Microsoft's Xbox losses almost double

Losses at Microsoft Corp.'s Home and Entertainment segment, which includes the Xbox game console, nearly doubled in the last three months of 2002, the company disclosed in a regulatory filing Friday.

The segment, which also includes Microsoft's TV platform and PC games, posted a quarterly operating loss of US$348 million, compared with US$180 million in the same period a year ago, the Redmond, Washington, company said in a filing with the U.S. Securities and Exchange Commission (SEC) for its second fiscal quarter.

The loss grew as the Xbox became available around the world, driving up segment revenue from US$833 million to US$1.28 billion. In the video game console industry vendors typically lose money on each console they sell, but try to earn that back when selling games, accessories and services.

Microsoft announced its second quarter results on Jan. 16, but at that time did not detail operating profit and loss per segment.

While Home and Entertainment recorded the largest operating loss of any segment, Microsoft Business Solutions, which includes Great Plains, bCentral and Navision, reported the largest jump in operating loss, from US$41 million in the final three months of 2001 to US$93 million in 2002. Microsoft acquired Navision last year.

Four of Microsoft's seven company segments posted an operating loss in the last months of 2002. The MSN Internet group, which offers Internet access and online services, and CE/Mobility, which includes handheld computing software, complete the list of loss-making company parts.

The Client segment, the Windows operating system part of Microsoft, continues to generate the most profit for the company, with US$1.97 billion in operating income on revenue of US$2.44 billion in the December quarter of 2002. This was down from income of US$2.11 billion and revenue of US$2.68 billion the same period a year earlier.

The Information Worker segment, which includes the Office products, is a close second when it comes to profit making. Operating profit here rose to US$1.88 billion on US$2.41 billion in revenue, up from US$1.74 billion income and US$2.2 billion in revenue a year earlier.

Operating profit at the Server Platforms part of Microsoft also increased in the last quarter of 2002 to US$498 million from US$402 million a year ago, with revenue up from US$1.44 billion to US$1.67 billion.

Microsoft also disclosed in the filing that it paid US$200 million for PlaceWare Inc., a privately held company that provides Web conferencing services for businesses. Financial terms were not disclosed when the deal was announced last month.

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Joris Evers

IDG News Service
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