Sales of Xbox360 consoles have dropped by 60% in the fiscal fourth quarter, InformationWeek writes (via Yahoo News), citing Microsoft Investor Relations information.
In its earnings statement for the quarter, Microsoft said it shipped 700,000 Xbox 360 units during the period, compared to 1.8 million in the fiscal fourth quarter of 2006 -- a fall off of 61%.
Microsoft's Xbox operations are housed within the company's Entertainment and Devices Division. The group saw fourth quarter revenue drop 10% year-over-year to $1.16 billion on an operating loss of $1.20 billion. The group lost $423 million the previous year.
Recently, Microsoft owed up to the Xbox360´s failure rate being "unacceptable", extended the warranty to 3 years and reserved more than one billion US dollars to cover repair costs. Altogether, the Xbox division incurred losses of around six billion US dollars.
Subsequent to the announcement, Microsoft´s senior vice president of interactive entertainment business, Peter Moore, left the company to head EA Sports.
When I asked Peter Moore about a possible price drop for the Xbox360 at X06, he shrugged off the suggestion with that confidence bordering on arrogance that had become his trademark. Undoubtedly, his departure is as big a loss to the Xbox division as it is untimely.
The only other high level executives to leave the Xbox team were Ed Fries in 2004 and Kevin Bachus in 2001 - and neither possessed Moore´s charisma. We may think of his tattooed PR messages as embarrassing and corny. But the message got across and that is what counts in his business. Nevertheless, there are rumours surrounding Moore´s departure.
There is a question as to "whether the story presented by Microsoft was accurate," said Van Baker, an analyst with industry research firm Gartner. He said that, because the departure came not long after Microsoft's announcement about Xbox hardware failures, "you wonder if he was pushed."
Other experts believe that Moore´s departure will actually have a negative impact upon the Xbox360´s success, at least in the short term.
Geoff Keighley, host of Spike TV's Game Head series, agrees. "This is a huge loss for Xbox. … Gamers will no doubt wonder what this means for the future of the platform. Xbox 360 will be fine. Peter's not the visionary behind the platform, but he was the voice and the soul of that whole division of Microsoft and the public cheerleader. Xbox will continue on without Peter, but I have a feeling that his departure will knock some wind out of the platform. … It's shocking to see him leave right before Xbox heads into the biggest holiday season ever. He's spent years building up for this fall with a remarkable lineup of games and now he won't be around to 'finish the fight' as they say in Halo 3."
Moore, who officially joins EA on Sept. 1, wanted to move back to the San Francisco bay area, says EA spokesman Jeff Brown. (...) "Another thing that makes Peter particularly attractive is that during his time at Microsoft nobody as mastered online like (the company did)." Wedbush Morgan Securites' Michael Pachter called EA's acquisition of Moore "a significant positive for EA."
Microsoft beat Sony and Nintendo to market and certainly established their platform with more than ten million units sold. But at what cost? Sales are slowing down massively as the hardware defects become an ugly stain on Microsoft´s reputation.
Wii has narrowed the gap to less than a million and is poised to claim the number one spot in a matter of months, certainly within the year. And Microsoft has had only multi-billion dollar losses to show for its brave venture into the home console market.
Of course, there are some fantastic Xbox360 games around the corner which may yet help the Xbox out of the reds for the first time. But still, adding up all the prospective profits and very real losses, Microsoft should seriously consider leaving the hardware business after their second console´s lifetime is over. In fact, I would be very surprised to learn that they are planning a third Xbox.
Sources: InformationWeek (via Yahoo News), NewsFactor (via Yahoo News), USA Today (via Yahoo News)
Thanks to: Some Guy