Xbox Generates $2 billion in Losses for MS. Hides it with Patent Royalties

#1thefabregas22Posted 11/8/2013 2:53:05 AM(edited)
http://www.businessinsider.com/microsoft-earns-2-billion-per-year-from-android-patent-royalties-2013-11

Microsoft is generating $2 billion per year in revenue from Android patent royalties, says Nomura analyst Rick Sherlund in a new note on the company.
He estimates that the Android revenue has a 95% margin, so it's pretty much all profit.

This money, says Sherlund, helps Microsoft hide the fact that its mobile and Xbox groups are burning serious cash.

For the past few years, Microsoft reported the revenue and operating losses of Entertainment and Devices, which was the group that housed Xbox, Windows Phone, and those Android royalty payments.

That group always seemed to be profitable, but Sherlund says it's largely because of the Android money.

Sherlund says that if you back out the Android profits, Microsoft is probably losing $2.5 billion on Skype, Xbox, and Windows Phone. Of that, $2 billion in losses are attributable to the Xbox platform.

Sherlund believes Microsoft needs to spin out Xbox. He sees it as an orphan group at Microsoft that doesn't really fit with anything it's doing.

Investors are blind to Xbox's struggles, says Sherlund, because they are "concealed by the hugely profitable Android royalties".


Not giving any opinion on the matter just reporting the news so don't call me a "hater of the X" please as I do actually like the look of the console.
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#2iKhan88Posted 11/8/2013 2:57:16 AM
I always wondered how Microsoft was able to step out of their industry so far, fail do hard, and still make money.

I'm guessing the XB1 will be make or break it for Microsofts role in the console market. They are the least invested of the big 3 in the first place, as Windows is already a viable gaming platform, and their console really fails to do anything different from the PS4 (not saying one is better than the other, they are essentially the same)
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#31nternationa7Posted 11/8/2013 2:59:07 AM
In related news: Amazon Is Bragging About Its Warehouse Full Of PlayStations On Twitter

Read more: http://www.businessinsider.com/amazon-brags-on-twitter-about-its-warehouse-full-of-playstations-2013-11
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#4Millertime660Posted 11/8/2013 2:59:31 AM
you should probably preface that this is all speculation..... not fact
#5iKhan88Posted 11/8/2013 3:20:22 AM
Millertime660 posted...
you should probably preface that this is all speculation..... not fact


By an analyst who's been at it for 20 years. It also makes a lot of sense given the XB's failure, the hardware issues on 360, the massive cost of the XB1's development, and paying for exclusivity rights.

Microsofts only major time of profitability with the brand has been with the 360 later in it's life, but they may have burned that out on exclusivity and R and D
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#6CyborgTwentyPosted 11/8/2013 6:35:51 AM
Ouch that's a lot of money down the toilet.
#7ILikesCheesePosted 11/8/2013 7:01:14 AM
For those on this board who are not in the finance industry and don't understand this topic, read this link from a business report last summer:

http://www.geekwire.com/2013/microsofts-revamped-financials-reveal-road/

It further details how Microsoft has gone to great lengths recently to "hide" the PL (profit loss) of several of its divisions.
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The Xbox One can only run most games in the 720P visual standard. Perhaps it should have been called the XBOX 720 after all.
LOL
#8HENTAIDOJIPosted 11/8/2013 7:19:24 AM
Of course it does. Apple loses billions on iphones amd ipads. They make the majority of their cash each quarter on the sales of actual apples.
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#9ILikesCheesePosted 11/8/2013 7:59:50 AM
HENTAIDOJI posted...
Of course it does. Apple loses billions on iphones amd ipads. They make the majority of their cash each quarter on the sales of actual apples.


Nonsense like this is why I have to ignore certain people on this board. Curiosity gets the best of me sometimes, but then a warm feeling of knowing I am doing the right thing by removing worthless annoyances from my daily life reasserts itself.

:D
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The Xbox One can only run most games in the 720P visual standard. Perhaps it should have been called the XBOX 720 after all.
LOL
#10ssjgohhkuPosted 11/8/2013 9:12:36 AM
If Apple buys Xbox what will it be called? The i-Xbox?