Microsoft Posts First Loss Since 1986 - Don't Blame Xbox Division

Microsoft's fourth financial quarter for 2012 has not gone well for the company overall. It has made a loss, the first loss since shares became available to the public in 1986. The net loss is of $492 million compared to a profit of $5.87 billion in the same period last year.

This is a bad thing, even if said this, “Delivering a record year takes great products, solutions, services, and tremendous execution by our people."

As far as the Entertainment and Devices Division - which houses Xbox and related items - "revenue grew 20% for the fourth quarter and 8% for the full year primarily reflecting the addition of Skype. Xbox has now been the top-selling console in the U.S. for 18 consecutive months."

Actual figures for Xbox 360 contributions to that 20% fourth quarter rise are less easy to get hold of than Mr Turner's flimsy spin. During the investor call that followed release of the figures, the following was mentioned:

"In the Entertainment & Devices Division, revenue grew 20%. Despite the soft console market, Xbox continues its leadership position and has 47% share of the U.S. market in June. Additionally, Xbox LIVE membership increased by more than 15%, driven in part by the new content partners we had brought to Xbox. We also announced Xbox SmartGlass which will connect phones, PCs and tablets with the Xbox 360 console to enable more interactive and engaging entertainment."

This lack of detail currently even prompted one investor - Phil Winslow of Credit Suisse to ask of Microsoft CFO Peter Klein, "Just want to focus go back on the EDD division, you talked about relatively flattish revenue. You gave a lot of colour" on your mix in terms of the revenue contributions there. But when you think about the operating expenses and the profitability of that business, what would you expect this coming fiscal year and this point in the cycle?"

To translate, "Colour" = "Blinding waffle".

Pete responds, "When I think about E&D, I feel really good about the evolution of the business model for the entertainment business, you have seen us really add the content partners that we have and grow the Xbox LIVE business."

Yup, nothing there.

"And so historically the profitability has been largely sensitive to the console market and that’s still a big piece of it, but as we broadened our business, we now are at different revenue streams."

Ok, this means - "thank god we're not relying on the stagnating games market, we haz the Netflixez!" He goes on...

"And obviously the other thing I’d say is with Halo 4 coming later this year, having a really high first-party title is always a great thing from a profit perspective."

"Strike those other comments, we *will* be relying on video games after all!" He continues, "So, when you think about the business model going forward, I feel great about some of the content is coming. I feel great about the subscription with Xbox LIVE and some of the access and discoverability we have with Kinect and Bing as well."

That would be more colour.

Sources:
Microsoft
Seeking Alpha