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[cja]

Home and Entertainment

Three months ended September 30
(In millions, except percentages) 2003 2004 Percentage Inc./(Dec.)
Revenue $581 $632 9%
Operating loss ($273) ($142) (48%)

Home and Entertainment includes the Microsoft Xbox video game console system, PC games, the Home Products Division (HPD), and TV platform products for the interactive television industry. The relative success of competing video game consoles is determined by console functionality, the portfolio of video game content for the console, and the relative market share of the console. We are a relatively new entrant in the video game console business with our first release in fiscal 2002, and have already established ourselves as one of the leaders. Revenue and unit volumes have grown quickly since 2002, but revenue growth moderated in fiscal 2004 due to price reductions typical at this stage in the console lifecycle. We believe our competitive position and revenue is bolstered by our increasing software game attach rates, providing higher margins to offset the decreasing price trend on consoles sold. Currently, Xbox consoles have negative gross margins.

In the three months ended September 30, 2004, Xbox revenue increased $71 million or 23% with $129 million related to higher Xbox software and console volumes as compared with the first quarter of the prior fiscal year. This was partially offset by a $58 million decline related to price reductions of Xbox consoles and software. Xbox console volumes increased 4% in the three months ended September 30, 2004 compared to fiscal 2004. The Xbox life-to-date U.S. games attach rate increased to 7.3 games per console according to industry analyst NPD as of September 30, 2004. Revenue from consumer hardware and software, PC games and TV platforms declined $20 million or 7% compared to fiscal 2004 due to lower PC games software sales.

The decrease in operating loss in the three months ended September 30, 2004 was primarily due to an increase in Xbox software volumes and a reduction in headcount related costs, primarily associated with a $19 million decline in stock-based compensation. This was partially offset by an increase in costs associated with the next generation console development efforts. Operating expenses continue to be driven by investment in the next generation Xbox platform design, sales and marketing efforts directed towards holiday season promotions, and headcount-related costs.

http://www.microsoft.com/msft/earnings/FY05/earn_rel_q1_05.mspx

 

[thorns]

Net profit for the world's largest software maker rose to $2.9 billion, or 27 cents per share, including stock-based compensation, for its first fiscal quarter ended Sept. 30, from a profit of $2.6 billion, or 24 cents per share, a year earlier.

$3 billion profits in 1 quarter??
I don't think they're going anywhere anytime soon.. -$142 million is almost nothing to them.

 

[LakeEarth]

Yeah Microsoft is smart. They know Xbox would be a loss for them. Becoming more popular is the goal this generation. Next gen will be the money making one (they hope).

 

[CrimsonSkies]

They are definitely designing the hardware for Xbox 2 with cost in mind this time.

 

[ManaByte]

Yeah Microsoft is smart. They know Xbox would be a loss for them. Becoming more popular is the goal this generation. Next gen will be the money making one (they hope).

The way Microsoft works, in every field they dip their toes into, is to play the game until there are no competitors left. Then, they'll create a new competitor to play the game all over again.

 

[Rocket Punch]

Then, they'll create a new competitor to play the game all over again.

Huh?

 

[Orin GA]

I didnt understand that either huzkee. Just back away slowly towards the exit, as I am doing.

 

[ManaByte]

What I mean is if MS has no one to compete with in a general field they'll find a company in trouble or a small start up and pump money into them just to get them up to a level that they can compete with.

 

[cabel]

Then, they'll create a new competitor to play the game all over again.

I'm guessing he means something like this:

1. Netscape develops an amazing web browser.

2. Tons of people use and download this web browser.

3. Microsoft doesn't like this.

4. Microsoft develops a shitty web browser called Internet Explorer, and thanks to infinite money and infinite power, they make it free, and eventually everybody uses it.

5. After a while, because everybody uses it and they don't have to care, Internet Explorer starts sucking extremely, and Microsoft stops development on it.

6. Netscape (neé Mozilla) creates Firefox, a back-to-basics, awesome web browser.

7. Tons of people use and download this web brwoser.

8. Microsoft doesn't like this.

9. Microsoft announces they're firing up IE development again, and begins soliciting requests and features.

Repeat cycle until the earth explodes.

And all the humans die, to be replaced with CYBORGS

 

[Orin GA]

*Quickly opens the door* Run Huzkee, Run like the wind.

 

[Leviathan]

What I mean is if MS has no one to compete with in a general field they'll find a company in trouble or a small start up and pump money into them just to get them up to a level that they can compete with.

Huh? Could you run that by me again?

 

[MadOdorMachine]

Not to mention how they nearly killed off Apple, then gave them money to save them from going under.

 

[cabel]

Not to mention how they nearly killed off Apple, then geve them money to save them from going under.

That's was a beautiful moment in Microsoft shrewdness.

"Oh, crap, you're almost out of business? Huh. Then we'll totally have a monopoly, no question. So, umm.. hey, here's $150 million! Hey, have fun! Oh, and one of the conditions of the $150 million is that you give us licenses to all your user interface patents, so you can't sue us in regards to Windows. Awesome, thanks!"

Of course, in the best of ironies, the Home and Entertainment (Xbox) department makes a lot of its money from sales of Mac Office.

EARTH WILL EXPLODE SOON I TELL YOU IT'S y2K ALL OVER AGAIN

 

[ManaByte]

Not to mention how they nearly killed off Apple, then gave them money to save them from going under.

That's was a beautiful moment in Microsoft shrewdness.

"Oh, crap, you're almost out of business? Huh. Then we'll totally have a monopoly, no question. So, umm.. hey, here's $150 million! Hey, have fun! Oh, and one of the conditions of the $150 million is that you give us licenses to all your user interface patents, so you can't sue us in regards to Windows. Awesome, thanks!"

Of course, in the best of ironies, the Home and Entertainment (Xbox) department makes a lot of its money from sales of Mac Office.

EARTH WILL EXPLODE SOON I TELL YOU IT'S y2K ALL OVER AGAIN

Exactly. I was just going to post that.

MS invested $150 million into Apple in 1997.

 

[Leviathan]

Exactly. I was just going to post that.

MS invested $150 million into Apple in 1997.

OMG!!!!1111!

Sony and Nintendo = TEH DOOM3D!!!!1!1

Sell your Playstation 2s, Gameboys and Gamecubes!11!1

IT'S ALL OVER!1!1!111

 

[ManaByte]

OMG!!!!1111!

Sony and Nintendo = TEH DOOM3D!!!!1!1

Sell your Playstation 2s, Gameboys and Gamecubes!11!1

IT'S ALL OVER!1!1!111

No one said that. But on the same token, if anyone thinks the Xbox taking losses will cause it to go away they are being delusional.

 

[andthebeatgoeson]

No one said that. But on the same token, if anyone thinks the Xbox taking losses will cause it to go away they are being delusional.

Thanks for taking all the fun out of my thesis. 2 years down the drain.

 

[Floyd]

They are definitely designing the hardware for Xbox 2 with cost in mind this time.

Which sucks for us. Microsoft being the consumers bitch to gain market share this gen has been awesome for us gamers. Party is well and truly over next gen.

Saying that though whos to say Microsoft wont support another money losing console next gen. If that's what its going to take to push the competitors out, then they are going to do it for however long it takes. I can't see how anyone can stop them in the end.

 

[sonycowboy]

Looks like next quarter may well be profitable for M$.

1) 3 million copies+ of Halo 2
2) Lots of Live resubscribers / new subscribers
3) Record hardware sales (actually will cost them money, but it will more than be made up for)
4) Record software sales.

Not bad.

 

[sonycowboy]

No shipments updates! Dammit. Have to wait for Sony's and they'll take a larger lead by default

 

[Renegade]

I thought MS now broke even on every Xbox console sold aside from assembly. The parts now are basically even with the price of the Xbox or lower.

 

[sonycowboy]

I thought MS now broke even on every Xbox console sold aside from assembly. The parts now are basically even with the price of the Xbox or lower.

Nope.

 

[jedimike]

I thought MS now broke even on every Xbox console sold aside from assembly. The parts now are basically even with the price of the Xbox or lower.

MS pays a set price per chip. That price was negotiated when Xbox went into production. So, in essence they are stuck with the price no matter how cheap it is for Intel and Nvidia to make them.

That's why they are going the Sony/Nintendo route with Xenon. They pay for the rights to the techonology and then pay for manufacting seperately with royalty bonuses depending on volume sales. So years down the road as manufacturing costs decrease, they will pay less in royalties.

Xbox = consumers spend less per console, Microsoft loses big money

Xenon = consumers spend less per console, Microsoft pays less per console

 

[PhatSaqs]

MS invested $150 million into Apple in 1997.

OMG! I think i'll start hating MS now....

 

[Kanbee-san]

I'm guessing he means something like this:

1. Netscape develops an amazing web browser.

2. Tons of people use and download this web browser.

3. Microsoft doesn't like this.

4. Microsoft develops a shitty web browser called Internet Explorer, and thanks to infinite money and infinite power, they make it free, and eventually everybody uses it.

5. After a while, because everybody uses it and they don't have to care, Internet Explorer starts sucking extremely, and Microsoft stops development on it.

6. Netscape (neé Mozilla) creates Firefox, a back-to-basics, awesome web browser.

7. Tons of people use and download this web brwoser.

8. Microsoft doesn't like this.

9. Microsoft announces they're firing up IE development again, and begins soliciting requests and features.

Repeat cycle until the earth explodes.

And all the humans die, to be replaced with CYBORGS

Netscape sucked and wasnt free. Thank god for IE. No if it could just stick to some web standards and fix up some security issues (XP SP2 is rock solid though) it would be heaven.

 

[cabel]

Netscape sucked and wasnt free. Thank god for IE. No if it could just stick to some web standards and fix up some security issues (XP SP2 is rock solid though) it would be heaven.

Well, I'm not sure what kind of alternate universe you grew up in, but Netscape is, and was ALWAYS, free. It is today, and it was back with Version 3.0, around when MSIE came out. What made you think it cost money? Or am I delusional?

Also, as a side note, does anybody else here remember that MSIE 1.0 was actually the result of aquiring NCSA Mosaic from Spyglass? More classic MS action.

-Cabel

PS: Only a true Microsoft fan could say "Thank god for IE", followed immediately by, "If only it could stick to web standards and fix some security issues.", without a hint of irony.

 

[explodet]

You COULD buy Netscape - meaning you could send money to them and they would give you the browser and some extra stuff.
But I never had to send them a dime.

 

[Kanbee-san]

Netscape was never free. You had to pay for it and its shitty winsock program. This was back in the 3.11 days folks.

PS: Only a true Microsoft fan could say "Thank god for IE", followed immediately by, "If only it could stick to web standards and fix some security issues.", without a hint of irony.

Call me what you will, it doesnt make your opinion any more valid than mine.

 

[explodet]

Netscape was never free. You had to pay for it and its shitty winsock program. This was back in the 3.11 days folks.

If Netscape wasn't free in the 3.11 days, but I could download it and install it when running Windows 95, how is it that it was never free?
I'm just not following here.

 

[ManaByte]

Netscape was always free. You just had to pay for it if you wanted tech support.

 

[Kanbee-san]

If Netscape wasn't free in the 3.11 days, but I could download it and install it when running Windows 95, how is it that it was never free?
I'm just not following here.

Follow this;

It wasnt free. You had to pay for it. Windows 3.11.


Not hard.


Edit: i used "never" not as in never in its lifetime.

 

[IJoel]

 

[explodet]

I see.
You mean "it wasn't always free".

Sorry dude, misunderstanding.
But there's a big difference between that and "it was never free".

 

[Kanbee-san]

I see.
You mean "it wasn't always free".

Sorry dude, misunderstanding.
But there's a big difference between that and "it was never free".

Dont mind me, i am a moron. Sorry if i had a pissy hissy fit.

 

[cabel]

Follow this;

It wasnt free. You had to pay for it. Windows 3.11.


Not hard.

True, not hard -- except you're wrong.

I've literally been using Netscape since version 1.0. That's not an exaggeration, just the sad, nerdy truth. When I designed my first website, you couldn't even set the background color of a web page -- it was gray or nothin'.

I've never, ever paid a single release of Netscape. Even when I used Windows 3.11 (Netscape 3.01, probably.)

Here's where I think you're confused: there was a Netscape Navigator 3.0 GOLD that included their HTML editor (Composer?). That version did, indeed, cost money (and came on a CD, I believe.)

The BROWSER itself -- absolutely never. Always free.

This doesn't have anything to with anything anymore, does it? I'll move on. BUT YOU'RE WRONG I SWEAR



-Cabel

PS: Microsoft totally sucks

 

[ferricide]

Well, I'm not sure what kind of alternate universe you grew up in, but Netscape is, and was ALWAYS, free. It is today, and it was back with Version 3.0, around when MSIE came out. What made you think it cost money? Or am I delusional?

you kind of left out the part about how netscape 4 fucking sucked and IE 4 was a massive improvement over IE 3.

that was the bigger problem in my eyes. of course, i use firefox now.

 

[cabel]

you kind of left out the part about how netscape 4 fucking sucked and IE 4 was a massive improvement over IE 3.

that was the bigger problem in my eyes. of course, i use firefox now.

Sure, I may have glossed over that little bit. Netscape 4 was a bit.. bloated.

But IE 5, in turn, suckled from the teat of Ms. Garbage. I've haven't gotten so many hard-to-remove ActiveX controls offered to my face since I started hanging around truck stop bathrooms.

I can't wait for Microsoft to purchase Firefox. Lord, then what?

Also: I will say that Microsoft is certainly no dumb-ass. They use their infinite money cheat code very wisely. The purchase of Bungie will go down in history as one of the most brilliant strategic moves in console history -- try to imagine where the Xbox would be without Halo. Of course, for every Bungie there's a Rare, but that's neither here nor there. And rhymed. (I deeply love Rare, I just want more.)

-Cabel

 

[Kanbee-san]

True, not hard -- except you're wrong.

I've literally been using Netscape since version 1.0. That's not an exaggeration, just the sad, nerdy truth. When I designed my first website, you couldn't even set the background color of a web page -- it was gray or nothin'.

I've never, ever paid a single release of Netscape. Even when I used Windows 3.11 (Netscape 3.01, probably.)

Here's where I think you're confused: there was a Netscape Navigator 3.0 GOLD that included their HTML editor (Composer?). That version did, indeed, cost money (and came on a CD, I believe.)

The BROWSER itself -- absolutely never. Always free.

This doesn't have anything to with anything anymore, does it? I'll move on. BUT YOU'RE WRONG I SWEAR



-Cabel

PS: Microsoft totally sucks

We had to pay for netscape for use in high school computers, $40 a pop. You can say i am wrong all you like, i know the truth !

 

[aaaaa0]

True, not hard -- except you're wrong.

I've literally been using Netscape since version 1.0. That's not an exaggeration, just the sad, nerdy truth. When I designed my first website, you couldn't even set the background color of a web page -- it was gray or nothin'.

You obviously never read the EULA then.

I've never, ever paid a single release of Netscape. Even when I used Windows 3.11 (Netscape 3.01, probably.)

Here's where I think you're confused: there was a Netscape Navigator 3.0 GOLD that included their HTML editor (Composer?). That version did, indeed, cost money (and came on a CD, I believe.)

The BROWSER itself -- absolutely never. Always free.

This doesn't have anything to with anything anymore, does it? I'll move on. BUT YOU'RE WRONG I SWEAR

Netscape 1.0 EULA, extracted straight from the zip file containing the installer.

http://www.sauna.org/retro/wintel/index.htm

END USER LICENSE AGREEMENT

FREE EDUCATIONAL AND EVALUATION USE

GRANT. Subject to the provisions contained herein, Netscape
Communications Corporation ("Netscape") hereby grants you a
non-exclusive license to use its accompanying proprietary software
product ("Software") free of charge if (a) you are a student, faculty
member or staff member of an educational institution (K-12, junior
college or college) or an employee of a non-profit organization; or (b)
your use of the Software is for the purpose of evaluating whether to
purchase an ongoing license to the Software. If you do not fit within
the description above, a license fee is due to Netscape and no license
is granted herein. If you are using a free version of the Software,
you will not be entitled to support or telephone assistance.

Basically that says you have to BUY Netscape unless:

1. You are a student or teacher.
2. You work for a non-profit.
3. You are evaluating whether or not to buy Netscape for use.

 

[aaaaa0]

PS: WOW it still actually runs on XP. Doesn't render anything right though.

 

[cabel]

Basically that says you have to BUY Netscape unless:

1. You are a student or teacher.
2. You work for a non-profit.
3. You are evaluating whether or not to buy Netscape for use.

Please don't make me get Geeky Old Man on you. Did you use Netscape 1.0? No? I did, dammit! I sure-as-a-dog's-cock didn't pay for it. You see, there was no way to pay back then -- no eCommerce website for registration, because there WAS NO ECOMMERCE IN THE FIRST PLACE! It wasn't in the stores. You couldn't pay. They didn't make you pay. Everybody was "evaluating" it. That clause was in the EULA in case Netscape wanted to charge larger companies for site licensing just in case; or, at least that's how they explained it to us at the time.

In short: it was 100% "free". Note the quotes.

EULA's say a lot of things. The Windows XP SP2 one has a clause about midgets. Does anybody pay attention?

-Cabel

PS: If you paid for Netscape 3 in school, that's because you dudes bought NETSCAPE GOLD, for Composer.

PPS: That's an awesome site, thanks! Time to load up some old browsers!

 

[FightyF]

cabel: Do you use Windows?

 

[shpankey]

doesn't matter, Netscape always has and always will suck complete ass.

 

[aaaaa0]

Did you use Netscape 1.0? No? I did, dammit! I sure-as-a-dog's-cock didn't pay for it. You see, there was no way to pay back then -- no eCommerce website for registration, because there WAS NO ECOMMERCE IN THE FIRST PLACE! It wasn't in the stores. You couldn't pay. They didn't make you pay. Everybody was "evaluating" it. That clause was in the EULA in case Netscape wanted to charge larger companies for site licensing just in case; or, at least that's how they explained it to us at the time.

In short: it was 100% "free". Note the quotes.

I used Netscape 1.0 as well. And Mosaic before that.

Regardless of what everyone was doing, not paying Netscape once you were using it regularly is a technical violation of the EULA, unless you were a student, a teacher, or a non-profit.

Just because no one was enforcing it, doesn't mean it was right.

EULA's say a lot of things. The Windows XP SP2 one has a clause about midgets. Does anybody pay attention?

There's no clause about midgets in the SP2 EULA. There's other stuff, but not that.

PS: If you paid for Netscape 3 in school, that's because you dudes bought NETSCAPE GOLD, for Composer.

I never paid for Netscape. By the time I needed to, I had switched to OS/2 Webexplorer. (How's that for geeky old man?)

http://www.sauna.org/retro/os2/index.htm

Hehehe.

PPS: That's an awesome site, thanks! Time to load up some old browsers!

Yup! Fun to see how far we've come.

 

[LakeEarth]

I used Netscape 1.0 as well. And Mosaic before that.

Awaiting someone to say "who cares, I used Gopher!"

 

[Kanbee-san]

What about Lynx ?

 

[Rhindle]

Netscape charged for Navigator (yes, even the basic version) from 1995 to 1998, when they made the basic version free in a last ditch effort to compete against IE.

Anyhoo, nice thread derailment there dude.

 

[cabel]

cabel: Do you use Windows?

I've got both a Windows machine (primarily for gaming) and a Powerbook (primarily for everything else).

I work for a Mac software company so you have to forgive any anti-Microsoft bias; I really try to tone it down.

No more thread derailment. Let's get this Quarterly Results train back on track!!

I'm very, very excited to see what Halo 2 does next month. I can't even imagine. Again, Bungie -- best thing they've ever purchased.

 

[Deleted member 284]

Awaiting someone to say "who cares, I used Gopher!"

Archie and Veronica bitches!!

 

[Vieo]

I never knew Microsoft stopped developement on IE. What about MASM (their assembler). I've been waiting to see a GUI windows version of MASM for AGES!