Microsoft reports 29% drop in Xbox revenue
Company's overall revenue grew 3%, earnings down 3%
Microsoft turned in a quarter largely in line with Wall Street estimates, posting revenue of $21.46 billion with net income of $6.38 billion. The revenue was 3 percent higher than the same quarter last year, but earnings were down 3 percent. The Entertainment and Devices Division, home of the Xbox, had 11 per cent lower revenues of $3.77 billion compared to $4.24 billion in the same quarter last year, though operating income was $596 million versus $517 million last year.
The big factor for the Entertainment and Devices Division was the large drop in Xbox revenue. According to Microsoft's statement, "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."
Microsoft explained the rise in EDD revenue: "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."
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.