Xbox marks the spot for Microsoft

Software giant records record revenue and better than expected earnings thanks to healthy Xbox 360 sales; stock gains on the news.

Microsoft reported a drop in profit for its fiscal second quarter Thursday, but sales and earnings beat analyst expectations thanks to strong sales of its Xbox 360 game console during the holidays.

The company reported record quarterly revenues of $12.54 billion, up 6 percent from a year ago and ahead of the $12.09 billion expected by analysts.

The stock rose about 1.9 percent in after-hours electronic trade.

"Revenue looked pretty good," said Rich Williams, analyst with ICAP. "We already knew Xbox sold well over the holidays, and we knew they lose money on every one sold, so that wasn't a huge plus. But the deferred revenue they reported was much higher than expected at $1.64 billion - very strong."

The Redmond, Washington-based software company reported earnings of 26 cents per share, compared to the 23 cents per share expected by analysts polled by Thomson Financial. A year ago, the company earned 34 cents per share in the second quarter.

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KingJames19065217d ago (Edited 5217d ago )

Keep in mind that the Xbox360 hardware and software are making a profit. Do you really think Sony will compete at their price ($500 - $600) with no price cut in sight for at least another year (from today.)? While Microsoft can lower the price (two to six months from today)of the Xbox360 to anywhere from $50 ($249 - $349.) or $100 ($199 - $299) dollars.

FordGTGuy5217d ago

but the Xbox 360 shares its budget with the Zune and the rest of the new Microsoft entertainment device projects.

DJ5217d ago

We have evidence that the 360 is sold at a $70 profit, but Microsoft says that they're sold at a loss in this interview? Was the old data flawed?

I do have to remind people that lowering the price of a console doesn't necessarily mean it will sell more. The Gamecube actually had its sales plummet when its price was dropped to $99.

If consumers only purchased the cheapest products, we'd all be at Walmart and everyone else would shut down. If Microsoft drops the price too much it would signal to consumers that they're intimidated by the PS3 and that their console is inferior.

Why is the Wii sold at half the price of PS3? Because it's inferior. The same mindset ends up traveling between products. Sony on the other hand has the luxury of benefiting from a price drop since it will always be more expensive than the 360. If you need reference as to what's going, just look at the Dreamcast.

shotty5217d ago

True but both sony and microsoft have brand awareness so who knows what will happen. The first step is getting everyone thats willing spend $400 onboard which microsoft got 10 million of, now they need to lower the price to get the fense sitters onboard. This sucks for sony since when sony finally goes down, microsoft would have already been in that price area and taken that market.

The great Me5217d ago

..when you say that a drop in price will be seen by consumers as an indication of an inferior product, and then you use the Wii as an example. Problem is that the Wii is killing the PS3 in sales like 4 to 1. truth is people will buy the cheaper system in most cases, especially when the benefit of the more expensive one is hard to see.

DJ5217d ago

when you said that my example of the Wii proves that lowering the price of a console doesn't guarentee success. But the Wii hasn't had a price drop. Thus, you wrote all that for nothing.

The Wii is in a whole different category, mostly because it's giving people next-gen game controls, but with last-gen graphics. It's the 360 and PS3 that are really competing with each other.

ArmrdChaos5217d ago

that they will cut the price of the consoles themselves. Instead I would expect them to either offer killer game packs that people can not refuse or a combination of both console drop/game pack. Maybe something like a Gears of War game pack at $350 dollars and a second controller.

KingJames19065217d ago

Hardware sold at a $70 dollar profit? Where did you get that crap? You forgot about the SOFTWARE. You know, Gears of War, Dead Rising, Rainbow Six, Ghost Recon, etc, etc. You know the million sellers one Xbox360. I guess hardware manufactures don't make money off software that graces their systems. Say what you want, PRICE drives everything. Maybe not in your small corner of the world, in mine, yeah. It's pretty simple; Microsoft is in a position to crush Sony with a large cut in the Xbox360 price by August of the year. By then, some great titles come out on both systems with the only difference of price of the console between them. I mean what would a company like Microsoft know about cornering any market? Oh, Wait doesn't like 90% of the world’s computers run their OS? Hmmm?

TheMART5217d ago

Oh hell yeah DJ again twisting facts.

Let's take in mind that the most expensive systems in it's generation are also most likely to fail:

Sega Saturn

They all failed miserably.

A cheaper product isn't viewed as inferior. Mostly people just won't buy overpriced stuff and get the alternative that does the same or more for a cheaper price.

Everyone sees what you try to lie and cheat about like always, trying to play some young kids minds. The Wii is inferior, thus halve the price etc etc. Yep the Wii is a supercharged gamecube. But still it outsells the PS3 by a large margin. Especially funny in Japan, where Playstation always is large. In the top 20 of most selling games in Japan from the last weeks, there is NOT ONE, I repeat, NOT ONE single PS3 game listed. Gears is in there however for the 360 which is a fun thing to see.

The 360 is cheaper then the PS3 because Sony tries to push it's overexpensive BetaBluRayplayer, which adds 200 dollar on the costprice. The rest of the hardware is less capable on giving one the best games then the optimized 360 hardware. You just can't argue that. The games prove it. COD3, FNR3, MLB 2k7 other games they all prove it.

Plus the best looking exclusives are on the 360. You can't argue quality you see.

Talking about pricedrops, history repeats itself when a console hits the 200 dollar first compared to the other competitors. They start selling to the mass, above it's for the diehard gamers.

Which means, that's why the Wii is selling. That's why the 360 will lower it's price this year. That's why the PS3 has a problem @ a pricelevel of 600 dollars, which is 2/3 to expensive to start selling to the mass of people.

I would get it the other way around: if Sony can't follow the price setting of the 360, it will be viewed as a overpriced piece of hardware that, seen the less quality in games compared to the 360, will be competing the much cheaper Wii then the superior, but right priced 360.

Let's take your own precious PS2 as an example. Which is cheap ass hell, just over 100 dollars. But it sells like hell. One small problem, Sony's public doesn't seem to buy many games.

Launch attach rates:

PS2/Gamecube: 1.9 game per unit
XBOX 1: 2.4 game per unit
XBOX 360: 4.5 game per unit
PS3: 1.5 game per unit

The 360 number rose to 5.3 lately. The numbers of the PS3 are not known yet, but we can say, not entering the Japanese gamelist top 20 certainly gives a direction where it's going.

It's not only about selling hardware, more important became the selling of software/content. Gears sold 3 million copies to about 11 units sold now, there are 14 games that sold over a million copies on 360. Not to speak about points used on Marketplace. The 360 is a healthy businessmodel. The PS3 isn't.

Not only consumers see that, the industry also confirms that, by getting former PS exclusives over to the 360. GTA, Assassins Creed, Fatal Inertia, Bladestorm, DMC4, Virtua Fighter 5, UT2007 aka Unreal Tournament 3... Soon Tekken 6, MGS4...

They're all jumping ship, running like rats and fast as hell. Nintendo failed 3rd gen, Sony will fail 3rd gen. Expensive or cheap, for them it doesn't make a real difference now.

Sorry DJ, it's time to face the truth and end your lies and twists to people. We'll kill your mindless posts by adding links, facts and real information. Others will do also, so you'll be seen as Mr. Twister or Lying Lame Lama from now on.

+ Show (3) more repliesLast reply 5217d ago
fjtorres5217d ago

Judging by their conservative forward guidance it looks like they're planning for slow sales for the next few months (barely a million) because they are more interested in short-term profitability.

Lets face it, 100k $800 PS3s in UK, 1 million total for the Pal-lands and slow PS3 sales in US and Japan are hardly an incentive for MS to cut prices early.

Looks like they're going to wait and see if Sony implodes before cutting the price.

Like they said last year: "Sony already gave us our price cut."

Covenant5217d ago domination! Everyone will have Zunes and 360s and Windows, and Bill will case himself in gem-studded solid gold as he stands astride the globe like Zeus come down from Olympus, and we shall worship his geeky countenance forever!

Just kidding...a little. I do like my 360, tho.

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