6 ms·

No Azure? No XBox? I feel like those have made Microsoft a decent chunk of cash since they hit the market...

Retric 13y ago
XBox has made far less money than a stock buy back plan would have therefore it was a bad idea. I don't know the specifics on Azure but it's still in the rounding error stage.
- throwawaykf02 13y ago
  I thought they're already making a billion a year on Azure? Xbox could be seen as a loss-leader to grab a place in the living room, where they've done better than most other players in the space.
  - Retric 13y ago
    Assure had 1b in revenue but actual proffit is based around internal booking keeping numbers some of which are a little off IMO.
  - mrb 13y ago
    Only 1.3% of Microsoft's revenues ($78B) are from Azure ($1B). Like he said: almost a rounding error.
    - throwawaykf02 13y ago
      Oh for Microsoft, maybe. I'd love to have rounding errors like that! A more salient question for now is, is that a rounding error for Amazon, Rackspace, Heroku, etc. as well?
- AYBABTME 13y ago
  But then people wouldn't have their XBox. An earlier comment about how better it would have been for Microsoft to just do nothing. Maybe, from a money perspective. But meanwhile they did research, tried out designs, products, services. It's not all loss. There's more to the trip than the destination. There's a whole ride where things happen and have a value in themselves. Unless we only value the shareholders' money.
- nandemo 13y ago
  ?? A stock buy back doesn't make any money. It's just an alternative to dividends. It distributes money that the company has made.
  - Maven911 13y ago
    It increases the stock price and is known to have a signifcant positive effect whenver a buybackplan is announced
    - YokoZar 13y ago
      It does this only because the market thinks that management thinks the shares are undervalued. If things are "efficient" then a buyback and dividend are equivalent Conversely, if shares are overvalued then a dividend payment is better for management. At any rate, the relevant thing to compare Microsoft's investments to is the opportunity cost of the money. If Ballmer spent ten billion dollars on a project that netted only a 3% ROI, then shareholders would have been better off receiving that money and putting it into other companies.
      - Maven911 13y ago
        Theoretically but dividends are also taxed and that makes dividends less attractive as an option
        YokoZar 13y ago
        Dividends are taxed at the same rate as capital gains, so it should make little difference to a shareholder if a company paid him 1000 dollars or raised the resale value of his stock by 1000 dollars.
        Retric 13y ago
        No, because your forced to pay capital gains early thus having less money to compound. Try simulating it with 10% growth vs 5% dividend (which is used to buy the same stock) and 5% growth for 10 years.
MichaelGG 13y ago
Has Xbox actually been profitable? I understood that overall, they're still down a net few billion. I can see how entertainment and taking over the home and living room (especially after their moronic handling of Media PC) is important, but I don't think it's been a cash maker by itself. A quick search turns up one article[1] claiming 3BN loss over 10 years. As far as Azure, I'd be surprised if they've recovered all the money they've put into engineering and so on. Maybe if you consider they had to do a lot of similar work for MS online. 1: http://www.neowin.net/news/report-microsofts-xbox-division-has-lost-nearly-3-billion-in-10-years http://www.neowin.net/news/report-microsofts-xbox-division-h...
- JonFish85 13y ago
  I honestly think the Xbox is their gamble on "the next big thing". I don't think it's about the games. I think it's about the living room presence. And in my mind that is Apple's next big battle, and Microsoft has a huge head start. Cable boxes are going to die/morph into the game consoles. If I had to make a prediction, I could see Apple and Nintendo working together on a competitor... But Xbox is just their entry into the next battlefield: the living room and tv.
  - zanny 13y ago
    Here is the VC question: how are you making money off a box in the living room? Who is buying it? Why? What does it bring that a tivo that plays netflix and hulu doesn't already? Of anyone I know, they either have no cable (younger gen), where they just hook a computer into the tv to watch online content, they have cable and a tivo or provider DVR (mid aged families) or they are >60 years old, don't want anything to change, and can't learn to use a dvr even when I guide them through it (my grandparents). Who is your audience? Why? What value are you delivering they don't already have in their living room? How is that going to save your company? How is an xbox one, which, while not sale-subsidized by license fees like the 360 or ps3 were, isn't making you healthy margins but supposed to provide revenue generation?
    - cglace 13y ago
rsynnott 13y ago
XBox is only profitable if you read the data very carefully (ignoring sunk costs), or if you take the 360 _on its own_, ignoring the original and XBox Live. It will probably eventually be profitable, but it isn't now. I'd be astonished if Azure is profitable; AWS isn't, and it sees vastly higher volume at similar prices. And, of course, profitability for Azure is a messy concept; is it profitable when it makes more than they spend on it, or when it makes more than what they spend on it plus what they're losing by selling fewer Windows Server licenses to Amazon et al?

XBox has made far less money than a stock buy back plan would have therefore it was a bad idea. I don't know the specifics on Azure but it's still in the rounding error stage.

throwawaykf02 13y ago
I thought they're already making a billion a year on Azure? Xbox could be seen as a loss-leader to grab a place in the living room, where they've done better than most other players in the space.
- Retric 13y ago
  Assure had 1b in revenue but actual proffit is based around internal booking keeping numbers some of which are a little off IMO.
- mrb 13y ago
  Only 1.3% of Microsoft's revenues ($78B) are from Azure ($1B). Like he said: almost a rounding error.
  - throwawaykf02 13y ago
    Oh for Microsoft, maybe. I'd love to have rounding errors like that! A more salient question for now is, is that a rounding error for Amazon, Rackspace, Heroku, etc. as well?
AYBABTME 13y ago
But then people wouldn't have their XBox. An earlier comment about how better it would have been for Microsoft to just do nothing. Maybe, from a money perspective. But meanwhile they did research, tried out designs, products, services. It's not all loss. There's more to the trip than the destination. There's a whole ride where things happen and have a value in themselves. Unless we only value the shareholders' money.
nandemo 13y ago
?? A stock buy back doesn't make any money. It's just an alternative to dividends. It distributes money that the company has made.
- Maven911 13y ago
  It increases the stock price and is known to have a signifcant positive effect whenver a buybackplan is announced
  - YokoZar 13y ago
    It does this only because the market thinks that management thinks the shares are undervalued. If things are "efficient" then a buyback and dividend are equivalent Conversely, if shares are overvalued then a dividend payment is better for management. At any rate, the relevant thing to compare Microsoft's investments to is the opportunity cost of the money. If Ballmer spent ten billion dollars on a project that netted only a 3% ROI, then shareholders would have been better off receiving that money and putting it into other companies.
    - Maven911 13y ago
      Theoretically but dividends are also taxed and that makes dividends less attractive as an option
      - YokoZar 13y ago
        Dividends are taxed at the same rate as capital gains, so it should make little difference to a shareholder if a company paid him 1000 dollars or raised the resale value of his stock by 1000 dollars.
        Retric 13y ago
        No, because your forced to pay capital gains early thus having less money to compound. Try simulating it with 10% growth vs 5% dividend (which is used to buy the same stock) and 5% growth for 10 years.

MichaelGG 13y ago

Has Xbox actually been profitable? I understood that overall, they're still down a net few billion. I can see how entertainment and taking over the home and living room (especially after their moronic handling of Media PC) is important, but I don't think it's been a cash maker by itself. A quick search turns up one article[1] claiming 3BN loss over 10 years. As far as Azure, I'd be surprised if they've recovered all the money they've put into engineering and so on. Maybe if you consider they had to do a lot of similar work for MS online. 1: http://www.neowin.net/news/report-microsofts-xbox-division-has-lost-nearly-3-billion-in-10-years http://www.neowin.net/news/report-microsofts-xbox-division-h...

JonFish85 13y ago
I honestly think the Xbox is their gamble on "the next big thing". I don't think it's about the games. I think it's about the living room presence. And in my mind that is Apple's next big battle, and Microsoft has a huge head start. Cable boxes are going to die/morph into the game consoles. If I had to make a prediction, I could see Apple and Nintendo working together on a competitor... But Xbox is just their entry into the next battlefield: the living room and tv.
- zanny 13y ago
  Here is the VC question: how are you making money off a box in the living room? Who is buying it? Why? What does it bring that a tivo that plays netflix and hulu doesn't already? Of anyone I know, they either have no cable (younger gen), where they just hook a computer into the tv to watch online content, they have cable and a tivo or provider DVR (mid aged families) or they are >60 years old, don't want anything to change, and can't learn to use a dvr even when I guide them through it (my grandparents). Who is your audience? Why? What value are you delivering they don't already have in their living room? How is that going to save your company? How is an xbox one, which, while not sale-subsidized by license fees like the 360 or ps3 were, isn't making you healthy margins but supposed to provide revenue generation?
  - cglace 13y ago

rsynnott 13y ago

XBox is only profitable if you read the data very carefully (ignoring sunk costs), or if you take the 360 _on its own_, ignoring the original and XBox Live. It will probably eventually be profitable, but it isn't now. I'd be astonished if Azure is profitable; AWS isn't, and it sees vastly higher volume at similar prices. And, of course, profitability for Azure is a messy concept; is it profitable when it makes more than they spend on it, or when it makes more than what they spend on it plus what they're losing by selling fewer Windows Server licenses to Amazon et al?