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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.

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MightyNoX656d ago

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.

iamnsuperman656d ago (Edited 656d ago )

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.

BiggerBoss656d ago (Edited 656d ago )

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+

Wizard_King656d ago TrollingShow
devwan656d ago

@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-man656d ago (Edited 656d ago )

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 why656d ago (Edited 656d ago )

. . .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.

PinkCrocodile75656d ago

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.

kneon656d ago

@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.

ZodTheRipper656d ago

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.

UltraNova656d ago

@ 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 Toasted656d ago (Edited 656d ago )

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

sonarus656d ago (Edited 656d ago )

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.

GTgamer655d ago

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_id655d ago

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.

guitarded77655d ago

@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 :/

Samsara82655d ago

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

xer0655d ago

@BiggerBoss

Yes - Sony in comparison made a profit.

UltraNova655d ago (Edited 655d ago )

@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!

darthv72655d ago

@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.

gaffyh655d ago

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_One655d ago

@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?

gaffyh655d ago

@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.

Magnes655d ago

@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.

Visiblemarc655d ago

@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.

thehitman655d ago

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

rainslacker655d ago

@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.

Bigpappy655d ago TrollingShow
Death655d ago (Edited 655d ago )

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.

HanzoHattori654d ago

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

+ Show (25) more repliesLast reply 654d ago
lelo656d ago OffTopicShowReplies(12)
TheWackyMan656d ago

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_King656d ago

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.

devwan656d ago (Edited 656d ago )

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.

marlinfan10656d ago (Edited 656d ago )

@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

reaperofsouls656d ago TrollingShow
marlinfan10656d ago

for the people disagreeing with my other comment

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

SniperControl656d ago

@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.

FITgamer656d ago

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

SonyMontana655d ago

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.

Kribwalker655d ago TrollingShow
TheWackyMan655d ago

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

n4rc655d ago TrollingShow
Dehnus655d ago

@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.

marlinfan10655d ago (Edited 655d ago )

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.

Evilsnuggle655d ago (Edited 655d ago )

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/...

user367272655d ago (Edited 655d ago )

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.

+ Show (12) more repliesLast reply 655d ago
Septic656d ago (Edited 656d ago )

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).

iamnsuperman656d ago (Edited 656d ago )

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

Septic656d ago

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.

Menkyo656d ago

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

Septic656d ago

"@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??

Spotie656d ago

@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.

Septic656d ago

@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.

brew656d ago

Yes , and they have more launches yet to come !

mixolydian_id655d ago

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-JEDI655d ago

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_655d ago

"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.

MysticStrummer655d ago

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

Wow. Such delusion.

rainslacker655d ago

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.

+ Show (9) more repliesLast reply 655d ago
die_fiend656d ago

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

Septic655d ago

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

Letthewookiewin656d ago

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

Fanci655d ago

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.

Magicite656d ago BadLanguageShow
MultiConsoleGamer656d ago (Edited 656d ago )

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. :)

sAVAge_bEaST655d ago TrollingShow
Kidmyst655d ago

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.

Anon1974655d ago (Edited 655d ago )

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.

system22655d ago (Edited 655d ago )

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.

iceman06655d ago

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.

chrismichaels04655d ago

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.

gangsta_red655d ago OffTopicShowReplies(1)
lawgone655d ago NotAReplyShow
GiantEnemyCrab655d ago

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

Orbertron655d ago (Edited 655d ago )

Money makes the world go round

cigi655d ago

This news is just so dumb. Xbox devision is still making money for MS - show me a history where a console is making money the first year.

Of course a new launch cost money - I bet if Sony told the real story about PS4 only - that would show up the same. But then again Sony is not doling well on anything else.

Stoppokingme655d ago TrollingShowReplies(2)