Microsoft Still Beats Apple when it Comes to Banking Coin (MSFT, AAPL)

July 23, 2010, 2:46 pm

Microsoft Corp. (NASDAQ:MSFT) just reported its quarterly earnings, posting revenues of $16.04 billion which ahead of Wall Street estimates and up 22% year over year. This still puts it about $300 million ahead of Apple Inc. (NASDAQ:AAPL), so Cupertino’s going to have to wait another quarter to edge Microsoft on the revenue front.

In terms of profit, Microsoft’s $4.52 billion for the quarter far exceeds Apple’s $3.25 billion, so while Apple may be near even in revenue, Redmond’s still making more money. This can be explained by the fact that a large portion of Microsoft’s business is in software, where profit margins are much higher.

So how did the XBOX, Zune and everything else that is Microsoft’s EDD (Entertainment & Devices Division) do?

Microsoft’s EDD (Entertainment & Devices Division) which “includes the Xbox 360 platform (which includes the Xbox 360 gaming and entertainment console, Xbox 360 video games, Xbox LIVE, and Xbox 360 accessories), the Zune digital music and entertainment platform (“Zune”), PC software games, online games and services, Mediaroom (our Internet protocol television software), the Microsoft Surface computing platform, Windows Mobile and Embedded device platforms, application software for Apple’s Macintosh computers, Microsoft PC hardware products, and other devices. EDD is also responsible for all retail sales and marketing for Microsoft Office and Windows operating systems,” posted a loss of $172 million on revenues of $1.600 billion for the June 2010 quarter. In the prior June quarter, EDD earned revnues of $1.257 billion, with losses at $141 million.

Microsoft states “EDD revenue increased reflecting an increase in Xbox 360 platform and PC game revenue and increased revenue from the non-gaming portion of the business. Xbox 360 platform and PC game revenue increased $228 million or 30%, primarily reflecting increased Xbox 360 consoles sold and increased Xbox LIVE revenue, partially offset by decreased revenue per console. We shipped 1.5 million Xbox 360 consoles during the fourth quarter of fiscal year 2010, compared with 1.2 million Xbox 360 consoles during the fourth quarter of fiscal year 2009. Non-gaming revenue increased $115 million or 23%, primarily reflecting increased sales of Windows Embedded device platforms.”

(gamrfeed.vgchartz.com) With 1.5m X360s shipped for the quarter, X360 shipments stand at 41.7m units worldwide. Microsoft also says Xbox LIVE membership has passed 25 million as of June 2010. Annual Xbox Live Digital Marketplace Revenue has also surpassed Xbox Live Subscription Revenue for the June 2010 fiscal year.

The company appears to be blaming the EDD loss for the quarter on the KIN –

“EDD operating loss increased primarily reflecting increased operating expenses, offset in part by increased revenue. Cost of revenue increased $251 million or 38% primarily from charges resulting from the discontinuation of the KIN phone and increased royalty costs resulting from increased Xbox LIVE digital marketplace third-party content sales. Sales and marketing expenses increased $73 million or 29% primarily due to increased Xbox 360 platform marketing activities. Research and development expenses increased $48 million or 10%, primarily reflecting increased third-party development and programming costs and increased headcount-related expenses.”

During the year ending June 2010, Microsoft EDD had $8.058 billion in revenues, with profits of $679 million. In the prior year, the division had revenues of $8.035 billion and profits of $108 million.

“EDD revenue was nearly flat reflecting increased revenue from the non-gaming portion of the business, partially offset by decreased revenue from Xbox 360 platform and PC games. Non-gaming revenue increased $35 million or 1% primarily reflecting increased sales of Windows Embedded device platforms, offset in part by decreased Zune and Windows Mobile revenue. Xbox 360 platform and PC game revenue decreased $12 million, primarily reflecting a reduction in Xbox 360 consoles sold and revenue per console, offset in part by increased Xbox LIVE revenue. We shipped 10.3 million Xbox 360 consoles during the fiscal year 2010, compared with 11.2 million Xbox 360 consoles during fiscal year 2009.”
Microsoft did not issue a forecast for the June 2011 fiscal year with regards to how well Kinect / X360 will perform, but the EDD portion of Microsoft is expected to see “mid-teen revenue growth (+15%)”. With the X360 Slim launch in mid June and July the next quarter should get June 2011 fiscal year off to a good start for the Redmond giant.

http://gamrfeed.vgchartz.com/story/80986/microsoft-ships-15m-x360s-in-apr-jun-2010-103m-in-fy/

Stocks to Watch