Microsoft sells Xbox 360 at $126 loss

Posted on Thursday, November 24 2005 @ 1:02 CET by Thomas De Maesschalck
Market research firm iSuppli has taken a look at Microsoft's Xbox 360 console and found that the materials inside the Xbox 360 console cost Microsoft $470 before assembly.

The console is sold at $399, meaning a loss of $71 per unit. But there are also other items packaged with the console like the PSU, cables and controllers which add another $55 to Microsoft's cost, meaning a loss of $126 per unit. These estimates include assumptions that Microsoft is getting a discount on many components.
That was the case with the first Xbox console, which contained about $323 worth of parts and materials when released, but sold at retail for $299. It's certainly not going to help Microsoft reverse the trend of losses in its home-entertainment segment. In the fiscal year ended June 30, that unit lost $391 million on sales just shy of $3.25 billion. That's a little more than 8% of Microsoft's total sales of $39.8 billion.

A Microsoft spokeswoman said that the company's plan calls for a "gross margin neutral" strategy through 2006, meaning that between the sales of consoles, game software, and accessories, it expects to essentially break even. Profits should follow in 2007.
Read more over BusinessWeek.

About the Author

Thomas De Maesschalck

Thomas has been messing with computer since early childhood and firmly believes the Internet is the best thing since sliced bread. Enjoys playing with new tech, is fascinated by science, and passionate about financial markets. When not behind a computer, he can be found with running shoes on or lifting heavy weights in the weight room.

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