Microsoft to lose $1 billion on Xbox by 2004...?!

http://biz.yahoo.com/rf/011105/n05254851_1.html

LOS ANGELES, Nov 5 (Reuters) - Microsoft Corp. (NasdaqNM:MSFT - news) could lose as much as $1 billion on its new Xbox video game console before breaking even in fiscal 2004, an influential Wall Street analyst said on Monday.

Morgan Stanley analyst Mary Meeker said the console faced competition in the short term but had long-term opportunity.

``We believe that Xbox could lose around ($1 billion) ... before breaking even in (fiscal 2004) if the product is reasonably successful,\'\' she said in a note to clients.

The Xbox launches in the U.S. on Nov. 15, in Japan in February and in Europe in March. Three days after the Xbox\'s U.S. launch, Nintendo Co Ltd. will launch its new console, the GameCube, in the United States.

Those two new consoles will compete with the already established PlayStation 2 from Sony Corp. , a unit analysts and industry observers expect to dominate the market this holiday season.

Microsoft has said it will spend as much as $500 million on the initial marketing for Xbox, which will retail for $299, the same price as PlayStation 2 and $100 more than the GameCube.

Microsoft had said it would have between 600,000 and 800,000 units available at launch, but later said it could not be sure. Most industry executives now expect them to ship 300,000 units at launch and 1 million to 1.5 million by year\'s end.

Shares in Microsoft were up 2.5 percent at $62.94 in morning trade on Nasdaq.

Even though this is Microsoft we\'re talking about, $1 billion is still a lot of money.  And they aren\'t going to break even until 2004?!  That really sucks for them.

Before anyone says it, yes this is obviously just speculation.  But if it turns out to be true, Microsoft is going to be hating life for the next few years.

thats speculation on a SPECIFIC number of xbox consoles that need to be sold by around that date

wonder how many employees will on the outside when microsoft does not hit those numbers

Yeah, good point Monkey Man.  I wonder what the Xbox\'s target sales numbers for this year and for next year are...  It will be interesting to see if they hit those numbers.

you KNOW he doesnt like being called that!

Originally posted by IronFist
Yeah, good point Monkey Man.

LOL. huh, eh.. no offence Clyde.

Yep, Microsoft is sure going to love those next few years from now. I wonder how they will deal with this, if it the X-Box turns out to be a huge failure. 1 billion is a huge number and it could be more if it fails bad. I wonder how the chances stand that Microsoft dumps it before it\'s too late?

Thanks btw, for the info IronFist.

you KNOW he doesnt like being called that!

Sorry, I thought that\'s what "MM" stood for.  Anyways, good point chimp.

Yep, Microsoft is sure going to love those next few years from now. I wonder how they will deal with this, if it the X-Box turns out to be a huge failure. 1 billion is a huge number and it could be more if it fails bad. I wonder how the chances stand that Microsoft dumps it before it\'s too late?

I can see it now: "Sony buys 19% of Microsoft in stock."  lol.

Gaming Age says "the loss is reportedly due to Xbox manufacturing costs. The Xbox is estimated to cost between $320 to $400 to manufacture."  I am surprised that it costs so little.  Isn\'t that how much the PS2 costed at first?  So if the Xbox is as successful as the PS2, than Microsoft can expect to break even a little over a year from launch.  Microsoft is in for some tough times.

A couple of months ago analysts had the figure closer to 2 or 3 billion by 2004 and that didn\'t include the ½ bill in \'marketing\'. I wonder what changed? Sony lost 900 million one year after the PS2 launch in Japan so one bill isn\'t a real big shock. Par for the course, maybe even a bit optimistic.

Yeah, I seem to remember the loss to Sony for each PS2 sold was reported to be around $80 and expected to be $100 cheaper to produce come November. Like right about now...

Agreed, the $320 to $400 numbers to produce xbox sound very low. Also that\'s a very fat spread between the two which says to me Gaming Age has no clue. My understanding is the cost variable is in chipset yield. The p3 cost should be well fixed at this point (and cheap). The big ? is the GPU, since it\'s only been in production for a few months we won\'t hear reliable numbers for a while yet.

:Heretic takes a l@@k around to see if any xbox fanboys are watching:

If the xbox doesn\'t show a whole lot better graphics within the next year or so it will be a miracle if the thing ever sells more units than the DC has sold to date

Be that as it may, don\'t expect MS to give in anytime soon. Why?

xbox = tool to prolong status quo of PC-buggy whip monopoly.

Am I the only one here who sees this? Think about it. Maybe the thought will slice through the thick cobweb of lies MS has been spinning about the xbox since day one and make some sense out of this seemingly questionable launch that approaches.

I mean 1billion beans is alot of moeny...but think about MS for a second. They will make up for it if xbox fails horribly. All they have to do is crank out more ****ty winblowz OS\'. Plus they still have a strangle hold even if their venture into consoles fails.