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Microsoft Revenues, Xbox 360 Shipments Edge Up

Microsoft Revenues, Xbox 360 Shipments Edge Up

October 24, 2008 | By Simon Carless

October 24, 2008 | By Simon Carless
More: Console/PC

Microsoft announced revenues up 9 percent to $15.06 billion for the latest quarter, with the Xbox 360-producing Entertainment & Devices Devision seeing slightly decreased revenue year on year, thanks to poor comparisons with Halo 3's release last September.

Overall, the company's profits edged up to $4.3 billion for the quarter, but EDD, which also includes Zune, Games for Windows, and Mac application software, decreased 6 percent to $1.81 billion. Its profits edged up 7 percent to $178 million.

Microsoft's SEC filing noted that the division's revenue decreased primarily due to decreased Xbox platform and PC game revenue, partially offset by increases across other EDD product revenue.

It revealed that Xbox 360 platform and PC game revenue decreased $331 million or 22 percent, primarily as a result of the $330 million of incremental revenue from the launch of Halo 3 in the three months leading up to September 30th, 2007, as well as decreased revenue on Xbox 360 consoles as a result of price reductions during the prior 12 months.

The company said it shipped 2.2 million Xbox 360 consoles (at significantly lower prices, as recently shown by Gamasutra) during the first quarter of fiscal year 2009, compared with 1.8 million Xbox 360 consoles during the first quarter of fiscal year 2008.

Luckily, the division was offset by non-game revenue, since other EDD product revenue increased 51 percent to $216 million, led by increased sales of application software for Apples Macintosh computers, the Zune digital music and entertainment platform, and mobile and embedded device platforms.

A couple of interesting tidbits from the filing: according to the company, "the cost of revenue decreased $251 million or 21 percent, primarily driven by decreased Xbox 360 manufacturing costs," suggesting cheaper hardware.

In addition, the company predicted EDD (including Xbox 360 and the division's other elements) will see "sustained profitability for fiscal year 2009" which runs through June 2009.

[UPDATE: During an analyst call held following the results announcement, Microsoft CFO Chris Liddell was asked about whether the Xbox 360 had too much inventory in stores heading into Christmas, given the deteriorating financial situation.

In reply, he noted, "We're feeling good about the overall level of inventory," and explained that "the price points that we're looking at this Christmas [for Xbox 360 hardware] are very good," referencing recent price cuts to as low as $199 for the Xbox 360 Arcade version.

Liddell was reasonably bullish about Microsoft's prospects for the Xbox 360 this Christmas compared to previous holiday seasons, when it was significantly more expensive than market leaders such as the Wii, concluding, "When you look at the relative price points [compared] to the competition, it's nowhere near as significant as it was, say, last Christmas."]

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