logic, the fact that Sony couldn’t make Playstation 3’s fast enough and people were literally killing each other to get them, and you could walk into the same store and easily walk out with an xbox, it’s not surprising that xbox sold more consoles. We will find out if the PS3 will be as successful over the course of this year.
Also, you can find Zunes everywhere now as before xmas, but some stores had run out of certain iPods, and iPods sales still blew the Zune away!