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Is Microsoft in trouble?

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Re: Is Microsoft in trouble?

#21

Post by [deleted] »

latch wrote: post #17
aresant wrote: post #14

What? a) XBOX usage destroys Wii in usage, games purchased, and subscription fees all of which are better indicators of the platform' success than hardware units sold which are traditionally a loss leader. And oh yah, XBOX is wildy profitable. Meanwhile Wii sales are down 45% since last September! b) They are JUST launching their mobile platform which has gotten fair to begrundgingly good reviews and is opening in 30…

What?! Xbox is wildly profitable? xbox (original + 360) has lost MS tens of billions of dollars in its history (not an exaggeration). The fact that its just now (the last 2 quarters, an no more) pulling in profits in the hundreds of millions means that they'll break even in 5-10 years. If you gave me $10, and I gave you back $0.50, would you consider it a "wildly profitable" venture for yourself?

[deleted]

Re: Is Microsoft in trouble?

#22

Post by latch »

aresant wrote: post #19
latch wrote: post #17

Earlier quoted context omitted.

What?! Xbox is wildly profitable? xbox (original + 360) has lost MS tens of billions of dollars in its history (not an exaggeration). The fact that its just now (the last 2 quarters, an no more) pulling in profits in the hundreds of millions means that they'll break even in 5-10 years. If you gave me $10, and I gave you back $0.50, would you consider it a "wildly profitable" venture for yourself?

In fact if I was MSFT and you gave me $25.82 (current stock price) I'd give you back $0.64 a year and a share of my stock (current dividend price). And in fact, they've made that sale 8,650,000,000 times so far (current outstanding shares). http://www.dividend.com/dividend-stocks/technology/applicati... EDIT -> You're ignoring that the division DOUBLED profits over the last year, what if they maintain that growth rat…

I honestly look quite fondly on trending, and yes, xbox is trending in the right direction. But I still think calling it "wildly profitable" is silly.

Having conceded that its trending positively, in this specific business, you're only as good as your last console. Nintendo is probably the only company that can lean heavily on its brand to get it through a poor hardware iteration (its brand and its so-far good-as-gold portable product).

Re: Is Microsoft in trouble?

#23

Post by brk »

aresant wrote: post #14

What? a) XBOX usage destroys Wii in usage, games purchased, and subscription fees all of which are better indicators of the platform' success than hardware units sold which are traditionally a loss leader. And oh yah, XBOX is wildy profitable. Meanwhile Wii sales are down 45% since last September! b) They are JUST launching their mobile platform which has gotten fair to begrundgingly good reviews and is opening in 30…

It seems like anytime I see someone disputing Microsoft's declining relevance, they are always talking about some rainbow that is JUST around the corner.

XBox has been a money pit, but WAIT, they are start to eek back some of the billions in losses.

The Kin died on the vine, WinCE phones were blah, but WAIT, they have a new mobile strategy.

Various search and online presence initiatives got their numbers only by being embedded as the default home page on millions of new PC's, but WAIT, Bing is taking off.

Microsoft is a HUGE ship, and it's sinking slowly. It likely has decades left, but overall it's going down, not up.

Re: Is Microsoft in trouble?

#24

Post by jasonlotito »

latch wrote: post #20
aresant wrote: post #14

What? a) XBOX usage destroys Wii in usage, games purchased, and subscription fees all of which are better indicators of the platform' success than hardware units sold which are traditionally a loss leader. And oh yah, XBOX is wildy profitable. Meanwhile Wii sales are down 45% since last September! b) They are JUST launching their mobile platform which has gotten fair to begrundgingly good reviews and is opening in 30…

Also, this is a must-read article about the financial and actual state of bing: http://www.businessinsider.com/microsoft-is-trashing-us-for-... Essentially, for every 1% non-reoccurring market share (worth $150 million), MS is spending $500 million.

The number is actually "For every $1 of new revenue it generates, it spends $1 in traffic acquisition costs." (FTA) The 150/500 number you have includes all internet businesses.

The problem is here, where he compares $2 bill for internet business, and then talks about a 4% increase in search.

"Over the past year, despite losing more than $2 billion in its Internet business, Microsoft has gained about 4 search share points."

Their internet business is far more than Bing.

Re: Is Microsoft in trouble?

#25

Post by mjfern »

aresant wrote: post #14

What? a) XBOX usage destroys Wii in usage, games purchased, and subscription fees all of which are better indicators of the platform' success than hardware units sold which are traditionally a loss leader. And oh yah, XBOX is wildy profitable. Meanwhile Wii sales are down 45% since last September! b) They are JUST launching their mobile platform which has gotten fair to begrundgingly good reviews and is opening in 30…

To your points above:

a) In Microsoft's 2010 fiscal year (which has ended), its Entertainment and Devices Division (which includes the Xbox 360) generated $8.5 billion in revenues and just $679 million in operating income. Considering Microsoft's consolidated operating income in 2010 was $24 billion, this $679 million only accounts for about 3% of Microsoft's profits. And in any event the Xbox 360, the PS3, and the Wii may be irrelevant given the emergence of connected televisions, thin devices, and cloud-based gaming.

b) I am moderately pessimistic about Microsoft's prospects with its Windows Phone 7 OS. There are definitely some promising signs, such as WP7’s distinctive and innovative user interface and Microsoft’s extensive partnerships with smartphone OEMs, application developers, and carriers. But there are also some definite warning signs: WP7 isn’t market ready, and it’s already mid-October; Microsoft is making it difficult for developers to convert existing iOS and Android applications over to WP7; Microsoft’s brand is weak with consumers and the developer community, especially in the smartphone market; and WP7 comes with a price tag, while the competition is free, at least on a variable cost basis. There’s also the fundamental issue of competition, which includes several ambitious and innovative companies, especially Google and Apple, that have established platforms and abundant application markets. Here are some more thoughts on WP7: http://www.fernstrategy.com/2010/10/13/the-windows-phone-7-c....

c) Bing has made some inroads in search, but laregely at the expense of Yahoo. For the year, I don't believe Bing has gained at all on Google. There are powerful network effects and learning curves in search, and tremendous scale economies. It will be very difficult for Bing to grow its share in search, much less overtake Google, unless Bing releases a game changing protectable innovation, or Google makes some kind of fatal mistake.

Re: Is Microsoft in trouble?

#26

Post by jimbokun »

jp wrote: post #11

So Microsoft is failing because Apple, Google and Nintendo is performing better in seperate markets ? What about the Nintendo Office Suite, the Apple SQL Server or the Google Zune ?

"What about the Nintendo Office Suite, the Apple SQL Server or the Google Zune ?"

They're smart enough not to invest billions into markets where they have no particular expertise, but make bets that play to their strengths, instead.

Apple in particular. It's easy to forget it wasn't long ago that the Mac was the lion's share of their revenue. iPod, iPhone, iPad have all added revenue and profits from day one.

The same can't be said for Microsoft's attempts to expand into new markets. Which is why Apple surpassed them in market cap, which still sounds ridiculous to me remembering what the situation in the 90s.

Re: Is Microsoft in trouble?

#27

Post by kj12345 »

The biggest threat to Microsoft is their lack of a clear vision and message about where Office is going. I guess there's some strange service at officelive.com where I can maybe store, maybe edit documents online, but possibly I need a license for Office to do so, and I still get the impression that its meant to be supplementary to the desktop offering. The lack of an actual full-on web-based product - whether Silverlight or HTML - seems like a huge failure on their part. They need to create something real here and then market it in a clear and direct way.

Re: Is Microsoft in trouble?

#28

Post by jerf »

aresant wrote: post #19
latch wrote: post #17

Earlier quoted context omitted.

What?! Xbox is wildly profitable? xbox (original + 360) has lost MS tens of billions of dollars in its history (not an exaggeration). The fact that its just now (the last 2 quarters, an no more) pulling in profits in the hundreds of millions means that they'll break even in 5-10 years. If you gave me $10, and I gave you back $0.50, would you consider it a "wildly profitable" venture for yourself?

In fact if I was MSFT and you gave me $25.82 (current stock price) I'd give you back $0.64 a year and a share of my stock (current dividend price). And in fact, they've made that sale 8,650,000,000 times so far (current outstanding shares). http://www.dividend.com/dividend-stocks/technology/applicati... EDIT -> You're ignoring that the division DOUBLED profits over the last year, what if they maintain that growth rat…

"what if they maintain that growth rate?"

That's a terrible argument structure. You might as well cut straight to "What if we just assume I'm right?" and be more honest about it.

http://www.joystiq.com/2010/04/23/xbox-division-posts-165-mi... says $165 million in profits on $1,670 million (1.67 billion) in revenue for the division. Saying "doubled their profits" sounds impressive, but it's not sustainable; say rather instead "increased their quarterly revenue by 5%" (or so, give or take a bit depending on the real numbers) for a better view of what that really represents. Still nothing to sneeze at (I'd take it), but not the same picture at all.

Re: Is Microsoft in trouble?

#29

Post by aresant »

mjfern wrote: post #25
aresant wrote: post #14

What? a) XBOX usage destroys Wii in usage, games purchased, and subscription fees all of which are better indicators of the platform' success than hardware units sold which are traditionally a loss leader. And oh yah, XBOX is wildy profitable. Meanwhile Wii sales are down 45% since last September! b) They are JUST launching their mobile platform which has gotten fair to begrundgingly good reviews and is opening in 30…

To your points above: a) In Microsoft's 2010 fiscal year (which has ended), its Entertainment and Devices Division (which includes the Xbox 360) generated $8.5 billion in revenues and just $679 million in operating income. Considering Microsoft's consolidated operating income in 2010 was $24 billion, this $679 million only accounts for about 3% of Microsoft's profits. And in any event the Xbox 360, the PS3, and the W…

Fair points, counters:

a) "may be irrelevant given the emergence of connected televisions" - Don't dismiss the millions of gamers that will buy in next generation for MSFT exlusives like Halo which popped off $200m in sale in a day, bringing net total Halo copies to ~34m sold.

b) I argued for #3 which I think is in the bank with RIMM falling all over themselves. And the competition definitely isn't free, not even Android - http://www.businessinsider.com/android-costs - I believe we'll see a trend towards Win7 adoption from companies that aren't going for vertical integration.

c) I believe this is the point that holds the most water. But to continue my contrarian rant I'd say that I put some credit into the argument that MSFT is fighting this war explicitly to distract Google's attention from desktop / mobile / etc.

Re: Is Microsoft in trouble?

#30

Post by ratsbane »

aphexairlines wrote: post #18
ratsbane wrote: post #12

Earlier quoted context omitted.

The Apple SQL Server is MySQL or Postgres. The Google Zune is Android. Lots of people still pay the premium price for Microsoft Office but they don't need to. I haven't used it in years. Instead I use Google Docs and OpenOffice.

How is this an argument? You personally don't use a product, ergo it's dying?

That clearly wasn't my point.

http://blog.rescuetime.com/2010/06/17/google-is-eating-micro...

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