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Microsoft Report 29% Fall In Xbox Revenue

Matt Gardner
Microsoft, Revenue, Xbox, Xbox 360

Microsoft Report 29% Fall In Xbox Revenue

The numbers are in! Microsoft have turned in their figures for the past quarter, with revenue for the company up 3% on this time last year - $21.46 billion with net income of $6.38 billion - however earnings were 3% down.

Although the company as a whole reported growth, though there were perhaps worrying signs for Microsoft's entertainment division, particularly the Xbox platform.

Microsoft's statement  revealed that both hardware and software sales were down, though partly offset by Xbox LIVE revenue:

"Xbox 360 platform revenue decreased $1.1 billion or 29%, due mainly to lower volumes of consoles sold and lower video game revenue, offset in part by higher Xbox LIVE revenue. We shipped 5.9 million Xbox 360 consoles during the second quarter of fiscal year 2013, compared with 8.2 million Xbox 360 consoles during the second quarter of fiscal year 2012. Video game revenue decreased, primarily due to $380 million of revenue deferred associated with the Video Game Deferral."

For the Entertainment and Devices Division as a whole, revenues were down by 11% - $3.77 billion compared to $4.24 billion this time last year - but operating income was up $596 million against $517 million from the same quarter the previous year.

"EDD operating income increased, due mainly to lower cost of revenue and sales and marketing expenses, offset in part by decreased revenue and increased research and development expenses" said Microsoft.

Microsoft also reduced marketing spending on the Xbox platform by 21 per cent, or $92 million. The only hint of the next generation of console hardware was the increase in research and development expenses of $98 million or 25%, primarily reflecting higher headcount-related expenses.

Analysts mostly focused on Microsoft's Surface and Windows 8 results, with no questions about the next generation of console hardware. Microsoft did say they expect growth in the next quarter in the "high teens" with overall growth for the year in single digits.

Microsoft will doubtless continue to have difficulty boosting Xbox revenue, particularly after a new console is announced. If, as is speculated, Microsoft launches a new console this year it would probably ship in the last three months of the year, which means it would probably not affect overall Microsoft revenue much one way or the other this year, regardless of its acceptance.

Microsoft's come under fire this week on a number of counts. Former Microsoft executive Joachim Kempin suggested that CEO Steve Ballmer was out of touch and needed replacing, saying that "Microsoft's board is a lame duck board, has been forever. They hire people to help them administer the company, but not to lead the company. That's the problem."

Earlier in the week, US business analyst Adam Hartung predicted “enormous layoffs over the next three years” for the company. The initial publication of Hartung's article was unequivocal in its doomsaying:

“Microsoft makes more than 75 per cent of its profits from Windows and Office,” he stated. “Less than 25 per cent comes from its vaunted servers and tools. And Microsoft makes nothing from its Xbox/Kinect entertainment division, while losing vast sums in its on-line division.

“No matter how much anyone likes the non-Windows Microsoft products, without the historical Windows/Office sales and profits Microsoft is not sustainable. Failure is already inevitable. At this stage, not even a new CEO can save Microsoft. Game over. Ballmer loses. And if you keep your money invested in Microsoft it will disappear along with the company.”

The stakes for next-gen, it would seem, are high indeed. [via GII]

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