Xbox losses mount; Office profits up

Microsoft nearly doubles its losses from the game console in the December quarter, while the unit that makes Office software closed in on Windows as being the company's most profitable.

Microsoft nearly doubled its losses from the Xbox video game console in the December quarter, according to a filing with the Securities and Exchange Commission.

Meanwhile, the unit that makes Microsoft's Office software closed in on Windows as being the company's most profitable.

In a quarterly report with the SEC filed Friday, Microsoft said it posted operating income of $1.97 billion in the December-ended quarter in its Windows-centered business unit on revenue of $2.44 billion. That was down from income of $2.11 billion and revenue of $2.68 billion in the year-earlier period.

Microsoft's Home and Entertainment segment, which includes the Xbox, PC games and the company's TV products, posted an operating loss of $348 million in the quarter on revenue of $1.28 billion. A year earlier it had a loss of $180 million on revenue of $833 million.

The company loses money on each Xbox it sells, with some analysts pegging the shortfall at more than $100 per $199 console, meaning that strong sales for the platform actually increase its losses.

Microsoft's Information Worker segment, which includes the Office suite of programs, posted operating income of $1.88 billion on revenue of $2.41 billion. A year earlier the segment had posted operating income of $1.74 billion on revenue of $2.2 billion.

The only other profitable division in the quarter was Server Platforms, which had operating income of $498 million on revenue of $1.67 billion. That was better than operating income of $402 million and revenue of $1.44 billion a year earlier.

The MSN Internet access segment had a loss of $157 million on revenue of $569 million, compared with a loss of $211 million on revenue of $462 million a year earlier.

Business Solutions, which includes the company's Great Plains software and the recently acquired Navision, lost $93 million on revenue of $139 million, compared with a loss of $41 million on $73 million in revenue a year ago.

The smallest segment in the quarter was CE/Mobility, including the Pocket PC operating system. Revenue was $21 million and the unit had an operating loss of $39 million. Both were improved over the year-earlier period when the unit turned in revenue of $17 million and a loss of $61 million.

The company also said it had repurchased 19.4 million shares in the quarter for $999 million.

In the filing, Microsoft also said that it had guaranteed the repayment of yen-denominated bank loans for an undisclosed entity in which it has an investment. Microsoft said the guarantees, which continue until the loans and interest have been repaid in full, had a maximum amount of $559 million at Dec. 31. It also said it could recover a portion of the guarantees if the entity was liquidated.

Story Copyright  © 2003 Reuters Limited.  All rights reserved.

Featured Video

Fitness You're Doing It All Wrong

You're Doing It All Wrong

by Sharon Profis