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Rumour: Xbox division loses Microsoft mega money

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I think this is nonsense, but an analyst reckons that Microsoft’s Entertainment and Devices Division – the one responsible for Skype, Windows Phone and crucially, Xbox  -  is haemorrhaging money to the tune of $2.5 Billion a year. Importantly, Xbox itself is responsible for $2 billion of that loss.

How could this be? We’ve always been told that the Xbox was monumental profitable for Microsoft, especially when you factor in all those Xbox Live subscriptions and the ludicrous sums the company charges for Dashboard advertising.

According to Rick Sherlund, analyst with Nomura, That’s just not the case, and the only reason the division isn’t tanking completely is because its the same one that houses a ton of patents that are used in, of all things, Android. Those patents earn Microsoft over $2 Billion every year. 

Sherlund is a rather prominent Wall Street analyst and tends to know what he’s talking about – and he says that investors don’t see the trouble with Xbox, because they’re “concealed by the hugely profitable Android royalties."

If this is true, it makes sense as to why Microsoft seems to be focusing less on games with its new Xbox, and more on it being a trojan horse in to getting the console in to every living room. If E&D is losing that much money though, I’d say it has to do more with Surface than Xbox, and even if it is Xbox, it’s because of years of R&D on the Xbox One.

Last Updated: November 7, 2013

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