Microsoft's Earnings Release FY14 Q4

Computing and Gaming Hardware revenue increased $3.2 billion or 49%, primarily due to higher revenue from the Xbox Platform and Surface. Xbox Platform revenue increased $1.7 billion or 34%, due mainly to sales of Xbox One, which was released in November 2013, offset in part by a decrease in sales of Xbox 360. We sold 11.7 million Xbox consoles during fiscal year 2014 compared with 9.8 million Xbox consoles during fiscal year 2013. Surface revenue increased $1.3 billion or 157%, due mainly to a higher number of devices and accessories sold.

[MightyNoX]

It's almost like I, and so many others, have been saying this for ages.

Hopefully it'll be a wake up call to some deluded people around here.

[iamnsuperman]

Launching a console does come with a lot of baggage (in particular cost) so the difference isn't unusal (expect maybe the size). What this does unofficially confirm is Microsoft really won't go with a price cut this early.

[BiggerBoss]

Yeah I agree that it's expected to lose money during the launch of new hardware, but dang. That much money could last me over 100 lifetimes.-.

Didn't Sony make profit off Playstation last fiscal year? Correct me if I'm wrong

@devwan. Ahhh that's right. Thanks+

[devwan]

@superman The majority of those costs is r&d. xbox one r&d costs are included in fy 13-14 results? Are you sure?

@BiggerBoss Last quarter, not last year.

[amiga-man]

Hardly the sort of news investors will want to hear, there has been plenty of talk of people wanting MS to sell their xbox division, although I don't think that will happen it only adds more pressure on the xbox.

[Why o why]

. . .but Sony . . . . .

Ok . . . Nobody has said it yet but I'm well surprised Sony haven't come up yet.

I like the point iamnsuperman made below about ms not acquiring deep pockets by making huge losses. It's true. .

Personally I hope they stay in the game and believe they will. Not all competition is good but anyone who thinks ms didn't wake Sony up is a little naive. Sometimes bad competition can be good too.

[pinkcrocodile75]

I'm not in the least bit surprised by the loss at this point in the Xbox One cycles, I'd expect a similar story from both Sony and Ninitendo too

Can we have a copy of the financial reports from both Sony AND Nintendo for a little comparrison.

I'd like to see how the same period on the Wii U and PS4 cycle affected finances, NOT SALES mind, just the company yearly finance report.

[kneon]

@Why o why

It wouldn't change things much if they sold off xbox, it would just change hands, it wouldn't go away. Companies like Google, apple and amazon are looking to get into this market.

[ZodTheRipper]

Microsoft simply sucks at making hardware, no wonder they are focusing on the cloud so much. I completely agree with Wizard_King, I'd rather see another company take Microsoft's spot in the console sector.

[UltraNova]

@ Above

Who Activision? EA? Amazon wont bite, Apple is out of the question...who could buy the Xbox division and be less 'evil' than MS? Tough question I know...

OT: 400 million is a drop in the ocean for MS, literally. Yes the shareholders don't like this but selling their gaming division is admitting defeat to Sony and we all know how much winning means to our American friends...

This loss is probably attributed to the R&D for Kinect 2 as the actual console is selling ok (when compared to the 360 in a similar time frame).

Xbox is going nowhere and we should all be grateful for this. Imagine letting Sony and Nintendo run wild! No thanks!

[Double Toasted]

Lol I believe MS will be fine. I can't say the same for their competition though.

[sonarus]

This news is almost irrelevant to gamers however, it his HIGHLY relevant to microsoft investors. The fact that the Xbox division has only accounted for about 1.5 % of Microsofts gross profit 2014 fiscal yr just shows how irrelevant xbox division is to Microsoft's bottom line. This is why investors want the xbox division sold, spinoff or shut down. Xbox division simply isn't part of Microsofts core competencies and knowing this off course investors will be pissed if its accounting for such substantial losses.

However, new ceo has said microsoft will keep xbox because of its potential as a home entertainment device.

[GTgamer]

To all people saying ohhhh this nothing to MS they can brush it off while being true No company likes losing Money it doesn't matter how much they have so stop being naive, you think MS wouldn't drop the xboxOne like a five Dollar hoe if it keeps losing money in the next few years ಠ_ಠ.

[mixolydian_id]

It's still a small drop in the ocean for a multibillion dollar corporate business.

That cost was probably incurred by the considerable amount of changes that had to be introduced following E3 (2013).

They had already planned to blow a load of money on Console development. If they had released a year later, that money would've still been invested into console development.

I imagine a lot of the team ran up some serious overtime payment this past year to boot.

Not a loss, it's nice to know my future console has been thoroughly invested in.

[guitarded77]

@UltraNova

Just for the sake of conversation, Google could, and would be less evil. I know they never would, but they could, and they're pretty open to devs and innovation.

Also, a private investment group could. It happens from time to time. Private investors buy a company and turn it around... but typically they run it into the ground. A positive example is Fender Guitars. They were run to crap in the 80's, but then a group of their workers bought the company and brought the standards up to the highest in the companies history (arguably) along with the greatest profits. They in turn bought many other guitar companies... some of which they shuttered, which was bad :/

[Samsara82]

In answer to BiggerBoss ...I might be wrong but the last numbers given by sony were not for the year but were trimestrial so their developments costs were not included...I think they were included in their previous trimestrial report...Will have to wait for a whole year report from them to really compare anything

[xer0]

@BiggerBoss

Yes - Sony in comparison made a profit.

[UltraNova]

@guitarded77

Although I get why you used the Fender Guitars example an interested investment group would take into account the negativity the xbox brand carries with it at the moment and should probably consider their own inevitable scrutiny that they will get subjected to from the media and gamers alike in search of similar 'evil' characteristics to Microsoft.

What I'm saying for the lack of better English is that who ever wants to buy the xbox brand must have a pretty clean floor under that carpet of theirs if they want to 'revive' the brand and profit from it.

We gamers are a stubborn bunch we don't forget and we hardly forgive!

[darthv72]

@ultra... "We gamers are a stubborn bunch we don't forget and we hardly forgive!"

That seems to be more of a newer generational sentiment. At least from an older perspective, those of us who have been around much longer when gaming was first starting to develop, dont follow that sort of thinking.

The way you describe it is more along the lines of the entitled way of thinking. the "i'll be damned" crowd which has been getting worse and worse over the course of the last few generations.

[gaffyh]

Wow, that's a lot, however I'm sure they expected some of this. I think it's worse because they haven't sold as much as they thought they would.

[UnHoly_One]

@Wizard King

MS has been a cancer on gaming for 15 years?

Basically every feature you enjoy on your Playstation console is a direct response to MS doing it first.

Not saying that NONE of it would have happened without them, but some of it sure wouldn't have.

Do you think you'd have PS+ without MS? Would online gaming even be anything like what it is now without MS pushing it?

[gaffyh]

@UnHoly_One - Not saying that MS is a cancer as I'm sure they sped up development particularly on the network side of things, but they weren't the first to do it at all. The Dreamcast already had an online infrastructure way before Xbox even existed, and even the PS2 had network support with games like SOCOM.

The only innovation that MS introduced to consoles was the ability to play games online with matchmaking, and HDDs on the box. And I am 100% certain that these features would eventually have been implemented on Playstation without MS being a competitor, but that the competition, sped up Sony's response.

I'd argue that MS actually copied Sony a lot more, almost their entire console strategy was copied off Sony's PS1 launch. And without Sony launching into the market, MS would never have even tried.

[Magnes]

@wizard_king nice anti American sentiment and people call us bad I'm not a MS supporter but people like you make me reconsider. Man did I love my Dreamcast though.

[Visiblemarc]

@UltraNova

400 million dollars is an enormous sum of money for *any* company.

There is a persistant myth in forums that large companies with deep pockets scoff at gigantic losses.

Not remotely true.

Companies get big by being good with money (and most being publicly traded have shareholders to answer to). Losing massive sums of it, is the road to failure and it almost always leads to huge policy shifts, staff changes and re-evaluations of strategies.

I recall a few years back people were talking about RIM's (Blackberry) warchest. Many thought those massive stores of cash made them invulnerable. In fact, it was no defense at all to an incredibly poor strategy.

I'm not directly comparing MS to RIM though (for countless reasons), in fact the massive Surface losses of recent times have probably made them even more sensitive. I expect increased caution.

[thehitman]

Kinect was a 400 million dollar disaster is whats that saying.

[rainslacker]

@darth

I have to disagree. At least partially. I do feel that the "Never forgive, never forget" mentality is a bit much, but gamers of all generations seem to be able to apply what happened with what could possibly happen and how it will affect them over the long term. I believe MS initial policies showed this to a great degree, as people not only were upset about the immediate result, but what it could mean if it were successful.

For my part, I have no reason to have to forgive MS. They were honest about it at least, and I never actually purchased anything to be upset about. I didn't approve, and I voiced my opinion, and didn't bother to pre-order the system. But from all this, I didn't forget either. What they did put a bad taste in my mouth for the future of gaming, and how I consume my gaming content. Having watched MS for well over 30 years, even before I really understood how seedy they are, none of it really surprises me in retrospect. It also means I have less faith in them to do the right thing in the future, because again, I don't forget.

They can certainly turn things around. But taking Sony's missteps last gen, which were nowhere near as bad, it took them several years before they started to be back in gamers good graces. I expect MS will be in a similar situation. If they do everything right this gen, they may not win this gen, but they may have a better chance of becoming "The winner" next gen.

[Death]

According to the Earnings Release, Microsoft made 893 million in gross margin on sales of 9.6 billion in 2014. This in contrast to 956 million gross margin on sales of 6.4 billion the year before. The Xbox didn't lose money, the division which includes Surface made 63 million less than the year before.

[HanzoHattori]

Playstation didn't make money last year because of the purchase of the Gaikai streaming service, which is now called Playstation Now.

[TheWackyMan]

What do you mean exactly? While 400 million dollars is a lot, it's Microsoft. I'm pretty sure they can handle a few losses. If it keeps happening, you should be a bit worried of course, but they are MUCH MUCH better off financially than Sony by a long shot.

[Wizard_King]

MS has been bleeding large amounts of money for over a decade now, nothing and I mean NOTHING has been going right for them in the business world. Windows 8 is a flop, the surface tablets and Windows phones are loosing money in every market and the console division hasn't been in the black now for about 3 years. Not to mention that the games that MS had pinned on selling large amounts of consoles never eventuated to anything real.

Things are not looking good for MS and I see them doing a large amount of trimming the fat in the near future. Even Amazon confirmed a while back that they where not interested in buying MS's console division. I mean who buys something that lost the owner 400 million bucks last fiscal year, oh right NO ONE.

Dreamcast 2.0 before 2015 mark the page.

[devwan]

Xbox 360 hardware is profitable. Xbox Live Gold earns lots of money. Royalties on software sales generates plenty of income.

Now offset all those and end up in the red by $400m.

That's one hell of a large hole brought about by xbox one.

"They can handle a few losses" is such an ignorant cop-out.

[marlinfan10]

@wizard

its obviously not good seeing a loss like this but where have you seen MS bleeding over the last decade? they continue to post profits year after year

[marlinfan10]

for the people disagreeing with my other comment

http://money.cnn.com/2013/1...

[SniperControl]

@marlinfan10

Wizard is right.

They wrote off $900 mill a year ago because surface bombed bigtime, in fact it still is, current figure is around $1.2 bill.
Zune lost them half a billion a few years ago, Windows 8 has flopped big style, there Win phone division is struggling against giants Google and Apple.
The only division making true profit is there Office products.

[FITgamer]

I love these types of comments. It's like people think Microsoft doesn't mind losing money.

[SonyMontana]

MS is surviving on money from their glory days. Virtually every product they have on the market is a failure (Bing, Smartphones, tablets, the now dead Zune, Windows 8). They need a big hit in order to make a come back but the problem is they are out of touch with what people want these days. The launch of the Xbone serves as a shining example of just how out of touch MS is these days.

[TheWackyMan]

@Kribwalker You're a god among men. Thank you.

[Dehnus]

@Wizard_King
And there you go again with deciding what I should like. You probably never worked with a surface or a WIndows phone and can already decide for me. Than this Dreamcast 2 crap like it is a bad thing!

NEWSFLASH SONY FAN! It is one of the best liked consoles of all time with some of the most original games ever produced! Yes the Dreamcast is still loved by many, including having one of the most active homebrew scenes available.

What you call Evil I can also say for Sony. That said I do not want an Xbox one either, but stop dragging everything non Sony through the mudd just because it isn't your favourite choice.

[marlinfan10]

yeah they've had a few failed products but that doesn't change the fact that they post profits quarter after quarter. every company has had bad products that end up costing money, thats why they don't put all their eggs in one basket. name any big company like MS that hasnt had products that cost them huge amounts of money. id bet you'd be hard to find one. saying they're a bleeding company with nothing going right is just silly when you look at their yearly profits. obviously somethings working.

[Evilsnuggle]

dev..wan@

360 didn 't make any money in fact 360 lost money . That is why the ex-CEO Nokia wanted to sale the X box brand. In fact X box has lost billions Microsoft would sell the X box brand if they could. Don't be surprised if Microsoft spins off the X box brand. If Microsoft spins of the X box brand then X box brand wouldn't have deep pockets like X box brand has now with huge advertisement and money hating games. I think it would do more harm than good . But it's the best way for Microsoft to make the best decision regarding X1.

Any way you cut it doesn't look good for X box brand. I don't think Microsoft will make another console. I really think Microsoft will make a set top that is a cloud services.

http://www.neowin.net/news/...

[user367272]

Bottom line is MS continue to make money even with a predicted loss on the console side as expected during the launch year. Can't say that about the competitors though. Imagine the tone in this thread if another company that is beloved here all of a sudden have a record quarter even with losses in launching a new hardware. MS will be fine and Halo 5 will still be released next year. That id what matters to us gamers.

[Gazondaily]

Doesn't launching a console always have high costs associated anyway? Whether or not this loss is 'reasonable' is another question entirely, but some of the other 'deluded' lot may jump to conclusions as they get over-excited and giddy over the news.

Anyway, as the chap above me has quite rightly said, MS can take this hit (natural or not). Others in the game may not be in a position to swallow these kind of losses (if they do suffer from them at all).

[iamnsuperman]

It depends how many losses they are willing to take. Microsoft has deep pockets but those deep pockets didn't materalise from huge losses. The problem for Microsoft isn't the Xbox brand. It's the electronically products as a whole. It has been estimated that Microsoft has lost a combined loss of 1.7 billion on the surface endeavour. That is a big loss. If Microsoft don't pull this around next year's those little discussions about how Microsoft should not be a manufacter might get louder.

That is the biggest threat to the Xbox. They may end up being lumped into a problem the Xbox could easily get out of.

@below If the Xbox brand doesn't bring return or small, insignificant, gains, it definitely will. The problem for the Xbox is Microsoft's other electronic endeavours are doing so poorly they may just scrap the whole thing entirely. The Xbox is a surprisingly small part of Microsoft of which sits low on the priority list

[Gazondaily]

Yeah that's a good point. I don't see the Xbox getting lumped into the whole electronics product anyway because the attachment and goodwill associated with the Xbox brand is tremendous (especially compared to failures such as Surface etc).

If however, the Xbox division continues to see losses over the course of this year and next year, then yeah, that's when alarm bells should be ringing at MS HQ.

[Menkyo]

@septic "good will" are you kidding ? What good will right now their the step child of gaming.

[Gazondaily]

"@septic "good will" are you kidding ? What good will right now their the step child of gaming."

Are you seriously telling me that the Xbox brand has no appreciable goodwill vested in it??

[Spotie]

@Septic: Within the gaming industry? Not really. A couple of fans, like yourself, have forgiven them. But most gamers have not, I think.

Seriously, look at how they manage to piss off everybody but the most devout fanboys. Sure, they may have changed things now, but people's memories don't just vanish.

[Gazondaily]

@Spotie

I'm talking about Goodwill in terms of the Xbox brand as an asset. Not just about consumer perception (of which admittedly it forms one part of it).

"Within the gaming industry? Not really."

Obviously its within the gaming industry.

[brew]

Yes , and they have more launches yet to come !

[mixolydian_id]

It's an expensive business. At least they haven't been sued yet!

To be fair, they would've blown a lot of that anyway... even if the console was released a year later.

There would've been some costs incurred from introducing the 180's so eagerly voiced by the brats.

I still would've preferred the old vision for the Xbox.

If thats just the annual spenditure number, I'm glad to see they've put so much money into the device. Actually makes it a more valuable commodity. Probably explains they're thirst for updates and new feature sets.

the 3 x operating system must've been a entirely new build. The first of it's kind ever. They pretty much wrote the book on it... I wonder how long it'll be until we start seeing multiple operating system devices pop up all over the place?

[BABY-JEDI]

MS have good will as they are now listening to the gaming community & they are now acting upon them.
I would say this is good will (regardless of all the mistakes)

[Revolver_X_]

"at least they haven't been sued yet!"

Google is your friend kid.

http://www.escapistmagazine...

Theres always some knitwit tryna make a buck off of strawman claims.

[MysticStrummer]

"At least they haven't been sued yet!"

Wow. Such delusion.

[rainslacker]

400 million isn't a whole lot when you take into account R&D, but I don't know if this figure includes that cost, as it was likely written off the year prior.

This particular figure is also from all their devices division, but I wouldn't doubt a lot of it is for marketing and R&D and distribution of the X1.

It's not the end of the world for the X1 by a long shot though. We're talking about a product that has a 5-7 year shelf life, and if they can make that money back in that time, or better yet profit, then investors will be happy-ish. If this is mostly X1 R&D, then going forward, it means they wouldn't post losses like that, as the costs have already been written off.

[die_fiend]

That's a lot of money to be losing on a console that is a categorical failure in every regard.

Maybe they should sell off this division after all

[Gazondaily]

Oh how you and your fellow 'gamers' would love to that.

[Letthewookiewin]

This in contrast to the PS4 already being profitable for Sony and selling almost double. This isnt good for Msoft and the X1.

[mrpsychoticstalker]

Lol.

[Fanci]

Xbox One is selling better than the 360. Microsoft did well with the 360. So things are most certainly looking good for both companies, and not bad for Microsoft.

[MultiConsoleGamer]

EDIT: Sorry not taking the bait.

Author better check your math. It would really hurt your rep, possibly ruin it, when someone calls you out on your numbers. :)

[Kidmyst]

If this is true, shareholders won't be happy and pressure might come to Xbox to make drastic changes or sell off the brand. This might explain all the leadership changes MSFT made earlier.

[Anon1974]

You hit it right on the head here. Microsoft is a business and it's their job to run the company in a way that maximizes shareholder returns.

The Entertainment and Devices division, even when making money, pales in comparison to MS's other division when it comes to return on the money invested. To break it down simply (and this is just illustrative), if you invest ten million dollars each year into six different divisions, and five of those divisions return you 20% on the money invested, and one division continually brings in only 5% for a decade, at some point investors are going to revolt and demand to know why those investments aren't being put into more lucrative areas of the company. That's what we've been seeing from some of Microsoft's biggest investors and board members alike.

Launches are supposed to be expensive, but most of the expense is taken up with initial R&D and launch marketing. Those expenses were accounted for two quarters ago. These loses should be concerning to gamers as Microsoft is clearly in a period of transition, despite the lip service being paid to the Xbox brand. Microsoft PR seemed just as committed to the Zune back in the day as well. And we really don't even know how bad it's been historically as Xbox losses have always been masked by patent royalties in the past. To anyone paying attention, the XBox has never been more vulnerable.

[system22]

ummm...

i agree that the xbox could be doing better in terms of sales but.... your comment is kind of naive. consoles are expensive not only to launch, but also to develop. look how much money it cost to develop the controller alone. also - margins on console margins are razor thin, if not losing money. it is expected that consoles make a lions share of the money through software and well... there just isn't a lot of great software right now.

granted this number is pretty crazy but i'm pretty confident a lot of it is not the result of poor sales, though more sales certainly wouldn't hurt.

the ps4's success is partially because of timing, partially because its a kick ass system but also partially because of luck. it had the perfect storm brewing for launch success.. people pissed at MS, pissed at xb1 policies and even more, some flubbed multiplat launch titles on xb1, people pissed about price with mandatory bundled kinect etc... had ms actually not made a slew of mistakes on their handling of the xb1 launch and promotion things would be tighter. at the end of the day the systems really are pretty close. xb1 just has a bad rep now.

[iceman06]

I'm sorry, but it is not luck when your competitor screws the pooch. Sony was just much wiser and less arrogant this time around. They didn't rest on their name and came out first. They created a machine with input from developers in the industry (listened BEFORE the launch). They even got in front on the reveal. None of this was luck. It was calculated and it seems to be working. On the other hand, MS was arrogant in its approach. It created a system that was hard to create a value proposition for in comparison to the competition. Even MS couldn't decide how to market their "All-in-one", "Always connected", "Only with Kinect" future. To compound that, they added in a dose of horrible PR blunders. Once again, this isn't tied to luck. It's directly tied to preparation and calculation.
That being said, these losses ARE probably tied to R&D, marketing, and licensing more than they are actual sales (unless MS severely over projected their sales). This is by NO MEANS the death knell that people imagine for MS. But, it can't make shareholders very happy because they want to squeeze every dollar they can out of the business. That's THEIR bottom line that MS is messing with.

[chrismichaels04]

I agree MightyNoX. A certain part of the gaming community loves to brag about Microsofts profits charts...but they ignore the fact that the majority of those profits come from Microsofts other non-gaming divisions.

[GiantEnemyCrab]

It's a console launch. You expend a huge amount of money. Gotta spend money to make money.

[Orbertron]

Money makes the world go round

[RIP_Cell]

they didn't lose 400 million, they make 400 million less profit than last year, big difference

[kenshiro100]

Did I read that right? 400 million?! Wow...

[RIP_Cell]

wow? do you know how much Sony is on track to lose this fiscal year? 1 billion

[kenshiro100]

Is that for the gaming division? Because the last time I heard about it, they were profitable. In fact, Sony is recovering from their losses.

By the way, stop dragging Sony into this. This is about Microsoft.

[prologic]

relax buddy!

http://money.cnn.com/2013/1...

[otherZinc]

It's amazing how many of you don't know a thing about business or how to read a financial report.

The XBOX ONE "is" profitable. It's been profitable from day 1.

The PS4 wasn't, maybe they should sell its games division. PS4 only became profitable "after" it laid off 100 ' of workers in each & every development house they own: Including, Guerilla Games, Naughty Dog, & Sony Santa Monica. Then they only made $12 per PS4 Sold, and that wasn't enough to remove Sony Stock from "Junk Status" by Moodys and Standard & Poors.

Some of you on this site are just silly.

[Death]

It's incredible how no one is checking the link. The division made almost 1 billion in gross margin yet everyone here is saying they lost money. The cost of revenue increased which is why gross margin this year based on 3.2 billion more in revenue decreased by 63 million.

Revenue was up 49%, but the margin decreased 7%.

[chaosx]

https://www.worldpayzinc.co...

check this out , Doesn't look as if they should be too worried.

[iamnsuperman]

That is an insane loss to be solely attributed to the Xbox platform. I doubt we are going to see a price cut anytime soon.

[Tony-A]

Agreed. It sounds counter-intuitive but keeping the price to at least $400 is really the only option they have right now and cutting price might only cause more damage.

I chalk it up to The Curse of the Third Console. Good or great debut, much more successful second coming and arrogance/pride destroys the third.

On one note, I would advise Microsoft to re-evaluate their goals and long term endeavors. They tend to always be that 12 year old kid that wants what the other kid worked hard for. Their software is a success because it was a user-friendly way of doing something that was already possible. But in today's generation, every market they've squeezed themselves into has come off as a "me too" approach. Phones, search engines, consoles, video game publishing, they all feel like a result of them seeing others making good money from it. Only difference is they don't really care if they do it better than others as long as they get a piece.

mmmmmmmmmbut I'm not a financial advisor...

[imt558]

Around 100$ loss on each Xbone sold.

Well, don't expect pricecut anytime soon.

@Fishy

Quote :

"...Probably the same scenario with the 360 or any other company's launch of a major new product..."

Well, this gen Sony doing quite opposite.

@InTheLab

Quote :

"...Maybe I missed it but where does it say they lose $100 on each sold?..."

It is just pure calculation. 400 mil. loss and around 4.9 mil. Xbone sold ( i presume ). Well, maybe my calculation is wrong.

@Fishy :

Quote :

"...If they make a profit on the PS4 alone in its first fiscal year that's one for the books and they must of had a minuscule R&D overhead. Which seems unlikely..."

http://www.dualshockers.com...

http://www.eurogamer.net/ar...

[InTheLab]

Maybe I missed it but where does it say they lose $100 on each sold?

[Fishy Fingers]

Well that good news for Sony then.

While I don't follow this as accurately as some I don't believe Sony posted outgoing revenue associated with individual products like is being done here.

If they make a profit on the PS4 alone in its first fiscal year that's one for the books and they must of had a minuscule R&D overhead. Which seems unlikely.

[Fishy Fingers]

Obviously a headline to grab attention. While revenue from the Xbox brand actually increased the outgoings did too. Like the article points out, your first fiscal year encompasses the additional R&D costs and marketing associated with launching a new product. Probably the same scenario with the 360 or any other company's launch of a major new product.

[Hanso]

WOW lol

[asmith2306]

That is a lot of money for a company who isn't a traditional gaming company in the sense that Nintendo and Sony are. I wonder what the board are thinking.

[wodan]

Wow i knew the xbox division does not make MS any money but this is really a big loss.

[Niv]

I now know why xbox tv got dumped.

[Shad0wRunner]

$400 MIL? Dayyyyum son. LOL

[Bennibop]

Its the curse of the 3rd console!

[wodan]

It is don mattrick curse.

[Mikeyy]

How that guy landed a new job after that PR blunder still escapes me...

[kewlkat007]

Who knew you loose money when you launch a new product...

[Menkyo]

Losing money is expected but not almost half a billion dollars.

[Afterlife]

Microsoft can recover from this. Gears of War and Halo, rinse and repeat. Problem solved.

[Hanso]

Dreamland sure must be nice.

[Tedakin]

That's a lot of money. To Microsoft that's nothing. But still that's a lot of money.

[prologic]

http://money.cnn.com/2013/1...

[SaveFerris]

MS has flipped the switch, promoted Spencer to concentrate on games, cut TV, dumped Kinect and are about to launch in China, Japan and other countries. That's gotta be costing them quite a bit of money.
Now MS has to play the waiting game to see if it pays off.

[grassyknoll]

Maybe this 400 million is for the Xbox division as a whole, so that's all the profits of the 360 + a extra 400 million spent on Xbox One. We could be taking anything from 600 million to a billion lost. That's far far higher than expected I imagined.

[chaosx]

I don't see why gamers would be happy about this….. we need all consoles making money or it ends up being bad for everyone.

[Tedakin]

Fanboys above are actually saying this makes them happy. Get rid of either Xbox or Playstation and see how awful gaming becomes with one supreme console, and nothing to keep it in check.

[grassyknoll]

No we don't. Competition means there are winners & there are losers. Sony & Nintendo are not only in competition with themselves, but PC, mobile, tablets, Netflix, the gym(!) Etc. They have to make complying hardware & software or they'll die too.

[marlinfan10]

they're just little kids that don't really understand anything. thats the conclusion ive come too. i find it hard to believe anyone over the age of 13 would act like some do on this site

[Qwagy UK]

Just imagine how good the xbox one could of been with that money invested in a decent GPU.

[prologic]

relax man... http://money.cnn.com/2013/1...

[mhunterjr]

Smh at those who think this has to do with poor sales...
Revenues are up, and the losses have been attributed to increased sales over the previous years.... Which means the platform is expected to be a loss leader... As is the case with most console launches ...

All this talk about dreamcast 2.0 is laughable.

"While the Xbox Platform’s revenue increased by $1.7 billion, the cost of said revenue increased by $2.1 billion. Both the differences point at the Xbox One’s launch as their primary cause. That’s a $400 million difference in gross margins."

This means that since launch, they've been losing money with each sale ... Having more sales wouldn't change that...

[HugoDrax]

Exactly! people see the headlines and comment without reading anything. Where is the article on N4G regarding this little tidbit? Because they sure mention the word PLAYSTATION in this article a few times.

http://bloomberg.com/news/2...

[Chris12]

How typical for dualshockers to offer an other clickbait article, which ignores the two key points.

1) Xbox revenue is up 34%
2) 'We have to keep in mind that this kind of result is pretty much to be expected at the launch of a new product'

In other words, there is no story other than strong Xbox sales, yet out come the kids to fight. SMH

[gfk342]

Ouch!
This explains Microsoft's CEO recent declaration according to which Xbox brand is not a core product for Microsoft. Adding the fact that Microsoft is not interested in keeping the exclusives for Xbox fans and also the closing of Microsoft studios, I'm afraid that hard times will follow for Xbox.

[KirbysDump]

Look guys. I probably put £1000 of money into buying this thing and games, headset etc. I spent that fixing the clutch on my car. If it it goes pop, I'll just chuck it in the skip.

[NexGen]

I don't know what it means, but I'm going to start saying "just chuck it in the skip."

[ScorpiusX]

This sucks but am hoping they come out on top and winning the consoles marathon. Go MS/Xbox

[enfestid]

How did this story get approved? It's completely incorrect. These figures are the differences in changes, not the total amounts.

The $1.7 billion is the increase amount of revenue, while the $2.1 billion is the increase amount of cost of revenue. $1.7 billion is cited as an increase of 34 percent, while $2.1 billion is cited as an increase of 72 percent. $1.7 billion is 34 percent of $5 billion, while $2.1 billion is 72 percent of $2.9 billion.

[Abriael]

You understand that the article says *exactly* that? Thought I'd point it out before you explode.

Did you actually read the article itself, or just the neogaf post that generated it?

The fact that the neogaf OP didn't notice, doesn't mean I didn't.

[enfestid]

I'm not about to explode, I'm just pointing out your inaccuracies. You wrote an article that is incorrect, and your headline reflects that. The fact that you've edited the article several times since it was originally published (which can be seen in the Google and Bing caches) doesn't change the incorrect headline that you're using in an attempt to generate clicks.

[Abriael]

@enfestid: The edits were made just a few minutes after the article was posted. Didn't really need your "help" for that.

The headline has also already been clarified and the mods have been asked to reflect the change here via ticket.

Mind you. The headline was still correct before and after the clarification. A loss in gross margins is still a loss. It's been clarified just for the sake of immediacy.

[Ron_Danger]

@Abriael

It's no use. His eyes are shut and his fingers are in his ears. Maybe instead of using dollar figures to explain it to him, use crayons or M&M's. That usually helps children comprehend things that adults understand everyday.

[MCTJim]

because its easy to spin financials like this.

[GW212]

No need to spin them here.

[dcbronco]

I think you two are ignoring Enfested's main point. The 1.7 billion is an increase over the previous year. And if you really wanted to understand stand what goes into making that number you can look it up on Microsoft's investors page on their site. So it does actually equal over 6.7 billion in revenue for hardware. Which does now include computer equipment like Surface. The revenue for transactions on Live are included in a different total. Transactions includes all dlc, music, movies and Apps sold on Live. I can't remember which one royalties from games is in. Live subscriptions goes with hardware though.

The new way they do their financials will make it easier to see Xbox makes money. And now that clueless analysts can see that we won't see anymore ignorant"sell off Xbox" at least from the likes of Bloomberg and Forbes. Though on this Pachter has been on the money.

So as I eat an M & M, I do so knowing I've said this for years and now it will be much easier for others to see as well.

Also see the line in Microsoft's earnings statement on cash on hand and cash equivalents. It's at over 85 billion now and if you look at it down the line you will see that it has grown over 11 billion or more per year for the last five years. So no. Microsoft has not lost money for the last seven years like some here seem to think.

[TheEnigma313]

I think this loss has a lot to do with the failure of the kinect. I' sure they spent a lot of r&d for it.

[HappyWithOneBubble]

The end is near for Xbox I can almost taste it.

[Abriael]

Oh please. It isn't even close.

[ghostrider32]

It's safe to say you threw a barbeque when the Dreamcast went out of commission.

[04STIBluByU]

No, but I threw one when the OG Xbox was canned lol!

[quenomamen]

Damn I bet they would kill to sell as many X1s now as they did Zunes years back.

[Mikeyy]

I still have my Zune 120gb. Love that thing.

There is still no comparable 7 years later.

64gb ipods are too small for me and the large capacity ipod has the crappiest interface ever. Also itunes is horrid for people like me with 100+ gigs of music. I can't stand apple products.

[Master-H]

Most of it is probably due to that BS device they call Kinect R&D costs, buying out timed exclusives/dlc must have not been helping either.

[HappyWithOneBubble]

Like the Titanfall exclusive deal most likely benefited EA and Respawn instead of MS.

[Abriael]

Actually, it's the opposite. The Titanfall exclusive deal most probably benefited Microsoft, and not Respawn/EA.

Microsoft got a lot of promotion out of it, and a highly anticipated exclusive.

EA and Respawn got less sales.

It's not rocket science to understand who reaped the benefits.

[Mikeyy]

The deal doomed titanfall if anything.

Game would have sold triple as multi plat

[Cueil]

I don't know what you two are smoking... MS financed titanfall making it almost 100 percent profit for EA... that's why it's exclusive

[cruzngta]

Thats not good at all. That asshole Mattrick really screwed the pooch when he was at the helm. I am happy for MS that Phil is in charge but ti is going to be very hard to overcome all of this. Good luck MS.

[ghostrider32]

If the Xbox division do get sold, just hope Appple don't get it. They'll probably try to release a new console every year.

[JeffGUNZ]

Correct me if I am wrong, because I am not expert in the field of finances or business, but isn't this somewhat expected during the launch years of a new console? I think MS will start knocking that number down some now they have a 399 console without kinect and the Halo MCC will help move some consoles. Hopefully Quantum Break is amazing next week and I truly believe 2015, all 3 consoles will strive. 2015 games for each console look amazing. Good year coming up to be a gamer.

[Wikkid666]

Nothing abnormal about this. Lots of expenses involved in launching a new product.

[OC_MurphysLaw]

N4G the home of apparentl.y tons of financial analyst's. I claim it no such expertise but I do know that R&D costs typically are front loaded into a console life cycle that's why they typically Take longer to make money

[Frogman180]

Dude stop, your not allowed to be right. The Xbox one sucks and MS is going bankrupt. I mean people can smell a Dreamcast 2.0 on the horizon. PS4FTW!!!!!!!!!!!!!!

[OC_MurphysLaw]

+bub for the chuckle

[Silentscope]

I just want to put this out there... Does no one remember the "massive failure" the PS3 was when it launched? Losing Sony $2.16 billion in fiscal year 2007. http://kotaku.com/5018899/s...

[OiNioB]

People here believe MS have been bleeding money for decades yet they some how post profits bigger then Sony and Nintendo combined, with their stock being up 50% YTD.

The agrees and disagrees for all of these comments are an even bigger joke.

[kurruptor]

MS is making money.

Xbox division is losing money.

[gedden7]

Oooohhhhh if I can just turn back the hands of time....

I stated that in one year the XBOX One would net MS a $1 billion in losses to MS.. And it looks like that is gonna happen.. But what did I get? A ton of dislikes and criticisms lol Oh gamers...

Oh well. I wonder if ms will sell the brand...? My Nintendo (company) is still looking good to me. Sony is still going bankrupt btw... Let the hate continue....

[OpieWinston]

You're still getting dislikes because they didn't take a "$1 Billion in losses" from Xbox One.

The fanboy is strong.

The computing and gaming division made a profit and it was expected Xbox would lose money in the LAUNCH year... The overall division still made a profit though.

893 Million kid...

[Cherchez La Ghost]

Tough times over there at MS. Hopefully, Nadella has a plan to turn things around. But this right here almost every business go thru. I'm very interested of how MS will evolve with the competition with Amazon, Google & Apple.

[mochachino]

Isnt that the amount they paid for exclusive NFL content.

[GodGinrai]

Kinda gives you an Idea of how much money MS have. those numbers make my head spin.

[bleedsoe9mm]

headline should have been "consoles are freaking expensive to launch"

[Ulf]

A console monopoly is the LAST thing we want, during this age of digital downloads, folks.

Think before you fanboy. ...I know that can be hard for some.

[danny818]

that's not much lol didn't sony buy gakai for 300 mil and its still not in use?

[GW212]

I think I actually get more stupid by visiting this site. When I click on a financial article, I actually have a hard time reading the comments because of how inaccurate and misinformed they are. Ugh. Children talking about finance, what a disaster.

[lawgone]

I was thinking the exact same thing. It's funny and scary at the same time.

[Emanno]

So Microsoft lost 400 million
Nintendo lost 97 million
Sony are still in financial debt

It's worse than Nintendo.

[Wikkid666]

Microsoft didn't lose 400 million. The Xbox division did. Microsoft as a whole doesn't lose money. EVER.

[btk]

Investors most likely will apply more pressure because this is the third gen XB console and it looks like it is going to do as bad as the first.
Remember - MS is used to monopoly profits - and like Zune they just don't get a proper control of the market like they usually do.

Might not bode well for XB.

[uth11]

Time to sell the Xbox division to someone who can do it profitably

[jnemesh]

Funny how even Microsoft's own financial statements aren't good enough for fans to admit that the Xbone is a failing money pit!

Guys, the numbers should tell you the tale loud and clear...and even if it doesn't, the people who DO understand the numbers and who are in control of the company CAN see the writing on the wall here!

Make no mistake, if this continues for the next few quarters, they WILL pull the plug! Regardless of the billions of dollars generated from their core business, they will not continue to fight a losing battle just for the sake of pride! The "Battle for the Living Room" is over. Not only did MS lose, but they already admitted that the "battle" isn't even relevant to them as a company!

Now, for those who say this will be "bad" for gamers. Remember that 15 years ago, we didn't have MS or the "competition" that they brought, and gamers and the industry did just fine without them! Gamers, and the industry as a whole, will do just fine when they exit the business as well. Remember that there is still PC, iOS, Android and Nintendo for Sony to compete with!

Also, with this, we can finally put to bed the idea that the Xbox One is "doing well"! It's not, and now, it's proven.

[lawgone]

Are you really that clueless or are you just trolling?

[TheTwelve]

Xbox Division stays bringing in no money for Microsoft. It remains alive purely due to Microsoft riches. I don't believe Xbox will ever make money for Microsoft as long as Sony is around.

[Dewitt]

Even though it has posted a profit the last 8 years running now?

[TheTwelve]

Xbox Division has made zero dollars against what they've invested in the gaming industry. Just a fact.

[Dewitt]

Wrong they have been in the green for market gain the past 8 years straight. The xbox division posted positive gross profits every year since 2008. Do some damn research so tired of lazy people who post their own version of the truth.

[timlot]

This argument is funny...

Microsoft Market Cap: $353.78 Billion
Sony Market Cap: 17.94 Billion

Microsoft can support Xbox with the change they find in the couch cushions.

[Wikkid666]

So true... MS could buy all of Sony's stock with just one years profits.

[GodGinrai]

that option may well be available to them, one day. Not like MS are strangers to buying out the competition...they got the money.

[thecowsaysmoo]

I am surprise... sony still has 18 billion dollars. They are always losing billions yet they still have some investors.

[lawgone]

The lack of business acumen here is not surprising. I love the grand conclusions made from one piece of a financial statement. There is absolutely nothing in the snippet provided that leads me to believe the Xbox One or MS is in trouble. You guys would lose your shirts if you tried to invest on your own.

[Goku781]

MS needs to as RoboCop said, "Drop it!"

[xx4xx]

Microsoft profited....PROFITED $24B last year. That is after all salaries, losses, operating expenses...they PROFITED $24B.

This amount of money is a mere pimple for Microsoft. It didn't stop them from buying the Gears franchise for $100+M (as rumored), it hasn't hampered production on AAA titles like Halo (MCC and #5), or Sunset Overdrive. This dollar amount will have zero impact on the XBox brand moving forward.

[VP37]

Exactly...well said my friend. All these morons on here laughing and carrying on about MS losing 400 million.

Hey dummies...MS didn't lose anything. Their profit margin shrunk by a few percent, which caused them to make 400 million less than last year. They still made a profit, just less profit. Morons.

What you Sony fanboy morons should be more concerned about is how the Play-Station division made a profit last quarter but Sony as a company is still in the toilet.

[PoodlePuncher]

I really think this is due to the lack of games on these new systems. They invest money in R&D and what not in the new consoles and make their money back and their real profits from the percentage they take from game sales. Problem is, there still really hasn't been many games for either platform. Yes, they have Forza, Ryse, blah blah, but we're getting close to a year since release and still haven't seen a decent game library. I'm sure this will all turn around once fall hits, a lot of good games releasing.

[Dewitt]

Can the mods fail this dualshockers libel fest now? It has been proven that the quarter actually earned 970 million, not a posting a loss. So tired of DS articles getting approved when they are wrong 75% of the time.

[Dewitt]

893 million, misread the original article.

[Jdoki]

Yeah, I downloaded the Excel sheet on the MS site with all the financial info in. It certainly makes different reading than what Dual Shockers have assumed.

[Elit3Nick]

Wait did the other article get banned?!? I read it an hour ago and now I can't find it...

[FayZ_]

ms are still rich
sony are still broke

xbone is selling well but the ps4 is selling better... but even then sony are still broke lol who do you think is going to survive?

[BillytheBarbarian]

Titan fall rules on 360. People don't feel the need to upgrade. I sure haven't.

[arugula]

Steve Ballmer and Bill Gates have around 100 Billion between them in personal finances. This is pocket change for MSFT as a company.

[PlayableGamez]

Why is this a good thing?

[XStation]

LOL you're on here to? I see you on YouTube...anyways look at this: http://gyazo.com/538cc9a495...

They failed to publish the right article.

[larrysdirtydrawss]

dont see xone lasting passed year 4,they see the light and will go multiplat with the few decent studios they have

[S2Killinit]

thats a lot of mulla

[XStation]

http://gyazo.com/538cc9a495...
http://gyazo.com/e42e6978b2...

The fanboy is strong on this website.

[jdiggitty]

So that's why their stock is only 2pts off their 52 week high!

[MultiConsoleGamer]

Uh oh! What's with the sudden title change?

I guess someone discovered the flaw in the author's fuzzy math.

How embarrassing.

All the fanboys in this comment section and the original author now look so foolish. For shame.

[christocolus]

Its too late, dualshockers has already spread lies and other articles online carrying dualshockers news have since updated it or pulled it down.

Its so embarrasing. Can't believe Abraiel would do something like that. This is how weak journalism spoils the xbx brand. Abraiel should have posted another article clarifying this one instead of changing the title alone and yet most people in here will keep thinking xbox made a loss meanwhile they made over$800mil profit, I'm gradually getting tired of the crap they keep pulling here..the mods didn't even pull down this article with all its failed comments ...its crazy.. I'll bring this up on the xbx sub reddit forums. Dualshockers just hit a new low in my books.

[OpieWinston]

Dualshockers hit a new low?
It's always been that low.

Mindless click bait to keep themselves above water... They have very little things interesting but go based off twitter or job postings as "News".

And ever since these consoles launched have been using flame bait article after flamebait.

Abriael learned the best way to generate hits was by feeding the trolls. He doesn't care.

I'm waiting for InnerCircle to do a Gaming news site so I can leave N4G/Dualshockers behind.

[Legend]

This comment section is the funniest thing I've seen all week. This has turned into a who's who of idiots on this site.

[MonkeyOne]

Christ people

Gaming Consoles haven't been a profitable business to be in since the PS2 era of console gaming ended.

This isn't news.

The Xbox 360 and PS3 have been WONDERFUL gaming platforms for consumers but don't confuse that with profitability.

The gaming scene is very fragmented now. PC and Steam have emerged as a major spoiler to the consoles as have smartphones and tablets with their $1.99 games.

It's NOT going to get any easier for Sony and Microsoft with the One and the PS4

The difference is that the Xbox division is not all that important to Microsoft's overall financial health whereas Sony's Playstation is far more relevant for their survival as a company.

[AutoCad]

So MS posts a loss and they are selling off the brand..
Yet Sony been posting losses for a decade and they are good..

ya okay lol back to the last of us

[DarkOcelet]

Bad pr and useless kinect aan ridiculous high price was the reason , but now that the kinect and better managment are here (i hope ) , they can do better...

[Rscottyg]

"That $400 Million would be a deduction from the division's gross revenue which according to their tax filings was $9 billion for the gaming devices and hardware division. When deducting all the related losses for manufacturing, marketing and more. The Xbox one $400 Million spend would be a deduction from the Gross revenue and not a loss. The reality is that the division emerges with a Gross Margin bottom line with $893 million profit. Not a $400 million loss.

http://www.microsoft.com/In...

Please don't insult people's intelligence like this ever again."

Enough said.

[chaosx]

check out this site , https://www.worldpayzinc.co...

MS as a whole are doing just fine!

[kewlkat007]

What happened to the Title? Fanboys and these sites are confusing me..

[RantandRave]

I have a question that I posted previously and has somehow been removed and not answered.

"We sold 11.7 million Xbox consoles during fiscal year 2014 compared with 9.8 million Xbox consoles during fiscal year 2013."

How many of the total 21.5 million consoles sold were 360's and xbox 1's? When will we see updated numbers?

Surely this must mean the 5 million reported sales must be higher and that would be great news for Microsoft.