Microsoft stretches online domain with Yahoo interest

[5 February 2008]

By Victor Godinez

The Dallas Morning News (MCT)

Microsoft’s proposal to buy Yahoo for $45 billion doesn’t mean much directly for gamers. But it does illustrate just how small-potatoes the Xbox business is for Microsoft.

Oddly, that should be comforting to Xbox 360 fans.

Microsoft recently reported its second fiscal quarter financial results and said its Entertainment and Devices division - which includes the Xbox, as well as the Zune and other digital flotsam - had a little more than $3 billion in sales for the quarter.

Now, that sounds like a lot of money (and it is), but keep in mind: That time period covered the superhot October-through-December Christmas sales period, so it will be tough for Microsoft to repeat that performance until next Christmas. In the first quarter, for example, the E&D division had sales of just under $2 billion.

So let’s say the third and fourth quarters are similar to the first. That’s $6 billion in sales, plus the $3 billion from the second quarter, which gives us $9 billion for the year.

Again, that’s real money for you, me and almost anyone else. But Microsoft is willing to pay five times that amount for Yahoo.

Microsoft obviously cares about turning a profit on its Xbox investment, and those profits are starting to trickle in. In the long run (like a decade), the Xbox platform could well be a major player in the new world of always-online digital entertainment.

But the console business right now is an afterthought for Microsoft. It worries about defeating Google and Apple and Linux a lot more than it frets about Sony and Nintendo.

Why is that good for Xbox fans?

Well, for now, Microsoft seems content to let the Xbox division putter along, and that’s actually been a smart strategy. While Microsoft did buy its way into the game with the first Xbox, it’s had to earn its reputation ever since. It didn’t break the bank on buying huge, guaranteed winners such as Nintendo or Electronic Arts or Activision and then coast to victory.

Instead, Microsoft built good hardware (although spending a little more on quality control on the 360 would have been wise), bent over backward to make its console accessible for game developers and was savvy enough to see the promise in a little game called Halo.

The company also spent the time to build the most ambitious online console service ever with Xbox Live and is a legitimate force for innovation in the industry.

The best thing that could happen to gamers is if the bigwigs at Microsoft spend the next decade sorting through the Yahoo buyout and let the hard-core gamers at the company continue to make good products.


Xbox Live update:

Speaking of Microsoft, the company recently announced a whole slew of new downloadable movies and TV shows on Xbox Live. Some of the highlights include the complete set of “Rocky” movies and a little gem called “The King of Kong,” a hypnotic documentary about the riveting and absurd world of old-school arcade competitions. Every gamer should watch that movie.

Also coming to Live are all the episodes of “Lost,” including new episodes 24 hours after they’re shown on TV. Almost all the new content is available in both standard definition and high definition, so you should definitely give it a gander.

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