How To Lose A Billion

Reuters had an interesting note:

Microsoft Corp. said it still expects its Xbox video game division to make a profit in fiscal 2008 after announcing a fiscal 2007 charge of more than $1 billion to cover repairs to Xbox 360 consoles.

“Our goal has been to have Xbox profitable in the coming fiscal year 2008,” said Robbie Bach, president of Microsoft’s entertainment and devices unit. “We don’t think this changes that in any way.”

The chart below shows how Microsoft stock continues to respond to the management capability of Microsoft.

Bach, who leads a unit that consistently loses billions of dollars for Microsoft, also conceded that Microsoft will miss their unit forecast for the Xbox. Interesting that he continues to predict a profit in FY2008. We’ll see.

Wii is currently outselling Xbox and PS3.

But pity the poor Microsoft shareholder. Apple, on the other hand, is performing exceptionally well.

MSFT AAPL

8 replies
  1. Ross
    Ross says:

    My brother told me about the Xbox 360 thing, as he is a an owner of one. It sounds very good, but being a Microsoft warrenty, it will be worded hidiously hard.

    Reply
  2. Michael
    Michael says:

    Well, the good thing is that some things never change – like your rabid slagging of Microsoft! So, I will offer two other points of view:

    1. The XBOX is an interesting one, damned if you do, damned if you do not. I can remember reading a particularly nasty blog where you yourself went on about your XBOX 360 going down.

    And in an age when too many manufacturers turn a blind eye to problems (Apple battery problems?), this is a refreshing change.

    PC Mag says it best:

    When Apple shipped iPods containing a worm last year, instead of issuing a humble mea culpa, Apple took a swipe at Microsoft, saying, “As you might imagine, we are upset at Windows for not being more hardy against such viruses, and even more upset with ourselves for not catching it.” As you can imagine, that didn’t fly with security experts. How about an apology to the folks who were unlucky enough to buy the infected iPods, period?

    Read the article ’10 things I hate about Apple’ here: http://www.pcworld.com/article/id,130994-page,1-c,macs/article.html

    You can read about the worm here: http://blogs.pcworld.com/staffblog/archives/002971.html

    For me, I am glad it was done, because in a world where to many companies dont do the ‘right thing’ due only to shareholder value, it is good to see companies that do it for the right reasons – to keep the customer happy (not because they are being sued).

    Another great example of this is the Tylenol scare of the 82. By recalling all product (at a massive cost), the company retained customer confidence and trust. I would expect this will do the same for Microsoft.

    2. What you chart does not include is $32B stock buy back that added $3 per share or the transition to a company that pays dividends. Granted, Apples stock performance has been great and they continue to spur the market. There is no denying it.

    3. And when the Mac gets interesting enough for hackers to actually write a hack for it (which is like writing a hack for Lotus notes, why bother? Not enough impact) .. it could get interesting .. Will Apple care enough about the customer to act? From PC Mag:

    Does anyone want to tell us when the next Mac OS X software updates will hit? What security vulnerabilities Apple is working on fixing? In April, Apple released a patch that plugged more than two dozen vulnerabilities–with absolutely zero advance notice. Mac users were wide open to attacks, and they never knew it. Even Microsoft (usually) tells people when to expect patches, and often tells you how to protect yourself until the patches are ready.

    Of course, that has yet to happen. But maybe one day …

    Just a few comments to provide an alternative perspective.

    Cheerio!

    Reply
  3. Serge
    Serge says:

    Overall I think this is a good thing. I hold some MS stock, and yes, it’s not going up much. BUT… Kudo’s… HUGE kudo’s to Microsoft for 1. Admitting the issue, and 2. Taking action.

    Luckily my 360 still works 🙂

    Reply
  4. Serge
    Serge says:

    Richard,

    I agree. But many companies don’t even admit it, let alone fix the problem.

    I bought an Ipod nano when it first came out. The first day I put it in my pocket with nothing but drier lint. The screen scratched. Apple just shrugged there shoulders, and magically just came out with a new version with a more resilient screen – forcing people to buy another one.

    So again, they SHOULD fix it – yes. But many companies don’t. So I applaud them for doing so.

    Reply

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